Davos edition 2019

Research
Institute
Assessing Global Debt

Color gradient or Image placeholder

Thought leadership from Credit Suisse Research and the world's foremost experts
Introduction
6LQFHWKHɇQDQFLDOFULVLVJOREDOGHEWKDVULVHQWR
DQHZKLVWRULFKLJKUHODWLYHWR*'37KLVFRXOG
SRWHQWLDOO\LPSO\WKDWZHDUHRQFHDJDLQKHDGLQJ
IRUDGLVUXSWLYHFULVLVLQNH\FRXQWULHVRUHYHQ
JOREDOO\7KHIROORZLQJUHSRUWDWWHPSWVWRDVVHVV
WKLVULVNE\LQYHVWLJDWLQJWKHGHEWLVVXHIURPD
EURDGUDQJHRIDQJOHV
7KHUHSRUWǵVNH\FRQFOXVLRQLVWKDWWKHUHDSSHDUWR
EHDQXPEHURIVSHFLɇFSRFNHWVRIULVNEXWWKDW
ǷV\VWHPLFǸLQVWDELOLW\VHHPVOHVVOLNHO\WKDQRIWHQ
SHUFHLYHG2QHRIWKHNH\UHDVRQVLVWKDWOHYHUDJH
LQRXURZQVHFWRUJOREDOEDQNLQJKDVUHFHGHG
PDUNHGO\VLQFHWKHFULVLVDOWKRXJKWKHUHDUHVRPH
QHZDUHDVRIKHLJKWHQHGɇQDQFLDOVHFWRUOHYHUDJH
RXWVLGHWKHIRUPDOEDQNLQJV\VWHP
0DQ\DGYDQFHGHFRQRPLHVDVZHOODV&KLQDKDYH
VHHQDPDUNHGULVHLQJRYHUQPHQWRUJRYHUQ-
PHQWUHODWHGGHEW2XWULJKWFULVLVULVNVQHYHUWKHOHVV
VHHPIDLUO\PRGHUDWHPDUNHWSUHVVXUHVLPSRVH
ORQJHUWHUPGLVFLSOLQHWRVRPHH[WHQWZKLOHORZUHDO
LQWHUHVWUDWHVLQFUHDVHGHEWVXVWDLQDELOLW\0HDQ-
ZKLOH&KLQDǵVJURZWKSRWHQWLDOVHHPVVXIɇFLHQWIRU
OHYHUDJHWREHNHSWLQFKHFNDOEHLWDWWKHFRVWRI
VRPHFRQWLQXHGǷɇQDQFLDOUHSUHVVLRQǸ
2
$ɇQDODUHDRIKHLJKWHQHGULVNLVQRQɇQDQFLDO
FRUSRUDWHGHEW&UHGLWTXDOLW\KDVQRGRXEW
VXIIHUHGLQFHUWDLQPDUNHWVHJPHQWV%XWHYHQ
KHUHWKHUHSRUWFRQFOXGHVWKDWULVNVVHHP
VRPHZKDWPRUHOLPLWHGWKDQLQWKHODVWSHULRGRI
VHULRXVVWUHVVLHWR
&OHDUO\DOOWKHVHFRQFOXVLRQVDUHWHQWDWLYHLQ
QDWXUHDQGPXVWEHFRQWLQXDOO\UHYLVLWHG0RVW
LPSRUWDQWO\VLJQLɇFDQWSROLWLFDORUHFRQRPLF
VKRFNVHPDQDWLQJIURPǷRXWVLGHǸWKHGHEW
PDUNHWVSHUVHFRXOGOHDGWRVXGGHQQRQOLQHDU
LQFUHDVHVLQULVN
,HQFRXUDJH\RXWRH[DPLQHDZDQGDOVRTXHVWLRQ
DZWKHɇQGLQJVRIWKLVUHSRUWLQGHWDLO7KHDXWKRUV
DQG,ORRNIRUZDUGWR\RXUFULWLFDOIHHGEDFN
Urs Rohner
&KDLUPDQRIWKH%RDUGRI'LUHFWRUV
&UHGLW6XLVVH*URXS$*
02 Introduction

04 Executive summary
 $JXLGHWRVRXUFHVIRUGHEWGDWD

11 Chapter 1: How debt has evolved since

the Global Financial Crisis
 'HEWFULVHV&RPPRQDOLWLHVDQGGLIIHUHQFHV

21 Chapter 2: Government debt – will the

end of QE trigger defaults?
 7$5*(7LPEDODQFHV1RWDVLJQRID
 KHLJKWHQHGGHIDXOWULVNLQWKH(XUR]RQH

33 Chapter 3: Banks – after ten years of

“repentance,” new “sins”?
 1HZɇQDQFLDOVWDELOLW\ULVNVEH\RQGEDQN
 EDODQFHVKHHWV

49 Chapter 4: Emerging markets – great

diversity, but few systemic risks
 0LGGOH(DVW7KHQHZGHEWLVVXHUV

57 Chapter 5: China – a challenging path

out of excessive indebtedness
 &KLQDǵVGHEWRYHUKDQJPD\FRQVWUDLQWKH
 %HOWDQG5RDG,QLWLDWLYH

67 Chapter 6: Corporate debt – declining

quality on the growing fringes
 3HUIRUPDQFHRIGHEWPDUNHWVRYHUWKH
 HFRQRPLFF\FOH

79 Chapter 7: Real estate – some overheated

markets, but less toxic debt

88 About the authors

90 General disclaimer /
important information

CREDIT SUISSE AG
5HVHDUFK,QVWLWXWH
3DUDGHSODW]
&+=XULFK
6ZLW]HUODQG
UHVHDUFKLQVWLWXWH#FUHGLWVXLVVHFRP
credit-suisse.com/researchinstitute

Assessing Global Debt 3

Executive summary

2OLYHU$GOHUDQG0LFKDHO2ǵ6XOOLYDQ

China and US corporates the main Debt has risen to a new historic high….
pressure points
'HEWKDVLQFUHDVHGVLJQLɇFDQWO\VLQFHWKH
7KLVVWXG\SURYLGHVDQRYHUYLHZDQGGHWDLOHG ɇQDQFLDOFULVLVDQGLVQRZDWLWVKLJKHVWOHYHO
DVVHVVPHQWRIWKHJOREDOGHEWVLWXDWLRQ7KH
NH\TXHVWLRQWKDWZHWU\WRDQVZHULVGRZH
IDFHWKHULVNRIDPDMRUGHEWFULVLVLQDQ\RIWKH
NH\FRXQWULHVDNLQWRSDVWFULVHVRUDUHVXFK
IHDUVRYHUEORZQ"7KHVHTXHVWLRQVFDQQRWEH
DQVZHUHGZLWKFHUWDLQW\RIFRXUVHZKLOH
SUHFRQGLWLRQVIRUFULVHVFDQEHLGHQWLɇHGWR
VRPHH[WHQWWKHDFWXDOSRLQWLQWLPHDWZKLFK
WKH\DUHWULJJHUHGDOPRVWDOZD\VFRPHVDVD
VXUSULVH:LWKWKLVGLVFODLPHULQPLQGZHGUDZ
DQXPEHURIWHQWDWLYHFRQFOXVLRQVIURPWKH
DQDO\VLVWKDWLVODLGRXWLQWKHIROORZLQJFKDSWHUV
UHODWLYHWR*URVV'RPHVWLF3URGXFWVLQFH:RUOG
:DU,,7KDWVDLGWKHLQFUHDVHLQGHEWLVIDUIURP
XQLIRUPDFURVVFRXQWULHVDQGVHFWRUV,QDG-
YDQFHGHFRQRPLHVRYHUDOOOHYHUDJHKDVEHHQ
VWDEOHVLQFHEXWJRYHUQPHQWGHEWKDV
LQFUHDVHGVKDUSO\LQPRVWFRXQWULHV$VVHVVLQJ
WKHVXVWDLQDELOLW\RIJRYHUQPHQWGHEWLVWKHUHIRUH
NH\:KLOHQRQɇQDQFLDOFRUSRUDWHGHEWKDV
LQFUHDVHGPRGHUDWHO\RYHUDOOWKHLQFUHDVHKDV
EHHQPRUHVLJQLɇFDQWDQGLQSDUWVZRUULVRPHLQ
WKH86$7KHWUHQGIRURYHUDOOQRQɇQDQFLDO
SULYDWHVHFWRUOHYHUDJHDVPHDVXUHGE\WKH

Figure 1: Credit gaps are very diverse, but have mostly narrowed since the crisis
'LIIHUHQFHEHWZHHQWKHFUHGLWWR*'3UDWLRDQGLWVORQJUXQWUHQGLQSHUFHQWDJHSRLQWV

100
80
60
40
20
0
-20
-40
-60
-80
-100
-120
1RUZD\
Spain

)LQODQG

6LQJDSRUH

Japan

+RQJ.RQJ
,UHODQG

3RUWXJDO

1HZ=HDODQG
(XURDUHD
'HQPDUN

$XVWUDOLD

5XVVLD

,VUDHO
,WDO\

&RORPELD
India

*HUPDQ\

6ZLW]HUODQG
*UHHFH

8QLWHG.LQJGRP

6DXGL$UDELD

0DOD\VLD
0H[LFR
)UDQFH

$UJHQWLQD
%HOJLXP

United States

Sweden

7XUNH\

&DQDGD
1HWKHUODQGV

$XVWULD

%UD]LO

6RXWK$IULFD
.RUHD

&KLOH

7KDLODQG

Indonesia

&KLQD

Q1 2009 Q2 2018

6RXUFH%DQNIRU,QWHUQDWLRQDO6HWWOHPHQWV%,6&UHGLW6XLVVH

4
 VRFDOOHGǷFUHGLWJDSǸ1KDVQHYHUWKHOHVVLP-
SURYHGLQPRVWDGYDQFHGHFRQRPLHVVLQFHWKH
ɇQDQFLDOFULVLVFigure 1))LQDOO\EDQNVLQ
DGYDQFHGHFRQRPLHVZKLFKZHUHDWWKHKHDUW
RIWKHɇQDQFLDOFULVLVKDYHVHHQVXEVWDQWLDO
GHOHYHUDJLQJ%\IDUWKHELJJHVWGULYHURIWKH
JOREDOGHEWH[SDQVLRQLQWKHSRVWFULVLV\HDUVKDV
EHHQWKHULVHLQWKHGHEWRI&KLQDǵVVWDWHRZQHG
HQWHUSULVHVLHHIIHFWLYHO\SXEOLFVHFWRUGHEW
+RZ&KLQDGHDOVZLWKWKLVGHEWRYHUKDQJZLOOEH
RINH\LPSRUWDQFHWRWKHJOREDOHFRQRP\
DVWKHVWUHVVHVLQYDULRXVGHEWPDUNHWVGHPRQ-
VWUDWHGLQ+LJKGHEWOHYHOVDUHLQWXUQD
FRQVWUDLQWRQFUHGLWDQGHFRQRPLFJURZWK
)LQDOO\DVLJQLɇFDQWULVHRIUHDOLQWHUHVWUDWHV
FDQQRWEHUXOHGRXWLIIRUH[DPSOHWKHǷVDYLQJV
JOXWǸLQ$VLDZHUHWRGLVVLSDWH
86ɇVFDOSROLF\DIWHUWKH4(ZLQGGRZQ
poses risks, mainly to others
7KHVLJQLɇFDQWSXUFKDVHVRIJRYHUQPHQWERQGVE\
…but so long as real interest rates
remain low, higher debt is sustainable
7KHULVHLQWKHUDWLRRIJOREDOGHEWWR*'3LQ
SULQFLSOHLQFUHDVHVWKHYXOQHUDELOLW\RIWKHJOREDO
FHQWUDOEDQNVTXDQWLWDWLYHHDVLQJRU4(KDYHLQ
SULQFLSOHDOOHYLDWHGWKHGHEWEXUGHQRIJRYHUQ-
PHQWVE\ORZHULQJ\LHOGV&RQYHUVHO\WKHZLQGLQJ
GRZQRI4(LQSULQFLSOHLQFUHDVHVWKHYXOQHUDELOLW\
RIJRYHUQPHQWɇQDQFHVHVSHFLDOO\LIJRYHUQPHQWV
GRQRWUHLQLQWKHLUGHɇFLWVSHQGLQJIRUGHWDLOVVHH
HFRQRP\WRLQWHUHVWUDWHVKRFNV+RZHYHUZKLOH
GHEWLVYHU\KLJKWKHOHYHORIUHDOLQWHUHVWUDWHV
LVORZHULQNH\FRXQWULHVWKDQDWDQ\WLPHVLQFH
WKHV0RUHLPSRUWDQWO\UHDOLQWHUHVWUDWHV
DUHDOVRORZUHODWLYHWRUHDOHFRQRPLFJURZWK
(Figure 2):KLOHWKLVLQFUHDVHVGHEWVXVWDLQD-
ELOLW\WKHWHQVLRQEHWZHHQORZUDWHVDQGKLJK
GHEWFDQFDXVHLWVRZQSUREOHPV,IUDWHVVWD\
ORZEHFDXVHJURZWKLVORZWKLVFDQXQGHUPLQH
WKHFUHGLWZRUWKLQHVVRIFRPSDQLHVDQGFRXQWULHV
ZLWKKLJKGHEWOHYHOVDQGPDNHWKHPPRUH
YXOQHUDEOHWRHYHQVPDOOULVHVLQLQWHUHVWUDWHV
7KHFUHGLWJDSLVDPHDVXUHRIWKHGHYLDWLRQRIWKHDFWXDO
FUHGLWWR*'3VHULHVIURPLWVRZQWUHQG
Figure 2: Low real interest rate increases debt sustainability
&KDSWHURQJRYHUQPHQWGHEW$PRQJWKH
PDMRUHFRQRPLHVWKHPRVWZRUU\LQJWUDMHFWRU\
IRUJRYHUQPHQWGHEWLVWREHIRXQGLQWKH86$
HVSHFLDOO\DIWHUWKHVLJQLɇFDQWWD[FXWVRIHDUO\
+RZHYHUDGHIDXOWE\WKH86JRYHUQPHQW
UHPDLQVKLJKO\XQOLNHO\JLYHQWKHEDFNVWRSWKDWWKH
86)HGHUDO5HVHUYHZRXOGPRVWOLNHO\SURYLGH
%XWLIWKH)HGZHUHWRFXWLQWHUHVWUDWHVLQD
VFHQDULRRIKLJKGHEWDQGZHDNHQLQJJURZWKD
VKDUSGHSUHFLDWLRQRIWKH86GROODUFRXOGEHWKH
UHVXOW7KHIDLUO\KLJK86FXUUHQWDFFRXQWGHɇFLW
DGGVWRWKHYXOQHUDELOLW\RIWKH86GROODU7KH8.ǵV
WZLQGHɇFLWVVXJJHVWDVLPLODUULVNIRUWKH%ULWLVK
SRXQGDOWKRXJKWKHXQGHUYDOXDWLRQRIWKHSRXQG
PLWLJDWHVWKDWULVNHVSHFLDOO\LI%UH[LWZHUHWREH
ǷVRIWǸRUSRVVLEO\HYHQUHYHUVHG
)LYH\HDUPRYLQJDYHUDJHIRU86\HDU7UHDVXU\\LHOGVGHɈDWHGE\&3,LQɈDWLRQUHDO86*'3JURZWKDQGGLIIHUHQFH
JDSEHWZHHQUHDO\LHOGVDQGUHDOJURZWKLQ

10

-2

-4
1953 1963 1973 1983 1993 2003 2013

*DS *'3JURZWK 5HDO\LHOGV

6RXUFH)HGHUDO5HVHUYH%DQNRI6W/RXLV&UHGLW6XLVVH

Assessing Global Debt 5

Italian debt is as sustainable as Japan’s,
absent political tail risk
6RPHRWKHUDGYDQFHGHFRQRPLHVDOVRH[KLELW
YHU\KLJKOHYHOVRIJRYHUQPHQWGHEWQRWDEO\
-DSDQDQG,WDO\,Q-DSDQULVNDYHUVHDQGDJLQJ
VDYHUVKDYHEHHQZLOOLQJWRKROGODUJHDPRXQWVRI
]HURLQWHUHVWEHDULQJJRYHUQPHQWGHEWRUFDVK
ZKLFKUHQGHUVGHEWVXVWDLQDEOHIRUQRZ,Q,WDO\
ɇVFDOPHWULFVVXFKDVWKHSULPDU\EDODQFHDUH
VWURQJHUWKDQLQ-DSDQDQGGRPHVWLFVDYHUVDOVR
KROGDODUJHVKDUHRIJRYHUQPHQWGHEW+RZHYHU
WKH(XURSHDQ&HQWUDO%DQNǵVFRQVWLWXWLRQDQG
Fiscal discipline has been better in most
other major emerging markets
2YHUDOOGHEWUDWLRVLQHPHUJLQJPDUNHWV
GHFOLQHGLQWKHGHFDGHIROORZLQJWKHHPHUJLQJ
PDUNHWFULVHVRIWKHODWHV+RZHYHU
JRYHUQPHQWDVZHOODVSULYDWHVHFWRUGHEWKDYH
LQFUHDVHGDJDLQLQPRVWFRXQWULHVRYHUWKH
SDVWWHQ\HDUVRUVR1HYHUWKHOHVVWKHULVNRI
FULVHVDQGFRQWDJLRQLVPRUHOLPLWHGQRWOHDVW
EHFDXVHWKHTXDOLW\RIPRQHWDU\SROLF\KDV
JHQHUDOO\LPSURYHGDOORZLQJFRXQWULHVWR
EHWWHUGHDOZLWKH[WHUQDOVKRFNV,PSRUWDQWO\
(XUR]RQHSROLWLFVGRHVQRWDOORZLWWRSURYLGHDQ FXUUHQFLHVDUHQRWSHJJHGWRWKH86GROODUDQ\
LURQFODGEDFNVWRSWR,WDOLDQGHEW7KLVǷ4( ORQJHU+RZHYHUVRPHFRXQWULHVZLWKXQVXV-
LQHTXDOLW\ǸLPSOLHVWKDWGHEWVXVWDLQDELOLW\LQWKH WDLQDEOHɇVFDOSROLFLHVDQGKLJKH[WHUQDO
(XUR]RQHSHULSKHU\LVVXEMHFWWRVLJQLɇFDQW GHɇFLWVFRQWLQXHWRUHPDLQDWULVN+LJK
SROLWLFDOWDLOULVN IRUHLJQFXUUHQF\GHQRPLQDWHGFRUSRUDWHGHEW
SRVHVULVNVWRLQYHVWRUVDVZHOOVHH&KDSWHU
The quality of key segments of the US
corporate debt market has been deteriorating
$IWHUDQLQLWLDOSKDVHRIGHOHYHUDJLQJFRUSR-
UDWHGHEWKDVEHHQULVLQJVLJQLɇFDQWO\VLQFH
HVSHFLDOO\LQWKH86$VHH&KDSWHU
RQHPHUJLQJPDUNHWV
Reduced leverage is the key reason to
worry less about a bank-triggered crisis
7HQ\HDUVDJRWKHVKRUWDJHRIFDSLWDODQG
RQFRUSRUDWHGHEW0HDVXUHVRIFUHGLWTXDOLW\
KDYHZRUVHQHGZLWKLQWKHLQYHVWPHQWJUDGH
ERQGVHJPHQWDOEHLWQRWGUDPDWLFDOO\VRIRU
QRZWKHYXOQHUDELOLWLHVVHHPWREHFRQFHQWUDWHG
LQVRPHKLJKO\LQGHEWHGǷROGHFRQRP\ǸFRPSD-
QLHVZKLFKDUHXQGHUVLJQLɇFDQWFRPSHWLWLYH
SUHVVXUH:LWKLQWKHKLJK\LHOGDUHDɇQDQFLDO
GLVFLSOLQHKDVLQFUHDVHGVLQFH+RZHYHU
QRQFDSLWDOPDUNHWɇQDQFLQJLQWKHIRUPRI
ORZHUTXDOLW\OHYHUDJHGORDQVKDVVXUJHG
6KRXOGWKHHFRQRP\VORZVLJQLɇFDQWO\DQGRU
LQWHUHVWUDWHVULVHVKDUSO\GHIDXOWUDWHVDUH
OLNHO\WRLQFUHDVHPDUNHGO\7KHOLPLWHG
H[SRVXUHRIEDQNVWROHYHUDJHGORDQVOLPLWV
V\VWHPLFULVNVKRZHYHU
ORZTXDOLW\ǷWR[LFǸDVVHWVFRPELQHGWREULQJWKH
EDQNLQJV\VWHPLQWKH86$DQG(XURSHWRWKH
EULQNRIFROODSVH'HOHYHUDJLQJLQFRPELQDWLRQ
ZLWKDPRGHUDWHGRYHUDOOULVNSURɇOHRIEDQNVǵ
EDODQFHVKHHWVKDVVLQFHUHGXFHGV\VWHPLFULVN
LQNH\FRXQWULHV+RZHYHUVRPHQHZDUHDVRI
ULVNKDYHHPHUJHGLQSDUWRQWKHIULQJHVRIWKH
IRUPDOEDQNLQJVHFWRU,QFRQWUDVWWRWKHSUH
FULVLVSHULRGPRQHWDU\SROLF\WLJKWHQLQJQRZ
UHSUHVHQWVOHVVRIDWKUHDWKRZHYHU,QIDFW
EDQNVZRXOGRQEDODQFHEHQHɇWIURPPRQHWDU\
SROLF\QRUPDOL]DWLRQ7KHNH\LVVXHLQWKHVHFWRU
HVSHFLDOO\LQ(XURSHVHHPVWREHLQVXIɇFLHQW
FRQVROLGDWLRQZKLFKGHSUHVVHVSURɇWDELOLW\
UDWKHUWKDQUDLVLQJV\VWHPLFULVNVHH&KDSWHU
China’s high debt likely to be tackled
ZLWKFRQWLQXHGǷɇQDQFLDOUHSUHVVLRQǸ
6LQFHWKHɇQDQFLDOFULVLV&KLQDǵVJRYHUQPHQW
KDVWULHGWRPDLQWDLQKLJKHFRQRPLFJURZWK
UDWHVZLWKDJJUHVVLYHFUHGLWH[SDQVLRQODUJHO\
IDYRULQJVWDWHRZQHGHQWHUSULVHVVHH&KDSWHU
RQEDQNV
Some real estate markets have overheated
on the back of cheap debt
Ƿ7R[LFǸPRUWJDJHGHEWXVHGWRɇQDQFHRYHU-
SULFHGUHDOHVWDWHOD\DWWKHKHDUWRIWKH
ɇQDQFLDOFULVLV:KLOHWKHFULVLVPDUNHWVVXFKDV
RQ&KLQD+RZHYHUWKHPDUJLQDOJURZWK
LPSDFWRIFUHGLWH[SDQVLRQKDVGHFUHDVHGRYHU
WLPHUHVXOWLQJLQDYHU\KLJKGHEWWR*'3
UDWLR$WWKHVDPHWLPHVSHFXODWLYHH[FHVVHV
LQWKHUHDOHVWDWHVHFWRUKDYHEXUGHQHG
KRXVHKROGVZLWKFRQVLGHUDEOHGHEW,QRXU
YLHZ&KLQDVKRXOGQHYHUWKHOHVVEHDEOHWR
WKH86$KDYHUHEDODQFHGDQGKRXVHKROGVKDYH
GHOHYHUDJHGDQXPEHURIVPDOOHUUHDOHVWDWH
PDUNHWVKDYHEHHQKHDGLQJIRUDERRPVLQFH
WKHɇQDQFLDOFULVLVDVGHFOLQLQJLQWHUHVWUDWHV
HQFRXUDJHGERUURZLQJDQGUHDOHVWDWHLQYHVW-
PHQW2ZLQJWRKLJKYDOXDWLRQVVRPHRIWKHVH
PDUNHWVDUHTXLWHYXOQHUDEOHWRVHWEDFNVLQRXU
HPHUJHIURPH[FHVVLYHOHYHUDJH%XWWKH
FRQWLQXHGIRFXVRQKLJKO\LQGHEWHGVWDWH
RZQHGHQWHUSULVHVZLOOWHQGWROLPLWWKHFRXQ-
WU\ǵVJURZWKSRWHQWLDOZKLOHUHTXLULQJFRQWLQ-
XHGǷɇQDQFLDOUHSUHVVLRQǸWRPRELOL]HGRPHVWLF
VDYLQJVLQRUGHUWRVXVWDLQGHEW
YLHZVHH&KDSWHURQUHDOHVWDWH7KDWVDLG
ɇQDQFLQJVWUXFWXUHVKDYHJHQHUDOO\EHFRPHOHVV
ULVN\LQERWKSULYDWHDVZHOODVFRPPHUFLDOUHDO
HVWDWHWKXVOLPLWLQJV\VWHPLFULVNV

6
1HZɇQDQFLDOVWDELOLW\ULVNVEH\RQGEDQN
balance sheets

'XULQJWKHɇQDQFLDOFULVLVUXQVRQǷVKDGRZ
EDQNVǸLQFOXGLQJPRQH\PDUNHWIXQGVH[DFHU-
EDWHGWKHGRZQWXUQ7KHULVNVLQWKHVHDQG
RWKHUIXQGVKDYHVLQFHGLPLQLVKHG+RZHYHU
WKHFRQVWUDLQWVRQEDQNOHQGLQJVLQFHWKHFULVLV
KDYHJLYHQULVHWRDQHZZDYHRIǷVKDGRZEDQNǸ
OHQGLQJHVSHFLDOO\LQWKH86$DQGLQ&KLQD,Q
WKH86$DVLJQLILFDQWVKDUHRIUHDOHVWDWH
OHQGLQJKDVEHHQIXQGHGE\VXFKQHZDQG
OHVVUHJXODWHGYHKLFOHVJUHDWHUUHJXODWRU\IRFXV
PD\EHUHTXLUHGKHUH,Q&KLQDVXFKYHKLFOHV
KDYHIXQGHGUHDOHVWDWHDVZHOODVFRUSRUDWLRQV
,QWKHPHDQWLPHWKH&KLQHVHDXWKRULWLHVKDYH
FODPSHGGRZQRQVKDGRZEDQNVUHGXFLQJ
VWDELOLW\ULVNV6RPHREVHUYHUVVXJJHVWWKDW
RWKHUDUHDVSRVHULVNVLQFOXGLQJWKHXVHRI
RIIEDODQFHVKHHWǷSOHGJHGFROODWHUDOǸE\EDQNV
0HDQZKLOHWKHVWDELOLW\ULVNVUHVXOWLQJIURPD
SRWHQWLDOIDLOXUHRIQHWWLQJRIGHULYDWLYHVRQ
H[FKDQJHVDSSHDUVOLPLWHG

Assessing Global Debt 7

A guide to sources
for debt data

Bank for International Settlements DQGKRXVHKROGVHFWRUVDZUHSRUWHGE\WKH,,)

DUHEDVHGRQ%,6ɇJXUHV2QWKHRWKHUKDQG
7KH%DQNIRU,QWHUQDWLRQDO6HWWOHPHQWV%,6
JDWKHUVGDWDIURPFHQWUDOEDQNVDQGRWKHU
QDWLRQDODXWKRULWLHV,WVGHEWGDWDLQFOXGHGDWDRQ
GHEWVHFXULWLHVDQGRQFUHGLWWRWKHQRQɇQDQFLDO
VHFWRU'DWDRQGHEWVHFXULWLHVFRYHUERUURZLQJ
DFWLYLW\LQGHEWFDSLWDOPDUNHWVDQGLQFOXGHDOO
GHEWLQVWUXPHQWVWUDGHGLQɇQDQFLDOPDUNHWV
LQFOXGLQJWUHDVXU\ELOOVFRPPHUFLDOSDSHU
QHJRWLDEOHFHUWLɇFDWHVRIGHSRVLWVERQGV
GHEHQWXUHVDQGDVVHWEDFNVHFXULWLHV7KHVH
VWDWLVWLFVGLVWLQJXLVKEHWZHHQGHEWVHFXULWLHV
LVVXHGLQLQWHUQDWLRQDOPDUNHWVHJD*HUPDQ
FRUSRUDWHLVVXLQJ86GROODUGHEWLQWKH86$DQG
WKRVHLVVXHGLQGRPHVWLFPDUNHWVHJD6ZLVV
FRUSRUDWHLVVXLQJDERQGRQWKH6ZLVVPDUNHW
+RZHYHUGDWDRQGRPHVWLFGHEWVHFXULWLHVDUH
DYDLODEOHRQO\IRUDIHZFRXQWULHV7KH%,6DOVR
GLVWLQJXLVKHVE\WKHW\SHRILVVXHUɇQDQFLDO
FRUSRUDWLRQVQRQɇQDQFLDOFRUSRUDWLRQVDQG
ɇQDQFLDOVHFWRUGHEWVWDWLVWLFVUHSRUWHGE\WKH
,,)DUHGHULYHGIURPWKHUHVSHFWLYHFRXQWULHVǵ
ɇQDQFLDODFFRXQWV)RUFRXQWULHVWKDWGRQRW
FRPSLOHɇQDQFLDODFFRXQWVɇQDQFLDOVHFWRU
LQGHEWHGQHVVLVHVWLPDWHGDVDVXPPDWLRQRI
FURVVERUGHUEDQNORDQVDQGERQGɇQDQFLQJ
:LWKLQWKHɇQDQFLDOVHFWRUFUHGLWE\QRQ
EDQNVLVH[FOXGHGSRWHQWLDOO\XQGHUHVWLPDWLQJ
ɇQDQFLDOVHFWRUGHEWLQFRXQWULHVZLWKODUJH
ǷVKDGRZEDQNLQJǸHQWLWLHVVXFKDV&KLQD
'DWDRQFXUUHQF\EUHDNGRZQVDQGVRXUFHVRI
FUHGLWDUHPDLQO\EDVHGRQQDWLRQDOVRXUFHV
DQG%,6GDWDEDVHVEXWLQFRUSRUDWHDVVXPS-
WLRQVRIDQGHVWLPDWLRQVE\WKH,,))RU
LQVWDQFHWKHEUHDNGRZQGDWDIRUQRQɇQDQFLDO
FRUSRUDWHGHEWDUHFRPSXWHGE\FRPELQLQJWKH
%,6FURVVERUGHUEDQNLQJDQGGHEWVHFXULWLHV
VWDWLVWLFVZLWKWKH%,6WRWDOFUHGLWVWDWLVWLFV
ZKLOHWKHFXUUHQF\EUHDNGRZQRIJRYHUQPHQW
JHQHUDOJRYHUQPHQW7KHVWDWLVWLFVRQFUHGLWWR
WKHQRQɇQDQFLDOVHFWRUFDSWXUHERUURZLQJ
DFWLYLW\RIWKHSULYDWHQRQɇQDQFLDOVHFWRUDQGWKH
JRYHUQPHQWVHFWRULQPRUHWKDQHFRQRPLHV
$OOIRUPVRIɇQDQFLQJDUHLQFOXGHGLHFXUUHQF\
DQGGHSRVLWVORDQVDQGGHEWVHFXULWLHVIURPDOO
VRXUFHVLHGRPHVWLFEDQNVRWKHUGRPHVWLF
ɇQDQFLDOFRUSRUDWLRQVQRQɇQDQFLDOFRUSRUDWLRQV
DQGQRQUHVLGHQWV)LQDOO\WKH%,6SURYLGHV
VWDWLVWLFVRQLQWHUQDWLRQDOEDQNLQJ7KHORFDWLRQDO
EDQNLQJVWDWLVWLFVSURYLGHGDWDRQEDQNVǵDVVHWV
DQGOLDELOLWLHVIURPDUHVLGHQFHSHUVSHFWLYHLH
GHEWLVFRPSXWHGXVLQJ%ORRPEHUJDQG%,6
JRYHUQPHQWGHEWVWDWLVWLFV
World Bank
7KH:RUOG%DQNǵV,QWHUQDWLRQDO'HEW6WDWLVWLFV
DUHXVHGWRDQDO\]HH[WHUQDOGHEWVWDWLVWLFVDQG
PDMRUɇQDQFLDOLQGLFDWRUVIRUORZDQG
PLGGOHLQFRPHFRXQWULHVVLQFH:HDOVR
XVHWKH%DQNǵV:RUOG'HYHORSPHQW,QGLFDWRUV
DFURVVFRXQWU\FRPSDUDEOHGDWDEDVHIRU
DQQXDOVWDWLVWLFVVXFKDVEDQNQRQSHUIRUPLQJ
IRFXVLQJRQWKHORFDWLRQRIWKHEDQNLQJRIɇFH ORDQV13/V*'3FXUUHQWDFFRXQWEDODQFHV
&RQVROLGDWHGEDQNLQJVWDWLVWLFVLQFOXGHGDWDRQ DQGLQWHUHVWH[SHQVHVRIJRYHUQPHQWV7KH
LQWHUQDWLRQDOEDQNLQJDFWLYLW\IURPDQDWLRQDO :RUOG'HYHORSPHQW,QGLFDWRUGDWDEDVHFRYHUV
SHUVSHFWLYHLHIRFXVLQJRQWKHFRXQWU\ZKHUH
WKHEDQNLQJJURXSǵVSDUHQWLVKHDGTXDUWHUHG
Institute of International Finance
FRXQWULHVERWKDGYDQFHGDQGHPHUJLQJ
VLQFH'DWDIRUQDWLRQDODFFRXQWVDQG
EDODQFHRISD\PHQWVFRPHIURPDFRPELQDWLRQ
RIGDWDIURPQDWLRQDOVWDWLVWLFDORUJDQL]DWLRQV
DQGWKH:RUOG%DQNǵVFRXQWU\PDQDJHPHQW
7KH,QVWLWXWHRI,QWHUQDWLRQDO)LQDQFH,,)
SURYLGHVWKH,,)*OREDO'HEW0RQLWRUGDWDEDVH
ZKLFKFRPSULVHVHPHUJLQJFRXQWULHVDQG
PDWXUHPDUNHWV0RVWRIWKHKHDGOLQHGHEW
QXPEHUVDZIRUSXEOLFQRQɇQDQFLDOFRUSRUDWHV
XQLWV$GMXVWPHQWVDUHPDGHLQWKHEDODQFH
RISD\PHQWVGDWDWRDFFRXQWIRUɇVFDODQG
FDOHQGDU\HDUGLIIHUHQFHV

8
International Monetary Fund )HGHUDOIXQGɈRZGDWD

7KH,QWHUQDWLRQDO0RQHWDU\)XQG,0)KLVWRULFDO )XQGɈRZGDWDE\WKH86)HGHUDO5HVHUYHLVD

SXEOLFGHEWGDWDEDVH+3''SURYLGHVGDWDDWWKH FRPSUHKHQVLYHGDWDVHWFRYHULQJDZLGHUDQJHRI
JHQHUDOJRYHUQPHQWOHYHOIRUFRXQWULHVRYHU ɇQDQFLDODFFRXQWVSHUWDLQLQJWRWKH86HFRQRP\
WKHSHULRGIURPWR*LYHQWKHGHDUWK ,WSURYLGHVGDWDDFURVVVHFWRUVEURDGO\IDOOLQJ
RIUHOLDEOHGDWDVXUYH\VDYDLODEOHRQDORQJHUWLPH LQWRWKHGRPHVWLFQRQɇQDQFLDOVHFWRUDQG
KRUL]RQWKHVWDUWLQJGDWHYDULHVDFURVVFRXQWULHV
DQGLVXVXDOO\DURXQGWKHGDWHRILQGHSHQGHQFH
IRUPRVWRIIRUPHUO\FRORQL]HGFRXQWULHV$VSHU
WKH,0)ǷWKHJHQHUDOJRYHUQPHQWVHFWRUFRQVLVWV
RIDOOJRYHUQPHQWXQLWVDQGDOOQRQPDUNHW
QRQSURɇWLQVWLWXWLRQVWKDWDUHFRQWUROOHGDQGPDLQ-
GRPHVWLFɇQDQFLDOVHFWRUDQGLQVWUXPHQWV
VWDUWLQJIURPDWDTXDUWHUO\IUHTXHQF\7KH
)LQDQFLDO$FFRXQWV*XLGHGHɇQHVGHEWDVǷGHEW
VHFXULWLHVRSHQPDUNHWSDSHU7UHDVXU\VHFXUL-
WLHVDJHQF\DQG*6(EDFNHGVHFXULWLHV
PXQLFLSDOVHFXULWLHVDQGFRUSRUDWHDQGIRUHLJQ
O\ɇQDQFHGE\JRYHUQPHQWXQLWVFRPSULVLQJWKH ERQGVDQGORDQVGHSRVLWRU\LQVWLWXWLRQORDQVQRW
FHQWUDOVWDWHDQGORFDOJRYHUQPHQWV7KHJHQHUDO HOVHZKHUHFODVVLɇHGRWKHUORDQVDQGDGYDQFHV
JRYHUQPHQWVHFWRUGRHVQRWLQFOXGHSXEOLF
FRUSRUDWLRQVRUTXDVLFRUSRUDWLRQVǸ,QRUGHUWR
PLQLPL]HVWHSGLIIHUHQFHVLQWKHGDWDDQGHQVXUH
FRPSDWLELOLW\DFURVVFRXQWULHVWKH,0)GHSOR\V
EUHDNVWRDGGUHVVWKHIRUPHULVVXHDQGXVHV
PRUWJDJHVDQGFRQVXPHUFUHGLWǸ,QDGGLWLRQ
WRGHEWYDULDEOHVWKHEDODQFHVKHHWGDWDRI
KRXVHKROGVDQGQRQɇQDQFLDOFRUSRUDWHVDUH
DOVRXVHGLQWKLVUHSRUW
PHGLDQVDQG3XUFKDVLQJ3RZHU3DULW\333
*'3ZHLJKWHGDYHUDJHVIRUFDOFXODWLQJUHJLRQDO
DJJUHJDWHV([WHUQDOGHEWVWDWLVWLFVDUHWDNHQ
IURPWKH-RLQW([WHUQDO'HEW+XE-('+D
MRLQWLQLWLDWLYHE\WKH%,6,0)2UJDQLVDWLRQIRU
(FRQRPLF&RRSHUDWLRQDQG'HYHORSPHQW
2(&'DQG:RUOG%DQN$GGLWLRQDOO\WKH
GDWDEDVHRQWKH,0)ǵV)LQDQFLDO6RXQGQHVV
,QGLFDWRUV)6,VIRUGHSRVLWWDNHUVLVDOVRXVHGIRU
WKLVUHSRUW'HSRVLWWDNHUVDUHGHɇQHGDVǷWKRVH
XQLWVWKDWHQJDJHLQɇQDQFLDOLQWHUPHGLDWLRQDVD
SULQFLSDODFWLYLW\DQGKDYHOLDELOLWLHVLQWKHIRUPRI
GHSRVLWVSD\DEOHDQGLQVWUXPHQWVWKDWPD\QRWEH
UHDGLO\WUDQVIHUDEOHVXFKDVVKRUWWHUPFHUWLɇ-
FDWHVRIGHSRVLWǸ

Assessing Global Debt

$VVHVVLQJ*OREDO'HEW 9
10
1. How debt has evolved since
the Global Financial Crisis
9LEKXWL0HKWDDQG.ULWKLND6XEUDPDQLDQ

Global debt has reached almost three times global Gross Domestic
Product (GDP) and international financial institutions as well as other
observers are issuing warnings intermittently about the seemingly
unsustainable accumulation of debt. In this chapter, we provide a
broad overview of debt accumulation since the financial crisis, while
the following chapters look in greater detail at the developments and
vulnerabilities of individual regions and sectors.

*OREDOO\GHEWVHHPVWREHJURZLQJLQH[RUDEO\ GHEWJURZWKDFFHOHUDWHGLQHPHUJLQJHFRQRPLHV
$FFRUGLQJWRWKH,QVWLWXWHRI,QWHUQDWLRQDO LQDGYDQFHGHFRQRPLHVJRYHUQPHQWGHEW
)LQDQFH,,)WRWDOGHEWVWRRGDWFORVHWR86' KDVEHHQWKHRQO\VHJPHQWJURZLQJVWURQJO\
WULOOLRQDWWKHHQGRI4RUDOPRVW VLQFHWKHFULVLVZKLOHKRXVHKROGDVZHOODVEDQN
WKUHHWLPHVJOREDO*'3:KLOHWKHSDFHRI GHEWKDYHFRQWUDFWHGDQGFRUSRUDWHGHEWKDV
GHEWDFFXPXODWLRQKDVYDULHGVLJQLɇFDQWO\RYHU JURZQRQO\PRGHUDWHO\86FRUSRUDWHGHEW
WLPHGHEWJURZWKDFFHOHUDWHGLQWKHSUHFULVLV KDVKRZHYHUJURZQYHU\VWURQJO\VLQFH
SHULRGIURPWR,WWKHQVORZHGLQ GHEWJURZWKLQHPHUJLQJHFRQRPLHVKDV
WKHSRVWFULVLVSHULRGRQO\WRDFFHOHUDWHDJDLQ EHHQGRPLQDWHGE\&KLQDZKLOHLWKDVEHHQ
DIWHUPLGȍWKHODWWHUEHLQJODUJHO\GXH
WRWKHGHEWEXLOGXSLQ&KLQDQRWHWKDWWKH
DEVROXWHGHFOLQHLQGHEWLQVKRZQLQ
Figure 1ZDVODUJHO\DUHVXOWRI86GROODU
DSSUHFLDWLRQZKLFKUHGXFHGWKH86GROODU
PRGHUDWHLQRWKHUHPHUJLQJHFRQRPLHVLQ
HPHUJLQJHFRQRPLHVKRXVHKROGDQGQRQɇQDQFLDO
FRUSRUDWHGHEWKDYHJURZQPRUHVWURQJO\
ZKHUHDVJRYHUQPHQWGHEWKDVLQFUHDVHGRQO\
PRGHUDWHO\DZWKDWVDLGPXFKRI&KLQDǵV
YDOXHRIQRQ86'GHQRPLQDWHGGHEW FRUSRUDWHGHEWPXVWHIIHFWLYHO\EHUHJDUGHG
DVJRYHUQPHQWGHEWJLYHQWKDWLWLVRZHGE\
$WWKHHQGRI4GHEWZDVDURXQG VWDWHRZQHGHQWHUSULVHV
KLJKHUUHODWLYHWR*'3LQDGYDQFHGHFRQRPLHV
FDFRPSDUHGWRHPHUJLQJHFRQRPLHV Household and bank deleveraging in
FDIRUHPHUJLQJHFRQRPLHVH[FOXGLQJ advanced economies
&KLQDGHEWZDVDFWXDOO\FRQVLGHUDEO\ORZHU
RI*'3DZVHHFigure 2,QWHUPVRI As shown in Figure 2WKHRYHUDOOGHEWUDWLR
VHFWRUDOGLVWULEXWLRQQRQɇQDQFLDOFRUSRUDWHV RIDGYDQFHGHFRQRPLHVVWRSSHGJURZLQJLQ
UHSUHVHQWHGWKHODUJHVWVKDUHDFFRXQWLQJIRU DQGKDVHYHQGHFOLQHGVOLJKWO\VLQFH
RIWRWDORXWVWDQGLQJGHEWIROORZHGE\ WKHQ7KLVLVHVVHQWLDOO\GXHWRWKHGHOHYHUDJ-
JRYHUQPHQWɇQDQFLDOFRUSRUDWHV LQJRIKRXVHKROGVDQGEDQNVVLQFHWKHɇQDQ-
DQGKRXVHKROGV FLDOFULVLVVHHFigure 31RQɇQDQFLDO
FRUSRUDWHVGHOHYHUDJHGVRPHZKDWLQWKH
:LWKLQWKLVEURDGSLFWXUHWKHIROORZLQJǷVW\OL]HG LPPHGLDWHDIWHUPDWKRIWKHFULVLVEXWKDYH
IDFWVǸRQJOREDOGHEWVWDQGRXWLQDGYDQFHG VLQFHWKHQLQFUHDVHGOHYHUDJHDOEHLWQRW
HFRQRPLHVRYHUDOOGHEWVWRSSHGJURZLQJUHODWLYH GUDPDWLFDOO\+RZHYHU86FRUSRUDWHVKDYH
WR*'3VKRUWO\DIWHUWKHɇQDQFLDOFULVLVZKLOH LQFUHDVHGWKHLUGHEWH[SRVXUHVXEVWDQWLDOO\

Assessing Global Debt 11

Figure 1: Global debt
,Q86'WULOOLRQ
300

250

200

150

100

50

0
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

*OREDOGHEWOHYHO

6RXUFH,,)&UHGLW6XLVVH

Figure 2: Debt in major regions

,QRI*'3
450
400
350
300
250
200
150
100
50
0
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

7RWDO'0GHEW 7RWDO&KLQDGHEW 7RWDO(0GHEWH[&KLQD

6RXUFH%,6&UHGLW6XLVVH

Figure 3: Developed markets – private sector debt declined, public sector debt increased
,QRI*'3

140

120

100

80

60

40

20

0
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

+RXVHKROGV 1RQILQDQFLDOFRUSRUDWHV *RYHUQPHQW )LQDQFLDOFRUSRUDWHV

6RXUFH,,)&UHGLW6XLVVH

12
Figure 4: Strong expansion of US corporate debt

66
64
62
60
58
56
54
52
50
2010 2011 2012 2013 2014 2015 2016 2017 2018

(VWLPDWHGVKDUHRI86QRQILQDQFLDOFRUSRUDWHGHEWVHFXULWLHVLQRIWRWDOGHYHORSHGPDUNHWQRQILQDQFLDO
FRUSRUDWHGHEWVHFXULWLHV

6RXUFH,,)&UHGLW6XLVVH

VLQFH$VDUHVXOWWKHVKDUHRIRXW- +RXVHKROGGHOHYHUDJLQJZDVDOVRHVVHQWLDOO\WKH
VWDQGLQJ86FRUSRUDWHERQGVLQWKHRYHUDOO UHVXOWRIWKHFULVLV$VUHDOHVWDWHYDOXHVGHFOLQHG
FRUSRUDWHERQGPDUNHWRIDGYDQFHGHFRQRPLHV DQGOHQGHUVLPSOHPHQWHGPRUHVWULQJHQWFUHGLW
KDVLQFUHDVHGWRDERYHVHHFigure 4
,QWKHPHDQWLPHWKHGHOHYHUDJLQJRIɇQDQFLDO
FRUSRUDWHVLQGHYHORSHGPDUNHWVLQWKHSRVW
FULVLVSHULRGKDVHVVHQWLDOO\EHHQGXHWRPRUH
VWULQJHQWFDSLWDOUHTXLUHPHQWVYDULRXVRWKHU
UHJXODWLRQVKLJKHUULVNDYHUVLRQRIEDQNVDQG
UHGXFHGFUHGLWGHPDQGLQVRPHFRXQWULHV
FRQGLWLRQVKRXVHKROGVZHUHIRUFHGWRUHGXFH
WKHLURXWVWDQGLQJGHEW,QVRPHFRXQWULHVWKH
86$DERYHDOORXWULJKWGHIDXOWVE\PRUWJDJH
GHEWRUVDOVRFRQWULEXWHGWRGHOHYHUDJLQJ
+RXVHKROGGHEWKDVQRWGHFOLQHGHYHU\ZKHUH
KRZHYHUEXWKDVLQIDFWLQFUHDVHGVLJQLɇFDQWO\
LQDQXPEHURIFRXQWULHVLQFOXGLQJ$XVWUDOLD
&DQDGD6ZHGHQDQG6ZLW]HUODQGDQGKDV
&KDSWHUSURYLGHVPRUHGHWDLOV JHQHUDOO\EHHQDVVRFLDWHGZLWKDERRPLQUHDO
HVWDWHDQGKLJKHUPRUWJDJHGHEWVHHFigure 5)

Figure 5: Households have not deleveraged everywhere

,QSHUFHQWDJHSRLQWV
,UHODQG
USA
Spain
'HQPDUN
UK
*HUPDQ\
1HWKHUODQGV
Japan
,WDO\
)UDQFH
$XVWUDOLD
%HOJLXP
&DQDGD
6ZLW]HUODQG
Sweden
-50 -40 -30 -20 -10 0 10 20 30

+RXVHKROGPRUWJDJHGHEWLQRI*'3FKDQJHEHWZHHQDQG

6RXUFH7KRPVRQ5HXWHUV&UHGLW6XLVVH

Assessing Global Debt 13

Figure 6: US student loans surged after the crisis
,QRI*'3

20

18

16

14

12

10

0
2003 2004 2006 2007 2009 2010 2012 2013 2015 2016 2018

$XWRORDQ &UHGLWFDUG 6WXGHQWORDQ

6RXUFH7KRPVRQ5HXWHUV&UHGLW6XLVVH

Figure 7: Weak growth a partial cause of government debt build-up

'ULYHUVRIWKHFKDQJHLQWKHQHWJRYHUQPHQWGHEWUDWLRDZLQRI*'3

70

60

50

40

30

20

10

-10
Spain Japan USA UK (XUR]RQH )UDQFH ,WDO\ &DQDGD *HUPDQ\ 6ZLW]HUODQG

&\FOLFDOIDFWRUV )LVFDOVWDQFH &XPXODWHGGHILFLW

6RXUFH,0)&UHGLW6XLVVH

14
&KDSWHUGLVFXVVHVWKHQH[XVEHWZHHQUHDO
HVWDWHPDUNHWVDQGGHEWLQJUHDWHUGHWDLO)LQDOO\
RWKHUIRUPVRIGHEWKDYHDOVRKDGDQLPSDFWRQ
KRXVHKROGGHEW,QWKH86$VHHFigure 6)
FUHGLWFDUGGHEWKDVGHFOLQHGPDUNHGO\VLQFHWKH
ɇQDQFLDOFULVLVUHODWLYHWR*'3PRVWOLNHO\GXHWR
PRUHUHVWULFWLYHOHQGLQJFRQGLWLRQVZKLOHVWXGHQW
ORDQVKDYHVXUJHGSRVVLEO\EHFDXVHVWXGHQWV
WHQGWRUHPDLQDWXQLYHUVLW\IRUORQJHULQSHULRGV
Emerging market debt build-up mainly by
corporates
7KHHYROXWLRQRIWKHHPHUJLQJPDUNHWGHEWSURɇOH
VLQFHWKHFULVLVLVTXLWHGLIIHUHQWWRWKDWRIDGYDQFHG
HFRQRPLHV:KLOHFRUSRUDWHGHEWLQDGYDQFHG
HFRQRPLHVKDVRQO\MXVWVXUSDVVHGWKHSUHFULVLV
OHYHOVQRQɇQDQFLDOFRUSRUDWHVLQHPHUJLQJ
PDUNHWVKDYHUDSLGO\EXLOWXSWKHLUGHEWOHYHOVVLQFH
RIODERUPDUNHWZHDNQHVVDQGWKHJRYHUQPHQW WKHFULVLV)LJXUH&RUSRUDWHGHEWKDVJURZQ
SURYLGHVORDQJXDUDQWHHV HVSHFLDOO\VWURQJO\LQ&KLQDȍE\4&KLQDǵV
VKDUHRIRYHUDOOHPHUJLQJPDUNHWFRUSRUDWHGHEW
0HDQZKLOHWKHJURVVGHEWRIGHYHORSHGPDUNHW KDGUHDFKHG*LYHQWKDWDODUJHVKDUHRI
JRYHUQPHQWVURVHVKDUSO\IURPDERXWRI WKLVGHEWHVWLPDWHGDWLVRZHGE\VWDWH
*'3LQWRDERYHLQEHIRUH
GHFOLQLQJVOLJKWO\WRDERXWLQ4
,QFRXQWULHVWKDWVXIIHUHGGHHSRUSURORQJHG
UHFHVVLRQVDQGVWDJQDWLRQSHULRGVHJ6SDLQ
DQG,WDO\DFRQVLGHUDEOHSDUWRIWKHGHEWEXLOGXS
ZDVGXHWRF\FOLFDOIDFWRUVLHWKHFRQVHTXHQFH
RZQHGHQWHUSULVHV62(VLWPXVWWRDODUJHH[WHQW
EHUHJDUGHGDVJRYHUQPHQWGHEW
0HDQZKLOHIRUPDOHPHUJLQJPDUNHWJRYHUQPHQW
GHEWKDVJURZQRQO\PRGHUDWHO\LQWKHSRVWFULVLV
SHULRGDIWHUKDYLQJGHFOLQHGLQWKHSRVW
RIEHORZWUHQGJURZWKFigure 7,QIDFWRXU SHULRGVHHFigure 8)7KLVZDVWKHSHULRGWKDW
HVWLPDWHVZKLFKDUHEDVHGRQGDWDIRUF\FOLFDO IROORZHGWKHVHULHVRIHPHUJLQJPDUNHWGHEW
DQGVWUXFWXUDOGHɇFLWVIURPWKH,QWHUQDWLRQDO FULVHVRIWKHODWHV2QWKHRQHKDQG
0RQHWDU\)XQG,0)PD\XQGHUHVWLPDWHWKH
F\FOLFDOLPSDFWDVWKHXQGHUO\LQJDVVXPSWLRQV
UHJDUGLQJWUHQGJURZWKPD\KDYHEHHQWRRKLJK
LQVRPHFDVHVLQWKHSRVWFULVLV\HDUV)LQDOO\LQ
VRPHFRXQWULHVVSHFLɇFPHDVXUHVVXFKDVWKH
VHWWLQJXSRIǷEDGEDQNVǸWRVXSSRUWWKHɇQDQFLDO
V\VWHPFRQWULEXWHGFRQVLGHUDEO\WRJRYHUQPHQW
GHEWDOWKRXJKDVVHWVDOHVE\WKHVHLQVWLWXWLRQV
VXEVHTXHQWO\UHGXFHGWKDWGHEWWRVRPHH[WHQW
HPHUJLQJPDUNHWJRYHUQPHQWVZHUHIDUPRUH
FRQVWUDLQHGLQWKHLUDELOLW\WRLVVXHGHEWDQGRQ
WKHRWKHUKDQGWKH\DOVRLPSOHPHQWHGPRUH
FDXWLRXVɇVFDOSROLFLHVIROORZLQJWKHVHFULVHV,Q
FRQWUDVWJOREDOERUURZLQJFRQGLWLRQVZHUHPRUH
IDYRUDEOHLQWKHSHULRGIROORZLQJWKHɇQDQFLDO
FULVLVEHFDXVHWKHHFRQRPLFRXWORRNIRUHPHUJ-
LQJPDUNHWVJHQHUDOO\LPSURYHGDQGLQWHUHVW
UDWHVGHFOLQHG0RUHRYHUWKHVHDUFKIRU\LHOGE\
LQWHUQDWLRQDOLQYHVWRUVIDYRUHGHPHUJLQJPDUNHW
GHEWLVVXDQFH

)LJXUH(PHUJLQJPDUNHWQRQɇQDQFLDOFRUSRUDWHGHEWKDVULVHQVKDUSO\
,QRI*'3
120

100

80

60

40

20

0
1995 1996 1998 1999 2001 2002 2004 2005 2007 2008 2010 2011 2013 2014 2016 2017

+RXVHKROGV 1RQILQDQFLDOFRUSRUDWHV *RYHUQPHQW )LQDQFLDOFRUSRUDWHV

6RXUFH,,)&UHGLW6XLVVH

Assessing Global Debt 15

7KHVLJQLɇFDQWGHFOLQHLQLQWHUHVWUDWHVLQWKH
PDMRUERQGPDUNHWVDOVRPDGHLWDWWUDFWLYHIRU
HPHUJLQJPDUNHWERUURZHUVWRLVVXHGHEWLQ
KDUGFXUUHQF\$VDUHVXOWWKHVKDUHRIIRUHLJQ
FXUUHQF\GHQRPLQDWHGGHEWLQFUHDVHGIRUWKH
PDMRULW\RIFRXQWULHVFigure 9DOWKRXJKLWLV
VWLOOPRGHUDWHLQPRVWFDVHV7KHWZRFRXQWULHV
ZLWKWKHKLJKHVWVKDUHRIGHEW$UJHQWLQDDQG
7XUNH\VXEVHTXHQWO\VXIIHUHGPRVWZKHQ86
LQWHUHVWUDWHVURVHLQ7KHWZRFRXQWULHV
ZKHUHIRUHLJQFXUUHQF\GHEWGHFOLQHGPRVWZHUH
+XQJDU\DQG3RODQG+HUHKRXVHKROGV
ERUURZHGKHDYLO\LQHXURVDQG6ZLVVIUDQFV
GXULQJWKHSUHFULVLVERRPSHULRGDVWKH
UHVSHFWLYHLQWHUHVWUDWHVZHUHPXFKORZHUWKDQ
LQGRPHVWLFPDUNHWVRQO\WRUXQLQWRJUHDW
GLIɇFXOWLHVZKHQWKHLUORFDOFXUUHQFLHVGHSUHFLDWHG
VKDUSO\HVSHFLDOO\DJDLQVWWKH6ZLVVIUDQF

Figure 9: Most emerging markets have increased foreign currency debt exposure since the crisis
)RUHLJQFXUUHQF\GHEWLQRI*'3

200
180
160
140
120
100
80
60
40
20
0
,VUDHO

&RORPELD
India

5XVVLDQ)HGHUDWLRQ

0H[LFR

0DOD\VLD
6DXGL$UDELD

&]HFK

$UJHQWLQD
3RODQG

+XQJDU\

%UD]LO

7XUNH\
.RUHD

6RXWK$IULFD

&KLQD

7KDLODQG

Indonesia

&KLOH

2009 2018

6RXUFH,,)&UHGLW6XLVVH

16
Debt crises: Commonalities
and differences
.ULWKLND6XEUDPDQLDQ
&RPPRQWULJJHUVIRUGHEWFULVHVDUHDVVHW
OLDELOLW\PLVPDWFKHVZKLFKDUHH[DFHUEDWHGZKHQ
LQWHUHVWUDWHVULVHLQFUHDVLQJWKHYDOXHRI
OLDELOLWLHVDQGUHGXFLQJWKDWRIDVVHWVHVSHFLDOO\
ZKHQHFRQRPLFZHDNQHVVIXUWKHUXQGHUPLQHV
DVVHWYDOXHVDQGUHGXFHVWKHLUOLTXLGLW\,IEDQNV
DUHKLJKO\OHYHUDJHGWKHFULVLVULVNLQFUHDVHV
)RUHLJQFXUUHQF\GHQRPLQDWHGGHEWFDQLQFUHDVH
VWUHVVZKHQH[WHUQDOGHɇFLWVDUHODUJHDQGZKHQ
FUXFLDO7KHIDVWHUGHEWVDUHUHVWUXFWXUHGDIWHUD
FULVLVWKHPRUHOLPLWHGWKHQHJDWLYHHFRQRPLF
LPSDFWRIFULVHVWHQGVWREH
7KHIROORZLQJWDEOHSURYLGHVDQRYHUYLHZRI
GHEWFULVHVWKDWKDYHRFFXUUHGLQWKHSDVWIHZ
GHFDGHVSRLQWLQJWRFRPPRQDVSHFWVDQG
GLIIHUHQFHV7KLVPD\KHOSLQDVVHVVLQJFXUUHQW
FULVLVULVNV0DMRUFULVHVLHFULVHVWKDWFDXVHG
DVZDVRIWHQWKHFDVHSULRUWRSDVWFULVHV
ERUURZHUVSHJJHGWKHLUFXUUHQF\WRWKH86'
ZKHQWKHSHJEURNHWKHDVVHWOLDELOLW\PLVPDWFK
ZDVPXOWLSOLHG([FKDQJHUDWHɈH[LELOLW\LVWKXVD
NH\LQUHGXFLQJFULVLVULVNV*RYHUQPHQWGHEW
FULVHVDUHPRVWVHULRXVHVSHFLDOO\LQWKHDEVHQFH
RIDFUHGLEOHGRPHVWLFOHQGHURIODVWUHVRUW
ɇQDQFLDOVXSSRUWIURPRIɇFLDOOHQGHUVLVWKHQ
VHYHUHFRQWDJLRQDUHKLJKOLJKWHGLQZKLWHZKLOH
PLQRUFULVHVDUHKLJKOLJKWHGLQJUD\3ULRUWRWKH
*OREDO)LQDQFLDO&ULVLVGHYHORSHGHFRQRPLHV
H[SHULHQFHGRQO\PLQRUFULVHVWKDWFRXOGEHIDLUO\
HDVLO\FRQWDLQHGDQGWKDWGLGQRWKDYHDQ\PDMRU
PDFURHFRQRPLFIDOORXW7KHVHYHUHGHEWFULVHV
ZLWKLQWHUQDWLRQDOUDPLɇFDWLRQVZHUHOLPLWHGWR
HPHUJLQJPDUNHWV

Year Crisis Causes and impact

ȍ 7KH8.ǵV6HFRQGDU\%DQNLQJ&ULVLV (QFRXUDJHGE\ULVLQJSURSHUW\SULFHVGXULQJWKHVDQGVVPDOOHUEDQNVLQWKH8.ZHUH

H[XEHUDQWDERXWOHQGLQJDJDLQVWSURSHUW\6HQWLPHQWZDVDOUHDG\IUDJLOHGXHWRWKHFROODSVHRIWKH
%UHWWRQ:RRGVV\VWHPLQ7KHRLOFULVLVDQGWKHVXEVHTXHQWVWRFNPDUNHWFUDVKDGGHG
WRWKHZRHVRIEDQNVH[SRVHGWRWKH8.SURSHUW\PDUNHWZKHUHSULFHVZHUHGHFOLQLQJLQUHVSRQVH
WRULVLQJLQWHUHVWUDWHVDQGHFRQRPLFZHDNQHVV7KH%DQNRI(QJODQGPDQDJHGWRFRQWDLQWKH
FULVLVE\VXSSRUWLQJEDQNV

1980s 866DYLQJV /RDQ&ULVLV 6DYLQJVDQGORDQ6 /LQVWLWXWLRQVLQWKH86$DFFHSWHGVDYLQJVGHSRVLWVDQGPDGHORDQV

PRUWJDJHDXWRDQGSHUVRQDO,QRUGHUWRWDPHLQɈDWLRQWKH)HGHUDO5HVHUYHUDLVHGUDWHVVKDUSO\
IURPWRLQ7KLVUHVXOWHGLQVLJQLɇFDQWDVVHWOLDELOLW\PLVPDWFKHVIRU6 /
LQVWLWXWLRQVHYHQWXDOO\OHDGLQJWRLQVROYHQF\LQPRVWFDVHV,QDGHTXDWHUHJXODWLRQFRQFHQWUDWHG
OHQGLQJWRWKHUHDOHVWDWHVHFWRUDQGVSHFXODWLYHLQYHVWPHQWVWUDWHJLHVDGGHGWRWKHULVNV
DVVRFLDWHGZLWKWKHVHWKULIWLQVWLWXWLRQV'XHWRWKHUHOXFWDQFHRISROLWLFLDQVWRWDNHRQWKHLVVXHLW
WRRNXQWLOWKHPLGVIRUWKHGHEWVWREHFRPSOHWHO\UHVROYHG

1982 )LUVW/DWLQ$PHULFDQ'HEW&ULVLV /DWLQ$PHULFDQHFRQRPLHVERUURZHGKHDYLO\LQWKHERRPSHULRGVRIWKHVDQGV

LQFOXGLQJLQ86GROODUV)DFHGZLWKZHDNHUFRPPRGLW\SULFHVDIWHUWZRRLOSULFHVKRFNVWKH\UDQ
KXJHFXUUHQWDFFRXQWGHILFLWVWKDWZHUHILQDQFHGZLWKLQFUHDVHGH[WHUQDOERUURZLQJV+RZHYHU
UHSD\PHQWVEHFDPHFRVWOLHUDV86LQWHUHVWUDWHVURVH0H[LFRZDVWKHILUVWWRGHIDXOWOHDGLQJWR
SDQLFLQWKHUHJLRQ5HILQDQFLQJORDQVZKLFKZHUHRIWHQVKRUWWHUPSURYHGLPSRVVLEOH2QO\DIWHU
867UHDVXU\6HFUHWDU\%UDG\SURSRVHGDUHVWUXFWXULQJRIWKHGHEWLQGLGWKHFULVLVPRYHWR
IXOOUHVROXWLRQ

Assessing Global Debt

$VVHVVLQJ*OREDO'HEW 17
 1985 -DSDQ$VVHW3ULFH%XEEOH )ROORZLQJWKH3OD]D$FFRUGWKH\HQDSSUHFLDWHGVKDUSO\ZHDNHQLQJWKH-DSDQHVH
HFRQRP\7RFRPEDWWKLVWKHJRYHUQPHQWDGRSWHGDORRVHILVFDODQGPRQHWDU\SROLF\WKDWOHGWR
LQFUHDVHGHFRQRPLFRYHUKHDWLQJIURPRQZDUG-DSDQHVHUHDOHVWDWHDQGHTXLW\PDUNHWV
EHFDPHVLJQLILFDQWO\LQIODWHGDPLGUDSLGFUHGLWH[SDQVLRQDQGVSHFXODWLRQ7KLVLQWXUQSURPSWHG
WKHFHQWUDOEDQNWRWLJKWHQSROLF\WKHUHE\WULJJHULQJDGRZQWXUQLQWKHUHDOHVWDWHPDUNHW$VWKH
JRYHUQPHQWZDVXQZLOOLQJWRKHOSUHVWUXFWXUHPRUWJDJHVEDQNFUHGLWUHPDLQHGWLJKWIRU\HDUVDQG
DUJXDEO\FRQWULEXWHGWRDOPRVWWZRGHFDGHVRIVWDJQDWLRQDQGGHIODWLRQ

1989 86-XQN%RQG&UDVK 3ULRUWRWKHFUDVKWKHKLJK\LHOGERQGPDUNHWUHFRUGHGH[SRQHQWLDOJURZWKIRUDGHFDGH/HJDO

DFWLRQGXHWRDOOHJHGLQVLGHUWUDGLQJDJDLQVW86LQYHVWPHQWEDQN'UH[HO%XUQKDP/DPEHUWDEDQN
WKDWZDVVWURQJO\H[SRVHGWRWKHMXQNERQGPDUNHWUHVXOWHGLQDUHWUHDWRILQYHVWRUVIDGLQJ
OLTXLGLW\DQGGHIDXOWV'UH[HO%XUQKDPHYHQWXDOO\GHIDXOWHGEXWDVLWZDVQRWDGHSRVLWWDNLQJ
EDQNFRQWDJLRQGLGQRWVSUHDG

ȍ 0H[LFRǵV7HTXLOD&ULVLV $QH[SDQVLRQDU\ɇVFDOVWDQFHDKHDGRIHOHFWLRQVOHVWRDZLGHQLQJH[WHUQDOGHɇFLWZKLFKZDV

ɇQDQFHGWKURXJKDKHDY\UHOLDQFHRQIRUHLJQERUURZLQJWKLVHYHQWXDOO\SURPSWHGVSHFXODWLYH
DWWDFNVRQWKHSHVRǵVSHJDJDLQVWWKH86GROODU$IRUFHGGHYDOXDWLRQRIWKH0H[LFDQFXUUHQF\
LQWHQVLɇHGFDSLWDOɈLJKWDQGOHGWRDYLFLRXVF\FOHRIGHSOHWHGIRUHLJQH[FKDQJHUHVHUYHVKLJKHU
ERUURZLQJFRVWVDQGXOWLPDWHO\GHIDXOW7KHFULVLVZDVFRQWDLQHGDIWHUWKH86$,0)DQG%,6
SURYLGHGODUJHEDLORXWORDQV

ȍ $VLDQ)LQDQFLDO&ULVLV $VLDQHFRQRPLHVH[SHULHQFHGDQHFRQRPLFERRPLQWKHHDUO\V$VPDQ\FRXQWULHVSHJJHG

WKHLUFXUUHQFLHVWRWKH86GROODUFXUUHQWDFFRXQWGHɇFLWVZLGHQHGVKDUSO\DQGFRXQWULHV
ERUURZHGKHDYLO\DQGVKRUWWHUPZKLOHWKH86GROODUDSSUHFLDWHG,PEDODQFHVLQFUHDVHGDVWKH
86)HGHUDO5HVHUYHEHJDQWRWLJKWHQSROLF\LQZKLOHWKH-DSDQHVH\HQDQGWKH&KLQHVH
UHQPLQELZHUHGHYDOXHG7KHFULVLVEHJDQLQ7KDLODQGDQGVSUHDGWRRWKHU$VLDQHFRQRPLHV
SDUWLFXODUO\,QGRQHVLD6RXWK.RUHDDQG0DOD\VLD7KH7KDLEDKWSHJEURNHDQGWKHFXUUHQF\
ZDVIRUFHGWRɈRDWGXHWRLQVXIɇFLHQWIRUHLJQFXUUHQF\UHVHUYHVWKLVOHGWRDPDMRUFRQɇGHQFH
FULVLVDQGFUHGLWFUXQFKLQWKHUHJLRQ7KH,0)VWHSSHGLQWRSURYLGHVXSSRUWDQGPRVW
HFRQRPLHVEHJDQWRUHFRYHULQ

1998 5XVVLDQ)LQDQFLDO&ULVLV 5XVVLDKDGERUURZHGVXEVWDQWLDOO\DVWKHHFRQRP\WRRNRIIIROORZLQJWKHFROODSVHRIWKH6RYLHW

8QLRQ,WDOVRPDLQWDLQHGDɇ[HGH[FKDQJHUDWHZKLFKERRVWHGWKHH[WHUQDOGHɇFLW5XVVLDZDV
KHDYLO\LPSDFWHGE\WKH$VLDQFULVLVDQGWKHVXEVHTXHQWGURSLQRLODQGPHWDOVSULFHV7KLVOHGWR
UDSLGGHSOHWLRQRIIRUHLJQFXUUHQF\UHVHUYHVDQGDZRUVHQLQJRIJRYHUQPHQWɇQDQFHVZKLFKZHUH
DOUHDG\EXUGHQHGE\FRVWVUHODWHGWRWKHɇUVWZDULQ&KHFKQ\D'HVSLWHUHFHLYLQJDORDQIURPWKH
,0)5XVVLDZDVIRUFHGWRGHYDOXHWKHUXEOHDVLWGHIDXOWHGRQGRPHVWLFGHEWDQGDQQRXQFHGD
PRUDWRULXPRQLWVIRUHLJQGHEW,QWHUQDWLRQDOEDQNVHVSHFLDOO\LQ*HUPDQ\ZHUHVHULRXVO\DIIHFWHG
DQGWKH/7&0KHGJHIXQGKDGWREHUHVFXHG

DZ 7KH$UJHQWLQH*UHDW'HSUHVVLRQ 0LOLWDU\UXOHDQGSRRUO\PDQDJHGSXEOLFILQDQFHVUHVXOWHGLQKLJKEXGJHWGHILFLWVFLYLOXQUHVWKLJK

2002 XQHPSOR\PHQWDQGK\SHULQIODWLRQ7KHJRYHUQPHQWWULHGWRVWDELOL]HLQIODWLRQE\SHJJLQJWKHSHVR
WRWKH86GROODU+RZHYHUDVJRYHUQPHQWERUURZLQJZDVQRWFRQWDLQHGWKHFXUUHQF\SHJ
FROODSVHGDQG$UJHQWLQDGHIDXOWHGRQLWVSXEOLFGHEWLQ

ȍ 7KH(QURQ&ROODSVH $FFRXQWLQJWULFNVZHUHXVHGE\WKHFRPSDQ\WRKLGHGHEWLQYDULRXVVSHFLDOSXUSRVHYHKLFOHV

WKLVPDJQLILHGRSHUDWLRQDOFRQVWUDLQWVDQGLQYHVWPHQWORVVHV8OWLPDWHO\WKHFROODSVHRI(QURQ
&RUSRUDWLRQZDVGXHDIDLOXUHRIDXGLWSURFHGXUHVDQGFRUSRUDWHJRYHUQDQFH

ȍ *OREDO)LQDQFLDO&ULVLV 7KH*OREDO)LQDQFLDO&ULVLVRULJLQDWHGIURPDPDMRU86UHDOHVWDWHDVVHWEXEEOHH[FHVVLYH

OHYHUDJHLQWKHSULYDWHVHFWRULQFOXGLQJEDQNVDQGWKHVXEVHTXHQWQHDUFROODSVHRIWKHEDQNLQJ
V\VWHP3ULRUWRWKHFULVLVWKH86HFRQRP\KDGHQMR\HGVL[\HDUVRIVROLGH[SDQVLRQSHDNLQJLQ
'HFHPEHU+RXVHSULFHVKDGDOUHDG\EHJXQWRGHFOLQHLQEXWWKHRYHUOHYHUDJLQJLQ
WKHVXESULPHPRUWJDJHPDUNHWDQGWKHPLVSULFLQJRIULVNHVSHFLDOO\LQWKHIRUPRIFRPSOH[
ILQDQFLDOSURGXFWVRQO\EHFDPHIXOO\DSSDUHQWLQ7KHFULVLVVSUHDGWR(XURSHZKHUHPDQ\

18
 EDQNVZHUHVWURQJO\H[SRVHGWRPRUWJDJHEDFNHGVHFXULWLHV,WZDVRQO\FRQWDLQHGZLWKKHDY\
ILQDQFLDOVXSSRUWIURPWKH86JRYHUQPHQW7$53SURJUDPDQGWKH)HGHUDO5HVHUYHZKLFK
DOVRSURYLGHGYHU\VXEVWDQWLDO86GROODUVZDSOLQHVIRU(XURSHDQFHQWUDOEDQNVWRRQOHQGWR
WKHLUEDQNV

2008 +XQJDULDQ&ULVLV ,QWKHSRVWERRP\HDUV+XQJDULDQEDQNVWHQGHGWRERUURZLQWHUQDWLRQDOO\DQGOHQG

IRUHLJQFXUUHQF\GHQRPLQDWHGGHEWSDUWLFXODUO\6ZLVVIUDQFVDQGHXURVWRORFDOKRXVHKROGVDQG
FRPSDQLHV$PLGJOREDOWXUPRLORULJLQDWLQJIURPWKH*OREDO)LQDQFLDO&ULVLVDQGWKHDGYHQWRI
UHFHVVLRQLQ(XURSHWKH+XQJDULDQIRULQWGHSUHFLDWHGVLJQLILFDQWO\UHVXOWLQJLQODUJHXQKHGJHG);
ULVNLQ+XQJDU\ǵVSULYDWHVHFWRU%DQNVERUHVXEVWDQWLDOFRVWVZKLFKZRUVHQHGWKHLUFDSLWDO
DGHTXDF\UDWLRVIRUFLQJWKHPWRGHOHYHUDJHDQGVORZWKHSDFHRIFUHGLWJURZWK+XQJDU\UHFHLYHG
DVLJQLILFDQW,0)ORDQZKLFKKHOSHGWKHFRXQWU\UHFRYHUIDLUO\IDVW

ȍ (XUR]RQH'HEW&ULVLV 7KH*OREDO)LQDQFLDO&ULVLVVSUHDGWR(XURSHGXHWRWKHVLJQLILFDQWH[SRVXUHRI(XURSHDQEDQNV

WULJJHULQJDVKDUSJOREDOUHFHVVLRQ,QODWHWKHQHZO\HOHFWHG*UHHNJRYHUQPHQWUHYHDOHG
WKDWLWVSUHGHFHVVRUKDGVLJQLILFDQWO\XQGHUVWDWHGWKHEXGJHWGHILFLWDQGH[WHUQDOGHEW,QWKH
SUHFHGLQJERRPSHULRGERWKWKHJRYHUQPHQWDQGSULYDWHVHFWRUKDGERUURZHGKHDYLO\DEURDGDQG
ILQDQFHGDUHDOHVWDWHEXEEOH&RQFHUQVDERXWD*UHHNH[LWIURPWKH(XUR]RQHWULJJHUHGDVKDUS
ULVHLQ\LHOGVDQGDFULVLVWKDWKHDYLO\LPSDFWHGEDQNVKROGLQJWKHGHEW+HQFHWKHOHYHUDJHHIIHFWV
ZHUHPXOWLSOLHGZKHQERWKUHDOHVWDWHYDOXHVDQGJRYHUQPHQWGHEWSULFHVFROODSVHG7KH*UHHN
JRYHUQPHQWDQGLWVEDQNVEHFDPHLQVROYHQW'HEWVZHUHSDUWLDOO\UHVWUXFWXUHGDQGWKH(8LQ
FRPELQDWLRQZLWKWKH,0)SURYLGHGKXJHORDQVWRVXSSRUWWKHJRYHUQPHQWDQG*UHHNEDQNVZKLOH
WKH(&%FRQWLQXHGWRVXSSRUWFRPPHUFLDOEDQNVYLDWKH*UHHNFHQWUDOEDQN2ZLQJWRLQVXIILFLHQW
GHEWUHVWUXFWXULQJDQGWKHLQDELOLW\RI*UHHFHWRGHYDOXHLWVFXUUHQF\WKHFULVLVFDUULHGRQIRUPDQ\
\HDUV2WKHUFRXQWULHVWKDWVXIIHUHGDUHDOHVWDWHUHODWHGFULVLVLQFOXGLQJ,UHODQGDQG6SDLQZHUH
DEOHWRUHFRYHUPRUHTXLFNO\SDUWO\EHFDXVHWKHLUEDQNVZHUHEDLOHGRXWPXFKIDVWHU

2018 $UJHQWLQDFXUUHQF\FULVLV $UJHQWLQDKDVDKLVWRU\RIGHEWFULVHVDZWKHODWHVWRIZKLFKRFFXUUHGLQDZZKLFKKDYH

HVVHQWLDOO\EHHQWULJJHUHGE\WKHLQDELOLW\RIJRYHUQPHQWWRPDLQWDLQILVFDOGLVFLSOLQHLQWKHIDFHRI
SUHVVXUHIURPHQWUHQFKHGLQWHUHVWJURXSV:LWKUHIRUPLVW3UHVLGHQW0DFULEHLQJHOHFWHGLQ
DQGUDLVLQJKRSHVIRUIXQGDPHQWDOUHIRUP$UJHQWLQDVHWWOHGLWVRXWVWDQGLQJGHEWLVVXHVZLWK
IRUHLJQOHQGHUVDQGZDVVXEVHTXHQWO\DEOHWRUHDFFHVVLQWHUQDWLRQDOERQGPDUNHWVDIWHUDKLDWXV
RI\HDUV+RZHYHUDVWKH86)HGEHJDQWRWLJKWHQSROLF\IDVWHULQHDUO\GRXEWVRYHU
$UJHQWLQDǵVUHSD\PHQWFDSDFLW\EHJDQWRLQWHQVLI\ZKLFKOHGWRDUDSLGDQGVKDUSGHSUHFLDWLRQRI
WKHSHVRDZE\-XO\WKHSHVRKDGORVWPRUHWKDQKDOILWVYDOXHUHODWLYHWRWKHVWDUWRIWKH\HDU
7KHUHTXHVWIRU,0)HPHUJHQF\OHQGLQJRQO\ZRUVHQHGLQYHVWRUVHQWLPHQWDVWKHFRXQWU\
VWUXJJOHGZLWKDVXUJHRILQIODWLRQDQGZRUVHQLQJJURZWK7KHJRYHUQPHQWVHFXUHGD\HDU
IXQGLQJSODQZRUWK86'ELOOLRQIURPWKH,0)DQGSURPLVHGWRIROORZDQDXVWHUHILVFDOSURJUDP
ZKLOHWKHFHQWUDOEDQNKLNHGUDWHVPDVVLYHO\IURPLQ0D\WRLQ$XJXVWWR
FXUEWKHSHVRGURS6NHSWLFLVPUHJDUGLQJWKHVXFFHVVRIWKHSURJUDPUHPDLQV

2018 7XUNH\VWUHVVHV ,QWKHPLGVWRIWKH$UJHQWLQHFULVLV7XUNH\ǵVFXUUHQF\DOVRFDPHXQGHUVHYHUHSUHVVXUH7KH

FRXQWU\ZDVUXQQLQJDYHU\KLJKFXUUHQWDFFRXQWGHILFLWRI*'3LQRQWKHEDFNRI
H[FHVVLYHHOHFWLRQUHODWHGJRYHUQPHQWVSHQGLQJDQGH[WHUQDOGHEWKDGJURZQVLJQLILFDQWO\LQSDVW
\HDUV7KDWVDLGDOPRVWZDVSULYDWHVHFWRUGHEWZKLOHJRYHUQPHQWGHEWZDVPRGHUDWH7KH
SUHVVXUHRQWKHFXUUHQF\ZDVDOVRGXHWRLQYHVWRUVǵFRQFHUQVRYHUWKHLQGHSHQGHQFHRIWKH
7XUNLVKFHQWUDOEDQNFUHGLWUDWLQJGRZQJUDGHVDQGFODVKHVEHWZHHQWKH7XUNLVKDQG86
JRYHUQPHQWV%HWZHHQ0D\DQG6HSWHPEHUWKH7XUNLVKOLUDKDGGHSUHFLDWHG&DSLWDO
IOLJKWEHFDPHDUHDOFRQFHUQDVGHPDQGVIRUGHEWUHVWUXFWXULQJJUHZLQWKHIDFHRIDPXFKZHDNHU
OLUD7KHFHQWUDOEDQNHYHQWXDOO\UDLVHGLQWHUHVWUDWHVE\RYHUESVDQGFDSLWDOIOLJKWZDVDOVR
UHGXFHGE\OLPLWLQJEDQNDFWLYLW\7KHFXUUHQF\UHFRYHUHGJURXQGTXLWHVXEVWDQWLDOO\EXWLWPD\EH
WRRHDUO\WRGHFODUHDOOFOHDU

Assessing Global Debt

$VVHVVLQJ*OREDO'HEW 19
20
2. Government debt – will the
end of QE trigger defaults?
0D[LPH%RWWHURQDQG2OLYHU$GOHU

Quantitative easing reduced the fiscal burden of advanced economy

governments by lowering interest rates and by replacing interest-
bearing government debt with zero-interest-bearing cash. If govern-
ments do not rein in their deficits as quantitative easing ends, the
resulting rise in interest rates could, in principle, trigger defaults.

:LWKLQWKH(XUR]RQHSRSXOLVWSROLWLFVDGGWRWKH
ULVNV7KDWVDLGWKHGHPDQGIRUJRYHUQPHQW
ERQGVKDVVRIDUSURYHQH[WUDRUGLQDULO\
UHVLOLHQWSUREDEO\GXHWRWKHVRPHZKDWGHIOD-
WLRQDU\VWDWHRIWKHJOREDOHFRQRP\-DSDQLVD
VFKHPHVKDGUHDFKHGDOPRVW86'WULOOLRQ
LQDGYDQFHGHFRQRPLHVDWWKHHQGRI
XSIURP86'WULOOLRQDWWKHHQGRI
,QSHUFHQWRI*'3-DSDQWRSVWKHǷGHEW
OHDJXHǸZLWKDQHVWLPDWHGUDWLRRI
FDVHLQSRLQW7RSUHYHQWGHIODWLRQIURPWDNLQJ IROORZHGE\*UHHFHDQG,WDO\
KROGDJDLQFHQWUDOEDQNVPD\HYHQKDYHWR 0HDQZKLOHWKH86DQG-DSDQHVHJRYHUQPHQWV
DEDQGRQWKHLUPRQHWDU\WLJKWHQLQJSODQVDQG RZHDERXWDQGRIWRWDODGYDQFHG
UHVWDUWTXDQWLWDWLYHHDVLQJ4(ȍZKLFKZRXOG
RQFHDJDLQVXSSRUWJRYHUQPHQWERQGV,Q
FRXQWULHVZLWKODUJHWZLQGHILFLWVVXFKDVWKH
8.DQG86$KRZHYHUVXFKDSROLF\VKLIWFRXOG
WULJJHUVKDUSFXUUHQF\GHYDOXDWLRQDQGERRVW
LQIODWLRQWKH$$$UDWLQJRI867UHDVXULHVFRXOG
EHLQTXHVWLRQ+RZHYHUWKHULVNRIRXWULJKW
GHIDXOWVHHPVFRQVLGHUDEO\JUHDWHULQQRQJRY-
HUQPHQWVHFWRUVWKDWERUURZHGH[FHVVLYHO\RQ
WKHEDFNRIWKH4(LQGXFHGILQDQFLDOPDUNHW
ERRPWKDQIRUJRYHUQPHQWGHEWLWVHOI
$IWHUGHFOLQLQJVRPHZKDWIURPWKHHDUO\V
XQWLOWKHPLGVWKHUDWLRRIJRYHUQPHQW
GHEWWR*'3URVHVLJQLILFDQWO\LQWKHODWHV
HFRQRP\JRYHUQPHQWGHEWUHVSHFWLYHO\
)UDQFHWKH8.DQG,WDO\ZLWKHDFKVOLJKWO\
DERYHDUHQH[W7KH86GHEWUDWLRKDV
UHDFKHGDSSUR[LPDWHO\WKHVDPHOHYHODVDIWHU
::,,LHDSRLQWLQWLPHDWZKLFKWKHSRWHQWLDO
IRUWKH86$WRRXWJURZLWVGHEWZDVKXJHO\
VXSHULRUWRQRZ*LYHQWKDWIDFWDVZHOODVWKH
GHIDFWRGHIDXOWRIWKH*UHHNJRYHUQPHQW
GXULQJWKH(XUR]RQHFULVLVDQGWKHORVVRI
DFFHVVWRFDSLWDOPDUNHWVE\RWKHUVDSSUHKHQ-
VLRQRYHUJRYHUQPHQWLQGHEWHGQHVVLVXQGHU-
VWDQGDEO\KLJK
7KHWUDMHFWRU\RIJRYHUQPHQWGHEWLVPDUNHGO\
GLIIHUHQWLQHPHUJLQJPDUNHWV+HUHJRYHUQ-
LQDGYDQFHGHFRQRPLHVFigure 1WKHPDLQ
GULYHUVLQFOXGHGKHLJKWHQHGPLOLWDU\VSHQGLQJE\
WKH86$DZRUVHQLQJILVFDOVLWXDWLRQLQ-DSDQ
DQGWKHHFRQRPLFVORZGRZQDURXQGWKHWXUQRI
WKHPLOOHQQLXP'HVSLWHTXLWHVWURQJHFRQRPLF
JURZWKWKHGHEWSLFWXUHIDLOHGWRLPSURYHLQWKH
VRQO\WRZRUVHQVLJQLILFDQWO\DIWHUWKH
ILQDQFLDOFULVLVLQSDUWGXHWRF\FOLFDOIDFWRUV
PHQWVDOVRERUURZHGVWURQJO\LQWKHVDV
LQWHUHVWUDWHVGHFOLQHGRQO\WRUXQLQWRVHYHUH
GLIILFXOWLHVLQWKHODWHV+RZHYHUD
FRPELQDWLRQRIRXWULJKWGHIDXOWVDQGPRUH
UHVWULFWLYHILVFDOSROLFLHVORZHUHGWKHGHEWUDWLR
YHU\VLJQLILFDQWO\LQWKHV:KLOHERUURZLQJ
KDVSLFNHGXSDJDLQLQWKHSDVWIHZ\HDUVWKH
JRYHUQPHQWGHEWUDWLRVJHQHUDOO\UHPDLQ
(see Figure 7SDJH7KH%DQNIRU,QWHUQD- VLJQLILFDQWO\ORZHULQHPHUJLQJPDUNHWVWKDQLQ
WLRQDO6HWWOHPHQWVHVWLPDWHVWKDWJHQHUDO WKHDGYDQFHGHFRQRPLHVVHHDOVR Figure 3
JRYHUQPHQWGHEWZKLFKLQFOXGHVOLDELOLWLHVRIDOO RQSDJH
JRYHUQPHQWOHYHOVDQGRIVRFLDOVHFXULW\

Assessing Global Debt 21

Figure 1: Advanced economy government debt ratio almost back to its 1945 peak
,QRI*'3
180
160
140
120
100
80
60
40
20
0
1800 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000

*$GYDQFHG *(PHUJLQJ

6RXUFH,0)&UHGLW6XLVVH

Figure 2: The interest burden of governments has remained moderate so far

KDVUHPDLQHGPRGHUDWHVRIDU,QWHUHVWSD\PHQWVRIWRWDOJRYHUQPHQWUHYHQXH
30

25

20

15

10

0
1990 1995 2000 2005 2010 2015

6ZLW]HUODQG *HUPDQ\ (XURDUHD Spain )UDQFH

8QLWHG.LQJGRP ,WDO\ Japan 2(&'PHPEHUV United States

6RXUFH:RUOG%DQN&UHGLW6XLVVH

Figure 3: How central banks accumulated assets

,Q86'WULOOLRQ

14
)RUHFDVW
12

10

0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Fed (&% %R( %R- 7RWDO

6RXUFH7KRPVRQ5HXWHUV&UHGLW6XLVVH

22
QE alleviated the debt burden
'HVSLWHWKHVLJQLILFDQWLQFUHDVHLQWKHGHEW
UDWLRWKHEXUGHQRIGHEWUHPDLQHGOLPLWHGIRU
DGYDQFHGHFRQRP\JRYHUQPHQWVLQWKHSRVW
FULVLVHUD,QIDFWWKHUDWLRRILQWHUHVWUDWH
H[SHQVHVUHODWLYHWRJRYHUQPHQWUHYHQXHZDV
VWDEOHRUHYHQFRQWLQXHGWRGHFOLQHDIWHUDWHP-
SRUDU\ULVHLQWKHLPPHGLDWHDIWHUPDWKRIWKH
IRXQGWKDWWKH4(SURJUDPKDVUHGXFHGZHLJKWHG
DYHUDJH\LHOGVE\DURXQGSHUFHQWDJHSRLQWV
ZLWK\LHOGVRIWKHPRUHYXOQHUDEOHSHULSKHU\
FRXQWULHVGURSSLQJWKHPRVW2
,QVRIDUDV4(ERRVWHGHFRQRPLFJURZWKWKH
LPSDFWRQWKHGHEWEXUGHQZDVOLNHO\HYHQODUJHU
)LQDOO\DVFHQWUDOEDQNVDZSDUWRIJRYHUQPHQW
DZQRZRZQVLJQLILFDQWSRUWLRQVRIJRYHUQPHQW
FULVLVFigure 2DVLQWHUHVWUDWHVFRQWLQXHGWR ERQGVRXWVWDQGLQJFigure 4QHWJRYHUQPHQW
UHWUHDWDFURVVWKHDGYDQFHGZRUOGDWOHDVWXQWLO GHEWKDVGHFOLQHGZKLFKDUJXDEO\UHGXFHV
TXLWHUHFHQWO\,QVRPHRIWKHFRXQWULHVVKRZQ GHIDXOWULVNDVZHOO,QWKHFRXQWULHVZKLFKZHUH
in Figure 2QRWDEO\,WDO\DQG6SDLQWKHUDWLRRI VXSSRUWHGE\WKH(XURSHDQ6WDELOLW\0HFKDQLVP
LQWHUHVWSD\PHQWVWRRYHUDOOUHYHQXHLVOLNHO\WR
KDYHGHFOLQHGIXUWKHULQDVZHOODV
GXHWRWKHHIIHFWRIERQGVEHDULQJKLJKLQWHUHVW
UDWHVEHLQJUHSODFHGE\ERQGVZLWKORZHU
LQWHUHVWUDWHV
4XDQWLWDWLYHHDVLQJZKLFKZDVODXQFKHGE\
YDULRXVFHQWUDOEDQNVLQWKHSRVWFULVLV\HDUV
PRVWOLNHO\FRQWULEXWHGWRWKLVGHFOLQHLQLQWHUHVW
FRVWVFigure 3VKRZVWKHSURFHVVRIDVVHW
DFFXPXODWLRQRIFHQWUDOEDQNVLQWKHSRVWFULVLV
SHULRG$FDGHPLFVWXGLHVVXJJHVWWKDWLQWKH
86$WKHILUVW4(SURJUDPOHGWRDGHFOLQHLQ
JRYHUQPHQWERQG\LHOGVRIWRSHUFHQWDJH
(60RULWVSUHGHFHVVRUWKH()6)DVZHOODV
WKH,QWHUQDWLRQDO0RQHWDU\)XQGPRVWSURPL-
QHQWO\*UHHFHEXWDOVR6SDLQ3RUWXJDODQG
,UHODQGWKHVHORDQVDUHFODVVLILHGLQFigure 4
XQGHUǷGHEWKHOGE\QRQUHVLGHQWVǸ$VWKHVH
ORDQVZHUHJUDQWHGXQGHUSUHIHUHQWLDOWHUPV
WKH\HIIHFWLYHO\DOVRDOOHYLDWHWKHGHEWEXUGHQ
DQGUHGXFHGHIDXOWULVN
The ending of QE potentially raises
default risks
-XVWDV4(HDVHGILVFDOFRQVWUDLQWVWKHULVNLV
RIFRXUVHWKDWDQHQGWR4(TXDQWLWDWLYH
SRLQWV,QWKH8.WKHHVWLPDWHVYDU\EHWZHHQ
DQGSHUFHQWDJHSRLQWVDQGWKH%DQNRI
-DSDQǵVSXUFKDVHVEHWZHHQDQGDUH
HVWLPDWHGWRKDYHUHGXFHG\LHOGVE\DQHVWLPDWHG
SHUFHQWDJHSRLQWV1,QWKH(XUR]RQHVWXGLHV
6HH<X(GLVRQǷ'LG4XDQWLWDWLYH(DVLQJ:RUNǸIURPWKH
WLJKWHQLQJZLOOERRVWERUURZLQJFRVWVRIJRYHUQ-
PHQWVDQGWKHUHE\LQFUHDVHGHIDXOWULVN+RZ
KLJKWKLVULVNLVHVVHQWLDOO\GHSHQGVRQZKHWKHU
6HH'H6DQWLV5REHUWRǷ,PSDFWRIWKHDVVHWSXUFKDVH
SURJUDPPHRQHXURDUHDJRYHUQPHQWERQG\LHOGVXVLQJ
PDUNHWQHZVǸIURPWKH(XURSHDQ&HQWUDO%DQN:RUNLQJ
)HGHUDO5HVHUYH%DQNRI3KLODGHOSKLD 3DSHU6HULHV

)LJXUH&HQWUDOEDQNVQRZRZQVLJQLɇFDQWVKDUHVRIJRYHUQPHQWGHEW
,Q

100
90
80
70
60
50
40
30
20
10
0
Japan *UHHFH ,WDO\ 3RUWXJDO USA Spain )UDQFH UK ,UHODQG *HUPDQ\

+HOGE\WKHFHQWUDOEDQN +HOGE\UHVLGHQWVH[FOFHQWUDOEDQN +HOGE\QRQUHVLGHQWV

6RXUFH,0):RUOG%DQN7KRPVRQ5HXWHUV&UHGLW6XLVVH

Assessing Global Debt 23

Figure 5: How debt sustainability would be affected by an interest-rate shock
,QRI*'3
6

-1

-2

-3

-4
*UHHFH 3RUWXJDO ,WDO\ Japan USA Spain UK &DQDGD )UDQFH ,UHODQG *HUPDQ\ 6ZLW]HUODQG

5HTXLUHGSULPDU\EDODQFHZLWKDWZRSHUFHQWDJHSRLQWLQFUHDVHLQUHILQDQFLQJFRVWV (VWLPDWHGSULPDU\EDODQFH

6RXUFH,0)&UHGLW6XLVVH

WKHJRYHUQPHQWGHEWUDWLRPRYHVRQWRDQ
ǷH[SORVLYHǸXQVXVWDLQDEOHSDWK)RUPDOO\WKH
HYROXWLRQRIWKHUDWLRRIGHEWWR*'3GHSHQGVRQ
WKUHHSDUDPHWHUVWKHDYHUDJHQRPLQDOLQWHUHVW
UDWHRQGHEWWKHJURZWKUDWHRIQRPLQDO*'3
DQGWKHSULPDU\ILVFDOEDODQFHLHWKHJRYHUQ-
UHODWLYHWRWKHLUFXUUHQWOHYHOVZKLOH*'3JURZWK
UHPDLQHGXQFKDQJHG$VWKHFKDUWVXJJHVWV
VXFKDULVHLQUHILQDQFLQJFRVWVZRXOGQRWEH
SDUWLFXODUO\SDLQIXOIRU,UHODQG*HUPDQ\DQG
6ZLW]HUODQGZKLFKDOOUXQSULPDU\VXUSOXVHVWKDW
DUHFXUUHQWO\KLJKHUWKDQZKDWZRXOGEHQHHGHG
PHQWEDODQFHH[FOXGLQJLQWHUHVWSD\PHQWV3
+LJKHUHFRQRPLFJURZWKZLOOPDNHWKHUDWLR
GHFOLQHZKHUHDVKLJKHULQWHUHVWUDWHVRUDKLJKHU
SULPDU\GHILFLWZLOOPDNHWKHUDWLRJURZIDVWHU
Figure 5VKRZVWKHFXUUHQWSULPDU\EDODQFHRI
VHOHFWHGDGYDQFHGHFRQRPLHVDQGWKHSULPDU\
EDODQFHWKDWZRXOGEHUHTXLUHGWRVWDELOL]HWKH
GHEWWR*'3UDWLRLIWKHDYHUDJHGHEWUHILQDQFLQJ
FRVWVZHUHWRULVHE\WZRSHUFHQWDJHSRLQWV
)RUPDOO\WKHFKDQJHLQGHEWLVFRPSXWHGDVIROORZV
řGt=dt-1(it–yt )-pbt+sftZKHUHřGt LVWKHFKDQJHLQWKH
GHEWWR*'3UDWLRdt-1LVWKHGHEWWR*'3UDWLRIURPWKH
WRVWDELOL]HWKHLUGHEWWR*'3UDWLRVLQDKLJK-
HULQWHUHVWUDWHHQYLURQPHQW*UHHFH3RUWXJDO
DQG,WDO\FXUUHQWO\UXQSULPDU\VXUSOXVHVDVZHOO
EXWVRPHPRUHILVFDOWLJKWHQLQJZRXOGEHQHHGHG
LIWKHLUUHVSHFWLYHILQDQFLQJFRVWVZHUHWRFOLPE
E\WZRSHUFHQWDJHSRLQWV
As Figure 5VKRZVWKHSULPDU\VXUSOXVZKLFK
WKH*UHHNJRYHUQPHQWLVUXQQLQJLVDOUHDG\
H[WUDRUGLQDULO\KLJK7KHUHPXVWEHVHULRXV
GRXEWVZKHWKHUWKLVXOWUDUHVWULFWLYHSROLF\VWDQFH
FDQEHPDLQWDLQHGRYHUWKHORQJHUWHUPDV
ZRXOGEHUHTXLUHGWRUHGXFHGHEWJLYHQWKH
QHJDWLYHLPSDFWRQWKHHFRQRP\DQGVRFLHW\
,WUDWKHUVHHPVOLNHO\WKDWRIILFLDOGHEWUHOLHIZLOO
SUHYLRXVSHULRG\HDULWLVWKHQRPLQDOLQWHUHVWUDWHyt is the
QHHGWREHJUDQWHGWR*UHHFHLQRUGHUIRUWKH
QRPLQDO*'3JURZWKUDWHpbt LVWKHSULPDU\EDODQFHDQGsft
HFRQRP\WREHDEOHWRUHFRYHU7KHRWKHU
WKHVRFDOOHGVWRFNɈRZDGMXVWPHQWLHH[FHSWLRQDOVSHQGLQJ
HFRQRPLHVVKRZQLQFigure 5FXUUHQWO\UXQ
VXFKDVEDQNEDLORXWV$VVXPLQJQRVWRFNɈRZDGMXVWPHQW
SULPDU\GHILFLWVDQGZRXOGDOOQHHGWRVZLWFKWR
WKHGHEWWR*'3UDWLRLVWKHUHIRUHFRQVWDQWZKHQřGt=0
SULPDU\VXUSOXVHVLQRUGHUWRVWDELOL]HWKHLU
ZKLFKLPSOLHVdt-1(it–yt ) = pbt+HQFHWKHKLJKHUWKHQRPLQDO
GHEWWR*'3UDWLRV7KHILVFDOHIIRUWUHTXLUHG
LQWHUHVWUDWHLWRUWKHORZHUWKHQRPLQDO*'3JURZWKytWKH
ZRXOGEHSDUWLFXODUO\SURQRXQFHGLQ-DSDQDQGLQ
ODUJHUWKHSULPDU\EDODQFHpbt PXVWEH2QO\ZKHQWKHQRPLQDO
WKH86$ZKHUHDQDGMXVWPHQWRIDURXQGILYH
LQWHUHVWUDWHLVORZHUWKDQ*'3JURZWKFDQDJRYHUQPHQWUXQD
SHUFHQWDJHSRLQWVRI*'3ZRXOGEHUHTXLUHGLQ
OLPLWHGSULPDU\GHɇFLWLHDQHJDWLYHSULPDU\EDODQFHZLWKRXW
WKHSULPDU\EDODQFH*LYHQWKDWLQWHUHVWUDWHVLQ
LQFUHDVLQJWKHGHEWWR*'3UDWLR
WKH86$KDYHLQFUHDVHGRYHUWKHSDVWWZR\HDUV

24
DQGWKHILVFDOGHILFLWKDVEHHQERRVWHGFRQVLGHU-
DEO\GXHWRWKHWD[FXWVLQHDUO\ZKLOH86
JURZWKLVQRZVORZLQJVWDELOL]LQJWKH86
JRYHUQPHQWGHEWUDWLRZRXOGEHGLIILFXOW
7KDWVDLGDIXUWKHUULVHRILQWHUHVWUDWHVE\
LVDUDWKHUVWDUNDVVXPSWLRQ,WZRXOGOLNHO\RQO\
FRPHDERXWLIHFRQRPLFJURZWKZHUHDOVR
PDUNHGO\KLJKHU7KLVZRXOGLQWXUQLPSURYHGHEW
VXVWDLQDELOLW\+RZHYHUDOWKRXJKWKLVVRXQGV
VRPHZKDWLPSODXVLEOHIXQGDPHQWDOVGRVXJJHVW
WKDWWKHULVNRIDQXQVXVWDLQDEOHGHYHORSPHQWRI
JRYHUQPHQWGHEWLVLQIDFWKLJKHULQWKH86$WKDQ
LQWKH(XUR]RQHLQFOXGLQJ,WDO\7KDWVDLGRXWULJKW
GHIDXOWE\WKH86JRYHUQPHQWVHHPVKLJKO\
XQOLNHO\JLYHQWKHDELOLW\RIWKH)HGHUDO5HVHUYHWR
DFWDVDOHQGHURIODVWUHVRUW,QWKHIROORZLQJZH
WDNHDFORVHUORRNDWWKHGHEWVLWXDWLRQLQWKH*
LHWKH86$-DSDQWKH(XUR]RQHDQGWKH8.
Japan: So far no signs of unwillingness to
accumulate non-interest-bearing cash
$NH\IDFWRUWKDWPLWLJDWHVWKHULVNRIVRYHUHLJQ
GHIDXOWLVWKHDELOLW\RIWKHFHQWUDOEDQNWR
SRWHQWLDOO\SURYLGHYHU\ODUJHDPRXQWVRIIXQGLQJ
WRWKHJRYHUQPHQWLHWRDFWDVDOHQGHURIODVW
UHVRUWIRUWKHVRYHUHLJQZLWKRXWGHVWDELOL]LQJPDU-
NHWV:KLOHKDYLQJORQJEHHQDWDERRPRQHWL]LQJ
GHEWVHHPVWRKDYHSURYHQLWVHOIDYLDEOHRSWLRQ
2EYLRXVO\WKLVVFKHPHLVRQO\YLDEOHDVORQJ
DVWUXVWLQWKHGRPHVWLFFXUUHQF\LVPDLQWDLQHG
6WUXFWXUDOLVVXHVWKDWGHSUHVVLQWHUHVWUDWHV
SDUWLFXODUO\WKHKLJKVDYLQJVUDWHVRIWKHDJLQJ
-DSDQHVHSRSXODWLRQDUJXDEO\PDNHLWHDVLHU
IRUWKH%R-WRFRQWLQXHWKLVSROLF\(IIHFWLYHO\
-DSDQHVHLQYHVWRUVGRQRWVHHPWREHOLHYHWKDW
WKHUHLVDQRWKHUǷVDIHǸDVVHWWKDWFDQFRPSHWH
ZLWKJRYHUQPHQWERQGVDWFORVHWR]HUR\LHOGV
RUHTXLYDOHQWO\FDVK2IFRXUVHWKHULVNWKDW
LQIODWLRQH[SHFWDWLRQVVXGGHQO\ULVHLQ-DSDQ
FDQQRWEHH[FOXGHGHJLQWKHFRQWH[WRI
DQRLOSULFHVKRFNRUULVLQJZDJHVGXHWR
LQFUHDVLQJODERUVKRUWDJHVWKDWFRXOGGULYHXS
\LHOGVDQGUHQGHUWKHGHEWSDWKXQVXVWDLQDEOH
7RPDLQWDLQVWDELOLW\WKHJRYHUQPHQWZRXOGDW
WKDWSRLQWQHHGWRGUDVWLFDOO\FKDQJHLWVILVFDO
SROLF\VWDQFH6RIDUKRZHYHUWKHUHKDYHQRW
EHHQDQ\LQGLFDWLRQVWKDWWKHERQGPDUNHWLV
EHFRPLQJGHVWDELOL]HGRQDFFRXQWRIWKH%R-ǵV
DJJUHVVLYHPRQHWDU\SROLF\VWDQFH
Eurozone: Solvency and default are
political choices
7KHVLWXDWLRQLQWKH(XUR]RQHGLIIHUVIURP
-DSDQǵVLQYDULRXVZD\V2QWKHSRVLWLYHVLGH
WKHILVFDOVLWXDWLRQLVIDUEHWWHUWKDQLQ-DSDQ
ZLWKSULPDU\ILVFDOEDODQFHVSRVLWLYHLQPDQ\RI
WKHFULWLFDOFRXQWULHVDQGFORVHWREDODQFLQJ
XQGHUFHUWDLQFLUFXPVWDQFHVQDPHO\ZKHQWKH HOVHZKHUHVHHFigure 57KLVLVGXHWR
ORQJWHUPLQIODWLRQRXWORRNLVVXEGXHGWKHULVN VXEVWDQWLDOILVFDOWLJKWHQLQJLQWKHDIWHUPDWKRI
RIFXUUHQF\GHSUHFLDWLRQDSSHDUVORZRUPRUH WKHILQDQFLDODQGHXURFULVHVFigure 6,Q
JHQHUDOO\WKHZLOOLQJQHVVRIWKHSXEOLFWR DGGLWLRQWKH(XURSHDQ&HQWUDO%DQN(&%DOVR
DFFXPXODWHQRQLQWHUHVWEHDULQJFDVKLVUREXVW HQJDJHGLQODUJHVFDOHJRYHUQPHQWGHEW
$VWURQJQHWIRUHLJQDVVHWSRVLWLRQRIFRXQWULHV SXUFKDVHVGXULQJLWV4(SURJUDPZKLFKODVWHG
DGGVWRWKLVUREXVWQHVVEHFDXVHLWWHQGVWR IURPXQWLOWKHHQGRIDQGWKHUHIRUH
LQFUHDVHIRUHLJQGHPDQGIRUWKHORFDOFXUUHQF\ DOVRKROGVDFRQVLGHUDEOHDPRXQWRIJRYHUQ-
6ZLW]HUODQGLVFHUWDLQO\DQHFRQRP\WKDWIXOILOOV
WKHVHFRQGLWLRQVDOWKRXJKLWVORZOHYHORI
JRYHUQPHQWGHEWPDNHVWKLVOHVVUHOHYDQW-DSDQ
LVDPXFKPRUHUHOHYDQWFDVHJLYHQLWVYHU\KLJK
OHYHORIJRYHUQPHQWGHEW
7KH-DSDQHVHHFRQRP\KDVEHHQFKDUDFWHUL]HG
E\ORZJURZWKDQGGHIODWLRQVLQFHWKHV
5HSHDWHGILVFDOVWLPXOXVSURJUDPVDVZHOODVWKH
PHQWGHEWRQLWVEDODQFHVKHHWVHHFigure 4
ZKLFKDUJXDEO\UHGXFHVGHIDXOWULVN
+RZHYHULQFRQWUDVWWR-DSDQLQWHUHVWUDWHV
KDYHQRWXQLIRUPO\GHFOLQHGLQWKH(XUR]RQH
7KHPDLQUHDVRQLVWKDWWKHERQGVRILQGLYLGXDO
JRYHUQPHQWVDUHQRWPXWXDOO\JXDUDQWHHGE\D
ILVFDOXQLRQ4XLWHWKHFRQWUDU\WKHFXUUHQF\
XQLRQǵVIRUPDOǷQREDLORXWFODXVHǸOLPLWVVXFK
SURORQJHGHIIRUWVRIWKH%DQNRI-DSDQ%R-WR
JHQHUDWHLQIODWLRQKDYHVRIDUDWEHVWVHHQ
PRGHVWUHVXOWV0HDQZKLOHDVDFRQVHTXHQFH
RILWVODUJHVFDOHSXUFKDVHVRIJRYHUQPHQWGHEW
WKH%R-KROGVDSSUR[LPDWHO\RQHWKLUGRILWV
VXSSRUWDQGDOVRFRQVWUDLQVWKH(&%LQLWV
OHQGHURIODVWUHVRUWIXQFWLRQ7KLVLQWXUQ
PHDQVWKDWLWLVOHVVOLNHO\IRUFRXQWU\ULVN
SUHPLXPVRQVRYHUHLJQGHEWWRQDUURZ7KH
2FWREHU'HDXYLOOHDJUHHPHQWEHWZHHQ
JRYHUQPHQWǵVRXWVWDQGLQJGHEWVHHFigure 4 IRUPHU)UHQFK3UHVLGHQW6DUNR]\DQG*HUPDQ
0XFKRIWKHUHPDLQGHULVKHOGE\ODUJH-DSDQHVH &KDQFHOORU0HUNHOZKLFKFDOOHGIRUWKHSULYDWH
LQVWLWXWLRQDOLQYHVWRUVVXFKDVWKH*RYHUQPHQW VHFWRUKDYLQJWREHDUVRPHORVVHVLQWKHFDVH
3HQVLRQ,QYHVWPHQW)XQG*3,)WKHZRUOGǵV
ODUJHVWSHQVLRQIXQGZKLFKLQWXUQLQYHVWV
VDYLQJVRI-DSDQHVHKRXVHKROGV$VORQJDVWKH
ODWWHUDUHZLOOLQJWRKROGLQFUHDVLQJDPRXQWVRI
VDYLQJVDW]HURLQWHUHVWWKH%R-FDQFRQWLQXHLWV
4(SROLF\DQGIXQGWKHJRYHUQPHQW$GHIDXOWE\
WKHJRYHUQPHQWLVHIIHFWLYHO\UXOHGRXWXQGHU
WKHVHFLUFXPVWDQFHV
RIVRYHUHLJQGHEWUHVWUXFWXULQJPD\KDYH
DGGHGWRWKRVHSUHPLXPVDVZHOO,QSULQFLSOH
JRYHUQPHQWGHEWLQWKH(XUR]RQHLVWKXVPRUH
DNLQWRVWDWHRUPXQLFLSDOGHEWLQRWKHUFRXQ-
WULHVLQFOXGLQJWKH86$DQG6ZLW]HUODQGZKLFK
DUHDOVRQRWEDFNHGE\HLWKHUWKHIHGHUDO
JRYHUQPHQWRUWKHFHQWUDOEDQN
Assessing Global Debt 25
)LJXUH0DUNHGUHGXFWLRQLQ(XUR]RQHEXGJHWGHɇFLWVLQFHWKHFULVLV
,QRI*'3
0

-1

-2

-3

-4

-5

-6

-7
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

%XGJHWEDODQFH

6RXUFH(XURVWDW&UHGLW6XLVVH

(YHQVRWKHQREDLORXWUXOHKDVEHHQVRIWHQHGWR GHQRPLQDWHGJRYHUQPHQWERQGVZKLFKLV

VRPHH[WHQWȍILUVWE\WKHUHVFXHRI*UHHFHDQG
WKHQE\WKHODXQFKRIWKH(&%ǵV4(SURJUDP
ZKLFKHIIHFWLYHO\DOVRVXSSRUWHGJRYHUQPHQW
GHEWDOWKRXJKQRWMXVWWKDWRIILVFDOO\IUDJLOH
FRXQWULHVWKH(&%DOVRERXJKWJRYHUQPHQWGHEW
RIILVFDOO\VWURQJFRXQWULHVE\SXUFKDVLQJGHEWLQ
SURSRUWLRQWRWKHPHPEHUFRXQWULHVǵFDSLWDO
HTXLYDOHQWWRGHIDXOW7KLVGHPRQVWUDWHVWKDWWKH
OHQGHURIODVWUHVRUWIXQFWLRQVWLOOUHPDLQVIDLUO\
ZHDNLQWKH(XUR]RQH
:KLOHZHEHOLHYHWKDW(XUR]RQHJRYHUQPHQWV
DUHYHU\XQOLNHO\WRRSWIRUHXURH[LWJLYHQWKH
GLUHFRQVHTXHQFHVIRUGRPHVWLFVDYHUVD
VKDUHVLQWKH(&%$PRUHIRUPDODOEHLWOLPLWHG
OHQGHURIODVWUHVRUWIXQFWLRQZDVDJUHHGXSRQ
DIWHU(&%3UHVLGHQW'UDJKLǵVIDPRXV
LQWHUYHQWLRQWKDWWKH(&%ZRXOGǷGRZKDWHYHULW
WDNHVWRSUHVHUYHWKHHXURǸ7KLVLVWKHVRFDOOHG
GHOLEHUDWHSROLWLFDOGHFLVLRQRIDHXURPHPEHU
WRGHIDXOWVWLOOFDQQRWEHUXOHGRXWFRPSOHWHO\
2IFRXUVHWKHVWDQFHRIRWKHUPHPEHUVWDWHV
ZRXOGDOVRLQIOXHQFHWKHRXWFRPHȍDGHFLVLRQ
WRVXSSRUWILVFDOO\ZHDNJRYHUQPHQWVZRXOG
Ƿ2XWULJKW0RQHWDU\7UDQVDFWLRQVǸ207VFKHPH
ZKLFKDOORZVWKH(&%WRVXSSRUWVRYHUHLJQGHEW
RILQGLYLGXDOPHPEHUVWDWHVXQGHUFHUWDLQ
FRQGLWLRQVQRWDEO\ILVFDOSROLF\WLJKWHQLQJDQG
WKHLPSOHPHQWDWLRQRIVWUXFWXUDOUHIRUPV
:KLOHWKH207SURJUDPZDVIRUPDOO\DSSURYHG
E\WKH(XURSHDQ&RXUWRI-XVWLFHLQIRUD
JRYHUQPHQWWRDFWXDOO\REWDLQ207VXSSRUWIURP
WKH(&%ZRXOGUHTXLUHGLIILFXOWSROLWLFDOFKRLFHV
,QSDUWLFXODUKLJKO\XQSRSXODUDXVWHULW\PHDVXUHV
ZRXOGOLNHO\EHUHTXLUHGDQGVXFKFRPPLWPHQWV
DUHXVXDOO\RQO\IRUWKFRPLQJZKHQPDUNHW
SUHVVXUHVDUHYHU\LQWHQVH,QRWKHUZRUGV
JRYHUQPHQWVZRXOGOLNHO\RQO\WDNHUHIXJHLQDQ
207SURJUDPLQWKHHYHQWRIDILQDQFLDOFULVLV
LHRQFHPDUNHWVDVVLJQDSRVLWLYHSUREDELOLW\WR
DGHIDXOWHJLIDJRYHUQPHQWWKUHDWHQHGWR
OHDYHWKHHXURDQGWRUHGHQRPLQDWHLWVHXUR
26
DOVRJHQHUDWHSROLWLFDOVWUDLQVLQWKHVWURQJ
FRXQWULHV8OWLPDWHO\VRYHUHLJQGHIDXOWLQWKH
(XUR]RQHZRXOGOLNHO\EHWKHRXWFRPHRID
SROLWLFDOǷJDPHRIFKLFNHQǸJRQHDZU\$VVHVV-
LQJWKHULVNRIVXFKDSROLWLFDOǷDFFLGHQWǸ
RFFXUULQJLVWKXVDOHDVWDVLPSRUWDQWDV
XQGHUWDNLQJTXDQWLWDWLYHGHEWVXVWDLQDELOLW\
DQDO\VHV,QGHHGDVUHFHQWGHYHORSPHQWVLQ
,WDO\VKRZSROLWLFDOVKLIWVLQDQDQWLHXUR
GLUHFWLRQKDYHOHGWRDPDUNHGVSLNHLQERQG
\LHOGVZLWKRXWHFRQRPLFIXQGDPHQWDOVKDYLQJ
FKDQJHGPHDQLQJIXOO\
)LJXUH86JRYHUQPHQWGHEWLVH[SHFWHGWRULVHVLJQLɇFDQWO\RYHUWKHQH[WGHFDGH
)HGHUDOGHEWLQRI*'3
120

100

80

60

40

20

0
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025

)HGHUDOGHEWKHOGE\SXEOLF

6RXUFH)5('(FRQRPLF'DWD&RQJUHVVLRQDO%XGJHW2IɇFH&%26WDWLVWD2SHQVRXUFH&UHGLW6XLVVH
USA and UK: Currency declines instead
of debt crises?
%RWKWKH86DQGWKH%ULWLVKFHQWUDOEDQNV
DOVRSXUFKDVHGVLJQLILFDQWDPRXQWVRIGRPHVWLF
VRYHUHLJQGHEWLQRUGHUWRVXSSRUWWKHHFR-
QRPLFUHFRYHU\DIWHUWKHILQDQFLDOFULVLV
+RZHYHUWKH86)HGHUDO5HVHUYHEHJDQ
UHGXFLQJLWVKROGLQJVRIJRYHUQPHQWGHEWLQ
WKHDXWXPQRIDQGKDVVLQFHUDLVHG
LQWHUHVWUDWHVPXOWLSOHWLPHV$WWKHVDPHWLPH
WKH86JRYHUQPHQWPRYHGWRFXWWD[HVZLWK
WKHUHVXOWWKDWWKHILVFDOGHILFLWKDVZLGHQHG
FRQVLGHUDEO\7KHFRPELQDWLRQRIWLJKWHUPRQH-
WDU\SROLF\DQGHDVLHUILVFDOSROLF\KDVERRVWHG
LQWHUHVWUDWHVWKXVHVVHQWLDOO\UHGXFLQJWKH
VXVWDLQDELOLW\RI86JRYHUQPHQWGHEW,QGHHG
WKH86&RQJUHVVLRQDO%XGJHW2IILFHQRZ
SURMHFWVDVLJQLILFDQWXSZDUGWUHQGLQWKHUDWLR
86JRYHUQPHQWGHEWE\UDWLQJDJHQFLHV,QDQ\
FDVHWKHVWURQJ86UHOLDQFHRQFDSLWDOLQIORZV
WRFRYHUWKHFRXQWU\ǵVODUJHFXUUHQWDFFRXQW
GHILFLWVVXJJHVWVDFRQVLGHUDEOHYXOQHUDELOLW\
RIWKH86GROODU
$VRPHZKDWGLIIHUHQWVFHQDULRWKDWLVEHFRPLQJ
PRUHSUREDEOHLVDVORZGRZQLQ86JURZWKRU
SRVVLEO\HYHQDUHFHVVLRQDVDUHVXOWRIWKH
IDGLQJILVFDOLPSXOVHDQGWLJKWHUPRQHWDU\SROLF\
WKHGHFOLQHLQ86ERQG\LHOGVDQGWKHIODWWHQLQJ
RIWKH86\LHOGFXUYHDUHSRLQWLQJLQWKLVGLUHF-
WLRQ:KLOHWKHGHFOLQHLQERQG\LHOGVRIFRXUVH
HQKDQFHVWKHVXVWDLQDELOLW\RIGHEWVORZHU
JURZWKZRUNVLQWKHRSSRVLWHGLUHFWLRQ0RUHRYHU
LIWKH)HGHUDO5HVHUYHUHVSRQGHGWRVXFK
HFRQRPLFZHDNHQLQJE\HDVLQJSROLF\WKH86
GROODUFRXOGZHOOGHSUHFLDWHTXLWHVLJQLILFDQWO\
7KDWZRXOGERRVW86LQIODWLRQDQGUHVXOWLQ
RYHUWKHFRPLQJ\HDUVFigure 7
:LWKDOO86JRYHUQPHQWGHEWGHQRPLQDWHGLQ
GRPHVWLFFXUUHQF\WKHULVNRIDQRXWULJKW86
JRYHUQPHQWGHIDXOWLVQHYHUWKHOHVVPLQLPDO
$IWHUDOOWKH)HGHUDO5HVHUYHFRXOGLQSULQFLSOH
EHIRUFHGE\WKHJRYHUQPHQWWRSURYLGHIXQGV
WRWKH867UHDVXU\LQRUGHUWRUHILQDQFHLWV
GHEW+RZHYHUVXFKDGHYHORSPHQWZRXOG
OLNHO\FDXVHDVLJQLILFDQWORVVRIFRQILGHQFHLQ
WKH86GROODULQWHUQDWLRQDOO\OHDGLQJWRDVKDUS
GHFOLQHRIWKHGROODULQIRUHLJQH[FKDQJH
PDUNHWV,WPLJKWDOVROHDGWRDGRZQJUDGHRI
VWDJIODWLRQ,QERWKVFHQDULRVORVVHVZRXOGEH
LPSRVHGRQIRUHLJQKROGHUVRI86JRYHUQPHQW
GHEWEXWZLWKRXWDQH[SOLFLWGHIDXOW:LWKWKH
GROODUGHSUHFLDWLRQERRVWLQJLQIODWLRQWKH)HGHUDO
5HVHUYHZRXOGKRZHYHUILQGLWVHOILQDYHU\
GLIILFXOWVLWXDWLRQXQOHVVWKH86&RQJUHVVPRYHG
WRZDUGILVFDOFRQVROLGDWLRQ:KHWKHUWKHWZR
SROLWLFDOSDUWLHVZRXOGILQGVXIILFLHQWFRPPRQ
JURXQGWRUHVWRUHILVFDOVXVWDLQDELOLW\ORRNVTXLWH
XQOLNHO\IURPWRGD\ǵVYDQWDJHSRLQW1RWVXUSULV-
LQJO\YDULRXV86SROLWLFDOOHDGHUVKDYHWKHUHIRUH
SRLQWHGWR86JRYHUQPHQWGHEWDVWKHJUHDWHVW
WKUHDWWR86QDWLRQDOVHFXULW\
Assessing Global Debt 27
7KH8.LVLQDVRPHZKDWVLPLODUSRVLWLRQWRWKH PHDVXUH,QGLUHFWIRUPVRIGHEWUHVFKHGXOLQJ
86$DOWKRXJKWKHJRYHUQPHQWKDVGRQHPXFK HJLQWKHIRUPRIUHGXFLQJWUDQVIHUVWRWKH
PRUHWRUHGXFHWKHGHILFLWZKLFKLVFXUUHQWO\ HOGHUO\RULQFUHDVLQJWKHUHWLUHPHQWDJHZRXOG
UXQQLQJDWRQO\DERXWRI*'3,QWHUHVW VXSSRUWJRYHUQPHQWGHEWPDUNHWVLQVWHDGRI
SD\PHQWVDUHDOVROHVVEXUGHQVRPHWKDQLQWKH GLVUXSWLQJWKHP
86$VHH)LJXUH7KHIDFWWKDWWKHZHLJKWHG
DYHUDJHPDWXULW\RI8.JRYHUQPHQWGHEWVWDQGV Risk scenarios: Rising real yields more
DWDERXW\HDUVWHQ\HDUVORQJHUWKDQLQWKH worrying than slower growth or deflation
86$DOVRUHGXFHVVRYHUHLJQYXOQHUDELOLW\$W
WKHVDPHWLPHWKH8.FXUUHQWDFFRXQWGHILFLW ,QWKHDEVHQFHRIVXFKSROLF\DGMXVWPHQWVWKH
FRQWLQXHVWRUXQDWDERXWRI*'3ZKLFK ULVNRIPDUNHWVZRUU\LQJLQFUHDVLQJO\DERXWGHEW
PDNHVWKH%ULWLVKSRXQG*%3YXOQHUDEOHWR
VHWEDFNV$QHJDWLYHVKRFNLQWKH8.SDUWLFXODU-
O\DǷKDUGǸ%UH[LWZRXOGTXLWHOLNHO\WULJJHUD
IXUWKHUGHSUHFLDWLRQRIWKHSRXQGZKLFKZRXOGLQ
WXUQOHDGWRKLJKHULQIODWLRQDQGFRXOGERRVW8.
\LHOGV+RZHYHUDQRXWULJKWGHIDXOWRIWKH8.
JRYHUQPHQWVHHPVDOPRVWDVXQOLNHO\DVWKH86
JRYHUQPHQWGHIDXOWLQJJLYHQWKHDELOLW\RIWKH
%DQNRI(QJODQGWRDFWDVDOHQGHURIODVWUHVRUW
%XWLIDKDUG%UH[LWZHUHWREHIROORZHGE\D
SHULRGRIILVFDODQGPRQHWDU\HDVLQJILQDQFLDO
PDUNHWVWUHVVFRXOGEHFRPHTXLWHVHYHUHLQWKH
8.DVZHOO$VRIW%UH[LWZRXOGFRQYHUVHO\
FRQWULEXWHVLJQLILFDQWO\WRUHGXFLQJWKHULVNRI
VWUHVVLQWKH8.*LOWPDUNHWDQGWKH*%3
H[FKDQJHUDWH
Defaults unlikely, an eventual return to
QE quite possible
2XUDQDO\VLVVXJJHVWVWKDWVRYHUHLJQGHIDXOW
ULVNUHPDLQVOLPLWHGLQWKHDGYDQFHGHFRQRPLHV
EHFDXVHFHQWUDOEDQNVVKRXOGEHDEOHWRDFWDV
OHQGHUVRIODVWUHVRUWLQDQHPHUJHQF\HVSHFLDOO\
VLQFHJRYHUQPHQWGHEWLVGHQRPLQDWHGLQ
GRPHVWLFFXUUHQF\$SRVVLEOHH[FHSWLRQLVWKH
(XUR]RQHLQZKLFKWKH(&%LVRQO\DOORZHGWR
SURYLGHVXSSRUWWRJRYHUQPHQWVXQGHUVWULQJHQW
FRQGLWLRQV$JRYHUQPHQWVXFKDV,WDO\ǵVFRXOG
VXVWDLQDELOLW\FDQQRWEHUXOHGRXW7KLVZLOO
XOWLPDWHO\GHSHQGRQWKHZLOOLQJQHVVRILQYHVWRUV
WRKROGVXFKDVVHWVDWLQWHUHVWUDWHVWKDWDUH
VXIILFLHQWO\ORZWRSUHYHQWGHEWPRYLQJRQWRDQ
H[SORVLYHSDWK6RIDULQGLFDWLRQVDUHWKDW
LQYHVWRUVDUHLQGHHGZLOOLQJWRGRVR\LHOGVRQ
JRYHUQPHQWERQGVKDYHRQO\PRYHGXSVOLJKWO\LQ
WKH86$DQG8.EXWJHQHUDOO\UHPDLQH[WUHPHO\
ORZLQERWKQRPLQDODQGUHDOWHUPVVXJJHVWLQJ
WKDWLQYHVWRUVVLPSO\GRQRWUHJDUGRWKHUDVVHWV
DVYLDEOHDOWHUQDWLYHVLQWHUPVRIH[SHFWHG
ULVNDGMXVWHGUHWXUQV
,IWKHJOREDOHFRQRP\ZHUHWRVORZIXUWKHURU
HYHQHQWHUUHFHVVLRQ\LHOGVZRXOGOLNHO\GHFOLQH
HYHQIXUWKHUORZHUUDWHVZRXOGWKHQRIIVHW
ORZHUJURZWKDQGUHQGHUGHEWVXVWDLQDEOH6XFK
DGHYHORSPHQWZRXOGOLNHO\DOVRUHDZDNHQWKH
ULVNRIGHIODWLRQ4(PLJKWWKHQQHHGWREH
UHYLYHGWRIXQGJRYHUQPHQWVSHQGLQJDQG
VXSSRUWWKHHFRQRP\7KDWZRXOGSXVKGHEW
OHYHOVXSHYHQIXUWKHUZKLOHRQFHDJDLQSRVW-
SRQLQJGHIDXOWVRUUHVWUXFWXULQJ
$SRWHQWLDOO\PRUHZRUU\LQJULVNVFHQDULRWKDQ
VORZJURZWKDQGRUGHIODWLRQZRXOGEHDQ
XSZDUGVKLIWLQUHDOLQWHUHVWUDWHV2QH86
HFRQRPLVWKDVUHFHQWO\VXJJHVWHGWKDWVXFKDQ
LQFUHDVHFRXOGFRPHDERXWLIWKHVLJQLILFDQWH[
WKHUHIRUHLQSULQFLSOHGHFLGHWRRSWIRUD
UHGHQRPLQDWLRQRILWVGHEWLQWRDZHDNHUFXUUHQF\
DQGWKHUHE\WU\WRULGLWVHOIRIGHEW+RZHYHU
JLYHQWKHVHULRXVGDPDJHWKLVZRXOGGRWR
GRPHVWLFLQYHVWRUVWKHOLNHOLKRRGRIVXFKD
FKRLFHVHHPVYHU\ORZLQRXUYLHZ,QVRPH
FRXQWULHVLQFOXGLQJWKH86$DQG8.ZHKDYH
DUJXHGWKDWILVFDOSROLFLHVWKDWVHHPWREHRQDQ
XQVXVWDLQDEOHSDWKUDLVHWKHULVNRIVLJQLILFDQW
FXUUHQF\GHYDOXDWLRQUDWKHUWKDQGHIDXOW2I
FRXUVHVXFKGHYDOXDWLRQVZRXOGLPSRVHORVVHV
RQIRUHLJQGHEWKROGHUV
$IRUPDOUHVWUXFWXULQJRIJRYHUQPHQWGHEW
UHPDLQVDWKHRUHWLFDOSRVVLELOLW\RIFRXUVHDOVRLQ
DGYDQFHGHFRQRPLHV,WFRXOGRFFXUIRUH[DPSOH
LISROLWLFDOSUHVVXUHWROLPLWLQWHUJHQHUDWLRQDO
WUDQVIHUVPRXQWVȍWKHODUJHVWFRPSRQHQWRI
ILVFDOVSHQGLQJLQPRVWDGYDQFHGFRXQWULHV
FRQVLVWVRIVRFLDOVSHQGLQJDQGVXFKVSHQGLQJLV
DOVRWKHNH\GULYHURIDQ\IXWXUHEXLOGXSLQGHEW
7RDOOHYLDWHWKLVSUREOHPH[SOLFLWUHVWUXFWXULQJRI
GHEWZRXOGQHYHUWKHOHVVEHDUDWKHUFUXGH
28
DQWHVDYLQJVVXUSOXVEHLQJJHQHUDWHGE\&KLQD
LQSDUWLFXODUZHUHWRGLVVLSDWH7KLVZRXOGORZHU
&KLQDǵVH[WHUQDOVXUSOXVDQGWKHUHE\ZHDNHQ
GHPDQGIRUJOREDOJRYHUQPHQWERQGVHVSHFLDOO\
867UHDVXULHV$VVXFKDVKLIWZRXOGFRPHDERXW
LQWKHFRQWH[WRIORZHUUDWKHUWKDQVWURQJHU
JOREDOHFRQRPLFJURZWKWKHLPSDFWRQGHEW
VXVWDLQDELOLW\ZRXOGEHHVSHFLDOO\GHOHWHULRXV
,QVXFKDVFHQDULRKLJKHUULVNERQGVZRXOGRI
FRXUVHEHDIIHFWHGHYHQPRUHQHJDWLYHO\WKDQ
JRYHUQPHQWERQGV0RUHRYHUVXFKDQH[RJH-
QRXVVKLIWLQUHDO\LHOGVFRXOGRQO\EHRIIVHWWR
DYHU\OLPLWHGGHJUHHE\PRQHWDU\HDVLQJ2QO\
ILVFDOWLJKWHQLQJZRXOGEHDEOHWRORZHU\LHOGV
EXWDWWKHFRVWRIORZHUHFRQRPLFJURZWKWKDW
ZRXOGLQWXUQZHDNHQULVNDVVHWV
TARGET2 imbalances: Not a sign of a
heightened default risk in the Eurozone

0D[LPH%RWWHURQ

7$5*(7LVDSD\PHQWV\VWHPRZQHGE\WKH Recent increase in imbalances due to QE

(XURV\VWHPLHWKH(XURSHDQ&HQWUDO%DQN
(&%DQGDOOWKHQDWLRQDOFHQWUDOEDQNVRIWKH 7KHUHDVRQZK\7$5*(7LPEDODQFHVKDYH
(XURSHDQ(FRQRPLFDQG0RQHWDU\8QLRQ(08 LQFUHDVHGVLQFHLVODUJHO\DVLGHHIIHFW
7$5*(7VHWWOHVSD\PHQWVUHODWHGWRERWKWKH RIWKH(&%ǵVTXDQWLWDWLYHHDVLQJ4(SROLF\
(XURV\VWHPǵVPRQHWDU\SROLF\RSHUDWLRQVDVZHOO 7KHFUHDWLRQRIFHQWUDOEDQNPRQH\LQWKH
DVFRPPHUFLDOWUDQVDFWLRQV,QWKHEXLOGXSWRWKH (XURV\VWHPLVODUJHO\GHFHQWUDOL]HGPHDQLQJ
(XUR]RQHFULVLVLPEDODQFHVLQFUHDVHGZLWKLQWKH WKDWHDFKQDWLRQDOFHQWUDOEDQNFUHDWHVPRQH\
V\VWHPDVWKH(XUR]RQHǷSHULSKHU\ǸLQFUHDVHG
LWVERUURZLQJIURPWKHFRUH7KHVHLPEDODQFHV
UHFHGHGLQWKHDIWHUPDWKRIWKHFULVLVEXWEHJDQ
WRLQFUHDVHDJDLQLQ7KLVKDVEHHQ
LQWHUSUHWHGE\VRPHDVDQLQFUHDVHLQGHIDXOW
ULVNZLWKLQWKH(08DOWKRXJKLWFRLQFLGHGZLWK
DUHGXFWLRQLQILVFDOLPEDODQFHVZLWKLQWKH
(XUR]RQHDVGLVFXVVHGDERYH
,QIDFWWKHULVLQJLPEDODQFHVUHIOHFWFDSLWDO
IORZVZLWKLQWKH(XUR]RQHEDQNLQJVHFWRU7R
SXWLWVLPSO\EDQNVLQ(XURSHDQǷSHULSKHU\Ǹ
FRXQWULHVLQFOXGLQJ,WDO\6SDLQ*UHHFHDQG
3RUWXJDOKDYHSURFHVVHGIDUPRUHSD\PHQWV
LQIDYRURIEDQNVLQǷFRUHǸ(XURSHDQFRXQWULHV
LHSURYLGHVOLTXLGLW\WRWKHEHQHILWRILWV
QDWLRQDOEDQNLQJV\VWHP:KHQDJJUHJDWH
OLTXLGLW\LQWKH(XURV\VWHPLVODUJHUWKDQWRWDO
OLTXLGLW\QHHGV7$5*(7LPEDODQFHVFDQ
JURZ,QH[FHVVOLTXLGLW\FUHDWHG
E\FUHGLWRSHUDWLRQVRIWKH(XURV\VWHPǷIOHGǸ
WKHPRUHYXOQHUDEOHFRXQWULHVDQGZDV
DFFXPXODWHGLQWKHPRUHVROLGEDQNLQJ
V\VWHPVLHVRXWKHUQ(XURSHH[SHULHQFHG
GHSRVLWRXWIORZV%HWZHHQDQG
WKHSXUFKDVHVRIDVVHWVE\WKH(&%LQWKH
FRQWH[WRI4(RQFHDJDLQUDLVHGH[FHVV
OLTXLGLW\OHDGLQJWRDUHQHZHGULVHRI7$5*(7
LPEDODQFHV(DFKQDWLRQDOFHQWUDOEDQN
SXUFKDVHGERQGVRILWVUHVSHFWLYHFRXQWU\
HVSHFLDOO\EDQNVLQ*HUPDQ\WKDQǷFRUHǸ IURPLQYHVWRUVDFURVVWKHZRUOGEXWFRPPHUFLDO
(XURSHDQEDQNVKDYHGRQHLQWKHLUIDYRU
7KHVHWUDQVDFWLRQVDUHQRWPDGHGLUHFWO\
EHWZHHQWKHEDQNVEXWYLDWKH(XURV\VWHP
)RUH[DPSOHD6SDQLVKEDQNWKDWPDNHVD
SD\PHQWWRD*HUPDQEDQNZLOOSURFHHGYLD
%DQFRGH(VSD³DWKH6SDQLVKFHQWUDOEDQN
%DQFRGH(VSD³DZLOOKDYHDFODLPRQWKH
6SDQLVKEDQNZKLOHWKH(XURV\VWHPZLOOKDYH
DFODLPRQ%DQFRGH(VSD³D2QWKHRWKHU
KDQGWKH*HUPDQEDQNZLOOKDYHDFODLPRQ
WKH*HUPDQ%XQGHVEDQNZKLFKLQWXUQZLOO
KDYHDFODLPRQWKH(XURV\VWHP7KH7$5-
*(7LPEDODQFHVUHIOHFWWKLVPHFKDQLVPWKH
(XURV\VWHPRZHVWKH*HUPDQ%XQGHVEDQN
EDQNLQWHUPHGLDULHVVHOOLQJWKHVHFXULWLHV
ZHUHQRWQHFHVVDULO\ORFDWHGLQWKHKRPH
FRXQWU\7KHEXONRIWKHSURFHHGVIURPVXFK
SXUFKDVHVZHUHGHSRVLWHGLQ*HUPDQEDQNV
ZKLFKVDZWKHLUFODLPVRQWKH(XURV\VWHP
ULVLQJWKXVH[SODLQLQJWKHULVHLQ*HUPDQ\ǵV
7$5*(7EDODQFH7KHULVHLQWKHLPEDODQFHV
LQWKH7$5*(7V\VWHPWKDWSUHYDLOWRGD\
WKXVODUJHO\UHIOHFWWKHGLVWULEXWLRQRIFRPPHU-
FLDOEDQNVǵH[FHVVUHVHUYHVZLWKLQWKH(08
DQGQRWWKHILVFDOLPEDODQFHVLQWKHV\VWHP
,WVKRXOGEHQRWHGWKDWDV4(ZDVZRXQG
GRZQZLWKLQWKH(XUR]RQHLQWKHVH
LPEDODQFHVVWRSSHGJURZLQJ$VKULQNLQJRI
(85ELOOLRQDVRI2FWREHUZKLOH WKH(&%ǵVEDODQFHVKHHWZRXOGWKXVUHGXFH
WKH%DQFDGǵ,WDOLDDQG%DQFRGH(VSD³DRZH H[FHVVOLTXLGLW\DQGKHQFH7$5*(7LPEDODQFHV
(85ELOOLRQDQG(85ELOOLRQWRWKH
(XURV\VWHPUHVSHFWLYHO\'XHWRWHFKQLFDO
IDFWRUVUHODWHGWRWKH(&%ǵVDVVHWSXUFKDVH
SURJUDPWKH(&%LWVHOIRZHVWKH(XURV\VWHP
(85ELOOLRQVHHFigure 1

Assessing Global Debt

$VVHVVLQJ*OREDO'HEW 29
What if someone leaves after all?
,WLVVWLOOZRUWKZKLOHFRQVLGHULQJZKDWZRXOG
KDSSHQLQFDVHDFRXQWU\OHIWWKH(XURV\VWHP
HJDVFRQVHTXHQFHRIWKHGHFLVLRQWRH[LWWKH
HXUR,QDOHWWHU0DULR'UDJKL3UHVLGHQWRIWKH
(&%VWDWHGLQ-DQXDU\WKDWǷLIDFRXQWU\
ZHUHWROHDYHWKH(XURV\VWHPLWVQDWLRQDOFHQWUDO
EDQNǵVFODLPVRQRUOLDELOLWLHVWRWKH(&%ZRXOG
7$5*(7OLDELOLWLHVZRXOGEHQHWWHGZLWK
SRWHQWLDOFODLPVRQWKH(XURV\VWHP,QWKHFDVH
RI,WDO\IRUH[DPSOH%DQFDGǵ,WDOLDKDVDFODLPRI
(85ELOOLRQRQWKH(XURV\VWHPUHODWHGWRWKH
DOORFDWLRQRIHXUREDQNQRWHVZLWKLQWKH(XURV\V-
WHPZKLOHWKH*HUPDQ%XQGHVEDQNKDVD
OLDELOLW\RI(85ELOOLRQ7KLVGLIIHUHQFHUHVXOWV
IURPWKHIDFWWKDWWKH%XQGHVEDQNKDVLVVXHG
PDQ\PRUHEDQNQRWHVWKDQLWVFDSLWDONH\LH
QHHGWREHVHWWOHGLQIXOOǸ+HQFHLQWKH LWVRIILFLDOVKDUHLQWKH(XURV\VWHPZRXOG
HYHQWWKDW6SDLQRU,WDO\RUDQ\FRXQWU\ZLWKD VXJJHVWZKHUHDV%DQFDGǵ,WDOLDKDVLVVXHG
7$5*(7OLDELOLW\ZHUHWROHDYHWKH(XURV\V-
WHP7$5*(7OLDELOLWLHVZRXOGFOHDUO\QHHGWR
EHLQFOXGHGLQWKHFRVWVRIOHDYLQJWKH(08,Q
WKHHYHQWWKDWDFRXQWU\ZLWKD7$5*(7OLDELOLW\
ZHUHWROHDYHWKH(XUR]RQHDQGGHIDXOWRQLWV
7$5*(7OLDELOLW\WKHORVVZRXOGEHVKDUHGE\
WKH(XURV\VWHPRYHUDOODFFRUGLQJWRDGLVWULEXWLRQ
NH\DQGQRWVSHFLILFDOO\E\FRXQWULHVZLWK
7$5*(7FODLPVVXFKDV*HUPDQ\0RUHRYHU
IHZHUEDQNQRWHV(YHQLIORVVPDNLQJǷVWURQJǸ
FHQWUDOEDQNVVXFKDVWKH%XQGHVEDQNFRXOG
SUREDEO\UHFDSLWDOL]HWKHPVHOYHVLQWKHFDVHRI
DQH[LWRIDZHDNHUPHPEHUVXFKDQHYHQW
ZRXOGQHYHUWKHOHVVFDXVHDPDMRUFULVLVLQWKH
V\VWHP

)LJXUH7$5*(7LPEDODQFHVKDYHLQFUHDVHGXQWLOUHFHQWO\GHVSLWHɇVFDOFRQVROLGDWLRQ
7$5*(7EDODQFHVLQ(85ELOOLRQ

1500

1000

500

-500

-1000

-1500
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

*HUPDQ\ )LQODQG/X[HPERXUJ1HWKHUODQGV ,WDO\ Spain 3RUWXJDO*UHHFH 2WKHUFRXQWULHV (&%

6RXUFH7KRPVRQ5HXWHUV&UHGLW6XLVVH

30
Assessing Global Debt 31
32
3. Banks – after ten years
of “repentance,” new “sins”?
2OLYHU$GOHUDQG0D[LPH%RWWHURQ

Ten years ago, low-quality “toxic” assets and the shortage of capital
combined to bring the banking system in the USA and Europe to the
brink of collapse. In the Eurozone, the high exposure of banks in the
“periphery” countries to fragile government debt triggered a second
serious crisis after 2010. Deleveraging in combination with a moderated
overall risk profile of banks’ balance sheets has since reduced systemic
risk in key countries. However, some new areas of risk have emerged,
partly on the fringes of the formal banking sector. In contrast to the
pre-crisis period, monetary policy tightening now represents less of a
threat; in fact, banks would on balance benefit from monetary policy
normalization.

7HQ\HDUVRIULVNUHGXFWLRQǷUHSHQWDQFHǸ 1RWDOOEDQNLQJVHJPHQWVKDYHUHFRYHUHGDWWKH

7RFRPSO\ZLWKQHZUHJXODWRU\SUHVFULSWLRQV VDPHSDFHKRZHYHUDQGUHJLRQDOGLIIHUHQFHVLQ
FUHGLWLQVWLWXWLRQVLQPRVWFRXQWULHVKDYH WKHGHJUHHRILPSURYHPHQWDUHVWLOOVXEVWDQWLDO
LQFUHDVHGWKHLUFDSLWDOSRVLWLRQVVLQFHWKHFULVLV ,PSURYHPHQWVKDYHEHHQPRUHPDUNHGLQWKH
(Figure 1DOORZLQJWKHPWREHWWHUDEVRUE 86$EHFDXVHWKHSUHVVXUHIURPWKH)HGHUDO
SRWHQWLDOORVVHV$WWKHVDPHWLPHIXQGLQJYLD 5HVHUYHDQGRWKHUUHJXODWRUVWRUDSLGO\UHFDSLWDO-
ERQGPDUNHWVKDVEHHQUHGXFHGXQWLOUHFHQWO\ L]HZDVJUHDWHUDQGEDGORDQVZHUHWKHUHIRUH
(Figure 2ZKLFKLVDQRWKHULQGLFDWLRQWKDW ZULWWHQRIIPRUHDJJUHVVLYHO\Figure 47KH
EDQNVKDYHGHOHYHUDJHGLQFRQWUDVWWRQRQ PRUHUDSLGLPSURYHPHQWVLQWKH86$ZHUH
ILQDQFLDOFRUSRUDWLRQV,QDGGLWLRQWKH\KROG UHIOHFWHGLQDIDVWHUUHFRYHU\RISURILWVDQGVWRFN
PRUHKLJKTXDOLW\OLTXLGDVVHWVSDUWLFXODUO\LQ SULFHVLQWKH\HDUVIROORZLQJWKHFULVLV,QPXFK
WKHIRUPRIFHQWUDOEDQNGHSRVLWVFigure 3
7KHVHPDNHWKHPOHVVUHOLDQWRQYRODWLOH
VKRUWWHUPIXQGLQJLQPDUNHWVDQGVKRXOGVKLHOG
WKHPIURPORVVHVDVWKHYDOXHRIWKHVHOLTXLG
DVVHWVLVH[SHFWHGWRUHPDLQVWDEOHLQWKHHYHQW
RIDFULVLV)XUWKHUPRUHLQFRXQWULHVKLWE\WKH
*OREDO)LQDQFLDO&ULVLVDQGXQGHUSUHVVXUHIURP
UHJXODWRUVDQGLQYHVWRUVEDQNVKDYHJHQHUDOO\
EHHQLQULVNUHGXFWLRQPRGHVLQFH%\
RI(XURSHIRUEHDUDQFHE\UHJXODWRUVZDVPRUH
JHQHURXVZKLFKGHOD\HGWKHǷFOHDQXSǸ7KLVLV
SDUWLFXODUO\WUXHIRU,WDO\,QFRQWUDVWWR6SDLQEXW
DOVR6ZLW]HUODQGWKHUHFRYHU\RI,WDO\ǵVEDQNV
ZDVDOVRGHOD\HGEHFDXVHWKHJRYHUQPHQWIDLOHG
WRVHWXSDǷEDGEDQNǸLQDWLPHO\PDQQHU,WDOLDQ
EDQNVDOVRUHPDLQPRUHH[SRVHGWKDQRWKHUVWR
VRYHUHLJQULVNDVWKH\FRQWLQXHWRKROGVLJQLIL-
FDQWYROXPHVRI,WDOLDQJRYHUQPHQWERQGVFD
QRZPRVWUHJXODWRUVDFNQRZOHGJHWKDWEDQNV
KDYHEHFRPHQRWLFHDEO\VRXQGHUDQGWKH
PDUNHWVǵULVNDVVHVVPHQWRIEDQNVDV
PHDVXUHGE\ERQGVSUHDGVIRUH[DPSOHKDV
DOVRLPSURYHGVXEVWDQWLDOO\
RIWRWDODVVHWV7KHUHFHQWFRQIOLFW
EHWZHHQWKH,WDOLDQJRYHUQPHQWDQGWKH(XURSHDQ
8QLRQRYHUILVFDOSODQVEURXJKWWKLVULVNWRWKH
IRUH6LQFHWKHODXQFKRIWKH%DQNLQJ8QLRQDQG
LWV6LQJOH6XSHUYLVRU\0HFKDQLVPKRZHYHU
SUHVVXUHRQEDQNVWRVWUHQJWKHQWKHLUEDODQFH
Assessing Global Debt 33
Figure 1: Capital strength has generally increased
5HJXODWRU\FDSLWDODVDSHUFHQWDJHRIEDQNVǵULVNZHLJKWHGDVVHWV
$XVWUDOLD
&DQDGD
Spain
,WDO\
USA
)UDQFH
6LQJDSRUH
+RQJǽ
Japan
*HUPDQ\
UK
6ZLW]HUOǽ
Sweden
0 5 10 15 20 25
2010 2017

6RXUFH,0))LQDQFLDO6RXQGQHVV,QGLFDWRUV7KRPVRQ5HXWHUV&UHGLW6XLVVH

Figure 2: Banks have until recently reduced debt exposure

'HEWVHFXULWLHVRXWVWDQGLQJLQ86'ELOOLRQ

40000
35000
30000
25000
20000
15000
10000
5000
0
2000 2002 2004 2006 2008 2010 2012 2014 2016

)LQDQFLDOFRUSRUDWLRQV 1RQILQDQFLDOFRUSRUDWLRQV

6RXUFH%,6&UHGLW6XLVVH

Figure 3: Higher and more stable liquidity

'HSRVLWVDWWKHFHQWUDOEDQNLQRIDOODVVHWV

25

20

15

10

0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

(XUR]RQH 6ZLW]HUODQG USA Japan UK

6RXUFH7KRPVRQ5HXWHUV&UHGLW6XLVVH

34
Figure 4: US banks wrote off bad loans much more aggressively
$YHUDJHZULWHRIIVUHODWLYHWRORDQYROXPHVLQ

0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

USA (XURSH

6RXUFH7KH%RVWRQ&RQVXOWLQJ*URXS&UHGLW6XLVVH

Figure 5: Since 2015, bad loans have also declined in the Eurozone
,Q(85ELOOLRQ

1200

1000

800

600

400

200

0
2009 2010 2011 2012 2013 2014 2015 2016 2017

&\SUXV*UHHFHDQG3RUWXJDO ,UHODQG,WDO\DQG6SDLQ 2WKHUV

6RXUFH,0)*OREDO)LQDQFLDO6WDELOLW\5HSRUW

Assessing Global Debt 35

VKHHWVKDVLQFUHDVHGDFURVVWKH(XUR]RQHDQG KDYHW\SLFDOO\EHHQDVVRFLDWHGZLWKJUHDWHUULVN
EDGORDQVKDYHDOVRGHFOLQHGFigure 5,QVXP H[SRVXUHDVWKH\RIWHQUHIOHFWDGHOLEHUDWH
VLQFHKROGLQJULVN\DVVHWVUHTXLUHVEDQNVWRKROG VHDUFKIRU\LHOG,QGHHGVXFKOHQGLQJJUHZ
PRUHFRVWO\FDSLWDOEDQNVKDYHUHGXFHGWKHP UDSLGO\LQWKH\HDUVSULRUWRWKH*OREDO)LQDQFLDO
DVVKRZQE\WKHGURSLQWKHUDWLRRIULVNZHLJKWHG &ULVLV6LQFHWKHQWKHYROXPHRIRXWVWDQGLQJ
DVVHWVWRWRWDODVVHWVLQWKHDIWHUPDWKRIWKH FURVVERUGHUDVVHWVDQGOLDELOLWLHVKDVGHFOLQHG
ILQDQFLDOFULVLVLQGHYHORSHGPDUNHWV DQGVWDJQDWHGLQDEVROXWHWHUPV5HODWLYHWR
*URVV'RPHVWLF3URGXFW*'3OHQGLQJKDV
$IXUWKHUPHDVXUHRIUHGXFHGULVNH[SRVXUHE\ GHFOLQHGPRUHVLJQLILFDQWO\7KLVWUHQGKDVEHHQ
EDQNVLVWKHVXEVWDQWLDOVORZGRZQLQFURVVERU- TXLWHSURQRXQFHGLQWKH(XUR]RQH8.DQG
GHUERUURZLQJDQGOHQGLQJFigure 6:KLOHLQ 6ZLW]HUODQGFigure 7
SULQFLSOHFURVVERUGHUEDQNLQJLVQRWQHFHVVDULO\
DQ\ULVNLHUWKDQGRPHVWLFEDQNLQJDVORQJDVWKH ,QWKH(XUR]RQHEDQNVUHWUHQFKHGLQWKH
VDPHOHQGLQJVWDQGDUGVDUHDSSOLHGDQGWKH FRXUVHRIWKHFULVLVDQGWKHLUFURVVERUGHU
FRXQWU\DQGFXUUHQF\ULVNVDUHZHOOPDQDJHG EXVLQHVVDVPHDVXUHGE\FURVVERUGHUFODLPV
VXUJHVLQFURVVERUGHUOHQGLQJDQGLQYHVWPHQW GHFOLQHGE\PRUHWKDQIRUWKHǷFRUHǸ

Figure 6: Cross-border lending has stagnated since the crisis

7RWDOFURVVERUGHUOLDELOLWLHVLQ86'WULOOLRQ

40

35

30

25

20

15

10

0
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017

7RWDOOLDELOLWLHV 7RWDOFODLPV

6RXUFH%,6&UHGLW6XLVVH

Figure 7: European and US banks reduced cross-border lending

&URVVERUGHUFODLPVRIUHSRUWLQJEDQNVLQVHOHFWHGPDUNHWVLQ86'WULOOLRQ

10
9
8
7
6
5
4
3
2
1
0
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017

7RWDOFRUH(XUR]RQH 7RWDOSHULSKHU\(XUR]RQH UK 6ZLW]HUODQG USA

6RXUFH%,6&UHGLW6XLVVH

36
(XUR]RQHFRXQWULHVDQGE\DOPRVWLQWKH
SHULSKHU\FRXQWULHVVLQFH4Figure 8
VKRZVWKDWFURVVERUGHUFODLPVRIEDQNV
EDVHGLQWKH/RQGRQILQDQFLDOFHQWHUDVZHOO
DVWKRVHRIWKHODUJH6ZLVVEDQNVVXUJHGLQ
,QFRQWUDVWFURVVERUGHUOHQGLQJE\EDQNV1 to
HPHUJLQJPDUNHWVDOWKRXJKLQWHUUXSWHGEULHIO\
LQWKHZDNHRIWKHILQDQFLDOFULVLVKDVFRQWLQ-
XHGWRULVHLQWKH\HDUVVLQFHWKHFULVLVZLWK
OHQGLQJURXJKO\GLYLGHGEHWZHHQEDQNVDQG
WKHJOREDOFUHGLWERRPSULRUWRWKH*OREDO QRQEDQNVFigure 8$FORVHUORRNDWWKH
)LQDQFLDO&ULVLVPRVWO\LQWKHIRUPRILQYHVW- GDWDUHYHDOVWKDWWKHEXONRIOHQGLQJHVSHFLDOO\
PHQWVLQ86KRXVLQJUHODWHGDVVHWV$IWHUWKH WREDQNVSUREDEO\DOVRLQWKHIRUPRIDFTXLVL-
FROODSVHRIWKLVFUHGLWEXEEOHEDQNVLQWKHVH WLRQVRIORFDOEDQNVRUIXQGLQJRIVXEVLGLDULHV
FRXQWULHVUHGXFHGWKHLUIRUHLJQH[SRVXUH7KH ZHQWWRWKH$VLD3DFLILFUHJLRQFigure 9
UHWUHQFKPHQWKDVEHHQSDUWLFXODUO\SURQRXQFHG &URVVERUGHUFODLPVRQEDQNVLQHPHUJLQJ
LQ6ZLW]HUODQGZKHUHEDQNVKDYHDOPRVW PDUNHWVKDYHDOPRVWWULSOHGVLQFHWKHHQGRI
KDOYHGWKHLUIRUHLJQFODLPV ZKLOHFURVVERUGHUFODLPVRQQRQEDQNV

1. Banks located in one of the 47 BIS reporting countries.

Figure 8: Lending to emerging markets continued to expand after a short-lived dip

&URVVERUGHUFODLPVRIEDQNVLQ%,6UHSRUWLQJFRXQWULHVRQHPHUJLQJPDUNHWVLQ86'ELOOLRQ

2500

2000

1500

1000

500

0
1977 1981 1985 1989 1993 1997 2001 2005 2009 2013 2017

1RQEDQNVHFWRUV %DQNV

6RXUFH%,6&UHGLW6XLVVH

Figure 9: Interbank lending mainly to Asian emerging markets

&URVVERUGHUFODLPVRIEDQNVLQ%,6UHSRUWLQJFRXQWULHVRQHPHUJLQJPDUNHWVLQ86'ELOOLRQ

2500

2000

1500

1000

500

0
1977 1981 1985 1989 1993 1997 2001 2005 2009 2013 2017

$IULFD0( $3$& /DWDP (XURSH

6RXUFH%,6&UHGLW6XLVVH

Assessing Global Debt 37

KDYHULVHQE\DOPRVWRYHUWKHVDPH
SHULRG*URZWKZDVVORZHUDQGRXWVWDQGLQJ
FODLPVDUHVPDOOHULQ/DWLQ$PHULFDDQG$IULFD
0LGGOH(DVWZKLOHFURVVERUGHUFODLPVWR
(PHUJLQJ(XURSHGHFOLQHG
*LYHQWKDWWKHPDMRULW\RI$VLDQHPHUJLQJ
PDUNHWVKDYHFRQWLQXHGWRH[KLELWIDLUO\VWURQJ
HFRQRPLFJURZWKDVZHOODVOLPLWHGH[WHUQDO
LPEDODQFHVWKHULVNWREDQNVIURPWKLVOHQGLQJ
DFWLYLW\VKRXOGRQWKHZKROHQRWUDLVHVWDELOLW\
ULVNVLQRUGLQDWHO\,QIDFWWKHVWUHVVHVWKDWKDYH
DULVHQLQHPHUJLQJPDUNHWVLQWKHSDVW\HDU
KDYHPRVWO\EHHQRXWVLGHWKH$VLDQUHJLRQ
0HDQZKLOHWKHH[SRVXUHRIEDQNVWRFRXQWULHV
ZKHUHILQDQFLDOVWDELOLW\LVJHQHUDOO\UHJDUGHGDV
OHVVDVVXUHGUHPDLQVOLPLWHG(YHQLQFRXQWULHV
OLDELOLWLHVUDWLREHIRUHWKHFULVLVWKHIXQGLQJ
VLWXDWLRQZDVLQLWLDOO\IDUPRUHIUDJLOHLQWKH
(XUR]RQH:LWKEDQNVVXIIHULQJGHSRVLW
RXWIORZVWKH(XURSHDQ&HQWUDO%DQNKDGWR
SURYLGHEDQNVZLWKFKHDSIXQGLQJWRVXSSRUW
EDQNOHQGLQJ+RZHYHUIXQGLQJFRQGLWLRQV
KDYHLPSURYHGVLJQLILFDQWO\LQWKHSDVWIHZ
\HDUVDQGEDQNVDUHQRZPXFKOHVVGHSHQ-
GHQWRQFHQWUDOEDQNIXQGV7KDWVDLGWKH
OLDELOLWLHVRIEDQNVLQ3RUWXJDO,WDO\DQG6SDLQ
VWLOOLQFOXGHPRUHWKDQRIFHQWUDOEDQN
IXQGVFRPSDUHGWROHVVWKDQIRUEDQNVLQ
)UDQFHDQG*HUPDQ\
%DQNVKDYHDOVRUHGXFHGRIIEDODQFHVKHHW
LWHPVDQGQRWDEO\GHULYDWLYHV2XWVWDQGLQJ
QRWLRQDODPRXQWVGURSSHGE\EHWZHHQ
ZKHUHEDQNVKDYHDIDLUO\KLJKH[SRVXUHWR
HPHUJLQJPDUNHWVLWLVOLPLWHGUHODWLYHWRWKH
RYHUDOOEDODQFHVKHHW7KHH[SRVXUHRI6SDQLVK
EDQNVWR7XUNH\DQG%UD]LOIRUH[DPSOH
UHSUHVHQWVRQO\DQGRIWKHLURYHUDOO
DVVHWVUHVSHFWLYHO\%ULWLVKEDQNVKDYHPRUH
end-2013 and end-2017 (Figure 117KH
GHFOLQHKDVEHHQSDUWLFXODUO\PDUNHGLQFUHGLW
GHIDXOWVZDSVDZLQVWUXPHQWVZKLFKSURWHFW
DJDLQVWWKHGHIDXOWRIDERUURZHU6LQFHHQG
WKHRXWVWDQGLQJQRWLRQDODPRXQWKDVIDOOHQ
E\DOPRVW:KLOHQRWLRQDODPRXQWVDUHVWLOO
H[SRVXUHWR&KLQDEXWWKLVLVVWLOOVOLJKWO\OHVV
WKDQRIWKHLUDVVHWV7KLVVXJJHVWVWKDW
FRQWDJLRQULVNVIRUEDQNVLQDGYDQFHGHFRQR-
PLHVIURPVWUHVVHVLQHPHUJLQJPDUNHWVDUH
QRZOLNHO\WREHPXFKORZHU
1RWRQO\KDVDVVHWTXDOLW\LPSURYHGDV
PHQWLRQHGDERYHEXWWKHEDQNVǵIXQGLQJLH
UHPDUNDEO\KLJKPRUHWKDQ86'WULOOLRQ
WKH\VD\OLWWOHDERXWWKHHIIHFWLYHULVNH[SRVXUH
)LUVWWKHEXONRIGHULYDWLYHVDUHLQWHUHVWUDWH
VZDSV&RXQWHUSDUWLHVHQWHULQJWKHVHGHULYDWLYHV
DJUHHWRH[FKDQJHLQWHUHVWUDWHSD\PHQWVEDVHG
RQDQRWLRQDODPRXQWEXWWKHULVNLVPXFKORZHU
WKDQWKHQRWLRQDODPRXQW6HFRQGRQFHQHWWHG
GHULYDWLYHSRVLWLRQVDUHPXFKVPDOOHUDQGDUH
WKHOLDELOLW\VLGHRIWKHEDODQFHVKHHWKDVDOVR UHSRUWHGRQEDQNVǵEDODQFHVKHHWV
VWDELOL]HG$VQRWHGEDQNVKDYHLQFUHDVHG
GHSRVLWVDVDVRXUFHRIIXQGLQJFigure 10 $ILQDOEXWLPSRUWDQWIDFWRUUHGXFLQJULVNVKDV
ZKLFKLVPRUHVWDEOHWKDQLQWHUEDQNOHQGLQJRU EHHQWKHUHFRYHU\LQEDQNSURILWDELOLW\5HFXUULQJ
VKRUWWHUPERUURZLQJ:KLOH-DSDQDOUHDG\ SURILWVDOVRSURYLGHDQLPSRUWDQWEXIIHULQWKH
KDGDUHODWLYHO\KLJKDQGVWDEOHGHSRVLWVWR FDVHRIDSRWHQWLDOVKRFN7KDWVDLGWKH

Figure 10: A larger share of banks’ liabilities consists of deposits

,QSHUFHQWDJHSRLQWV

USA

6ZLW]HUODQG

8QLWHG.LQJGRP

(XUR]RQH

&DQDGD

Japan

-2 0 2 4 6 8 10 12 14

&KDQJHVLQWKHUDWLRRIGHSRVLWVWRWRWDOOLDELOLWLHVEHWZHHQ'HFHPEHUDQG-XQH

6RXUFH7KRPVRQ5HXWHUV&UHGLW6XLVVH

38
Figure 11: Exposure to derivatives has dropped
1RWLRQDODPRXQWVRXWVWDQGLQJLQ86'WULOOLRQ
800

700

600

500

400

300

200

100

0
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

(TXLW\ ,QWHUHVWUDWH )RUHLJQH[FKDQJH &'6 &RPPRGLWLHV 7RWDO

6RXUFH%,6&UHGLW6XLVVH

UHFRYHU\LQEDQNSURILWVKDVEHHQYHU\XQHYHQ New “sins”? Selective increase in

DFURVVDQGZLWKLQFRXQWULHV,QJHQHUDOSURILWV
RI86EDQNVKDYHUHFRYHUHGIDUPRUHVXEVWDQ-
WLDOO\WKDQWKRVHLQ(XURSHZKLFKLVDUJXDEO\
GXHWRWKHDERYHPHQWLRQHGIDFWWKDWWKHEDQN
FOHDQXSSURFHHGHGPXFKIDVWHULQWKH86$
WKDQLQ(XURSH0RUHRYHUWKHVXSSRUWE\WKH
FHQWUDOEDQNVLQWKHIRUPRIYHU\HDV\PRQH\
ZDVPXFKPRUHGHFLVLYHDQGFDPHHDUOLHULQWKH
FDVHRIWKH)HGHUDO5HVHUYHWKDQVD\LQWKDWRI
WKH(XURSHDQ&HQWUDO%DQN(FRQRPLFJURZWK
SHUIRUPDQFHZDVRIFRXUVHDOVRPXFKEHWWHU
LQWKH86$WKDQLQPDQ\(XURSHDQFRXQWULHVLQ
WKHSRVWFULVLV\HDUVZKLFKKHOSHGVSHHGXS
risk exposure…
:KLOHEDQNVLQNH\UHJLRQVKDYHEHFRPHPRUH
UHVLOLHQWULVNVPD\KDYHEHHQEXLOGLQJLQRWKHU
UHJLRQVDQGFHUWDLQVHFWRUV$VRPHZKDW
VLPSOLVWLFDSSURDFKWRPHDVXUHWKHHYROXWLRQRI
ULVNVHPDQDWLQJIURPWKHEDQNLQJV\VWHPLVWR
ORRNDWKRZEDQNEDODQFHVKHHWVKDYHJURZQ
UHODWLYHWRWKHUHVSHFWLYHHFRQRPLHV&UHGLW
JURZWKZDVPRUHRUOHVVLQOLQHZLWKQRPLQDO
*'3JURZWKLQWKH86$RYHUWKHSHULRGIURP
WRDQGZHOOEHORZWKDWLQWKH
(XUR]RQH,QVRPHRWKHUFRXQWULHVKRZHYHUFUHGLW
WKHSURILWUHFRYHU\)LQDOO\WKHHDUOLHUPRYHE\
WKH)HGHUDO5HVHUYHWRUDLVHLQWHUHVWUDWHVDOVR
VXSSRUWHGWKHSURILWDELOLW\RI86EDQNVǵPDWXULW\
WUDQVIRUPDWLRQEXVLQHVVLQFRQWUDVWWRWKH
(XUR]RQHZKHUHH[WUHPHO\ORZUDWHVFRQWLQXH
WRKDPSHUWKHSURILWUHFRYHU\
%HFDXVHOHYHUDJHLVQRZPXFKORZHUDQG
DVVHWTXDOLW\KLJKHUDULVHLQLQWHUHVWUDWHV
ZRXOGQRZEHQHILWEDQNVLQFRQWUDVWWRWKH
SUHFULVLV\HDUVZKHUHWKHULVHLQUDWHVZDVD
NH\WULJJHUIRUWKHFULVLV+RZHYHUWKHFKDQFHV
WKDW(XURSHDQEDQNVZLOODQ\WLPHVRRQEH
SURYLGHGWKDWVXSSRUWLQDQ\PHDQLQJIXOZD\
VHHPTXLWHORZ
JURZWKKDVEHHQIDUPRUHUDSLGFigure 12WKHVH
DUHJHQHUDOO\FRXQWULHVZKHUHEDQNLQJV\VWHPV
ZHUHQRWVWURQJO\H[SRVHGWRWKH*OREDO)LQDQFLDO
&ULVLVRUWKH(XUR]RQH'HEW&ULVLV
:KLOHGRPHVWLFFUHGLWJURZWKKDVODUJHO\EHHQLQ
OLQHZLWK*'3LQ-DSDQ-DSDQHVHEDQNVVWDQG
RXWLQWHUPVRIWKHJURZWKLQWKHLUFURVVERUGHU
OHQGLQJ0RUHWKDQ\HDUVDIWHUWKHFRXQWU\ǵV
KRXVLQJDQGEDQNLQJFULVLVWKHILQDQFLDOVWUHQJWK
RI-DSDQHVHEDQNVKDVLPSURYHGVXEVWDQWLDOO\
ZLWK-DSDQUXQQLQJDSHUVLVWHQWFXUUHQWDFFRXQW
VXUSOXV$QGJLYHQWKHH[WUHPHO\ORZGRPHVWLF
LQWHUHVWUDWHVWKHUHKDVEHHQDFRQVLGHUDEOH
LQFHQWLYHWRUHF\FOHWKLVVXUSOXV+RZHYHU
DVVHVVLQJWRZKDWH[WHQW-DSDQHVHEDQNVǵ
Assessing Global Debt 39
EDODQFHVKHHWVDUHDWULVNIURPIRUHLJQVKRFNV H[WUHPHO\OD[PRQHWDU\FRQGLWLRQVSUHYDLOLQJIRU
LVGLIILFXOW6RPH-DSDQHVHEDQNVPD\KDYH PDQ\RIWKHSRVWFULVLV\HDUVGLGRIFRXUVH
SURYLGHGIXQGLQJWR86QRQEDQNILQDQFLDO VLJQLILFDQWO\VWLPXODWHWKHUHDOHVWDWHVHFWRUDQG
LQVWLWXWLRQV$VLJQLILFDQWSDUWRIWKHLQFUHDVHRI OHQGLQJWRLWLQFOXGLQJLQGLYHUVHFRXQWULHVVXFK
FURVVERUGHUORDQVVHHPVWRKDYHEHHQWR
RIIVKRUHFHQWHUVPRVWOLNHO\LQ$VLDDQGIURP
WKHUHTXLWHSRVVLEO\WRRWKHU$VLDQGHVWLQDWLRQV
,WLVGLIILFXOWWRDVFHUWDLQKRZKLJKWKHULVN
H[SRVXUHLVLQWKHVHFDVHVEXWLQJHQHUDOWKH
ULVNPHWULFVIRU-DSDQHVHEDQNVKDYHQHYHUWKH-
OHVVUHPDLQHGTXLWHVWDEOH:LWKWKH-DSDQHVH
UHVLGHQWLDOUHDOHVWDWHPDUNHWIDLUO\VWDJQDQWULVN
H[SRVXUHKDVPRVWOLNHO\QRWLQFUHDVHGLQWKLV
DUHD2IJUHDWHUFRQFHUQIRU-DSDQHVHEDQNVDV
IRUWKRVHLQWKH(XUR]RQHLVPRUHOLNHO\WREHWKH
H[WUHPHO\ORZOHYHORILQWHUHVWUDWHVDQGWKHIODW
\LHOGFXUYHZKLFKLVKDPSHULQJSURILWDELOLW\
6RPHRWKHUVPDOOHUHFRQRPLHVKDYHDOVRVHHQ
DV&KLQDVHH&KDSWHURQ&KLQDDQG6ZLW]HU-
ODQG:KLOHWKHRYHUDOOVL]HRIEDQNVǵEDODQFH
VKHHWVKDVVKUXQNLQ6ZLW]HUODQGGXHWRWKH
UHWUHQFKPHQWRIWKHODUJHEDQNVGRPHVWLFFUHGLW
KDVH[SDQGHGVLJQLILFDQWO\IDVWHUWKDQ*'3DQG
SULYDWHPRUWJDJHGHEWKDVULVHQVKDUSO\LQ
FRQWUDVWWRFRXQWULHVVXFKDVWKH86$DQGD
QXPEHURI(XURSHDQHFRQRPLHVZKHUHWKHUHDO
HVWDWHVHFWRUVXIIHUHGDVHYHUHVHWEDFNGXULQJ
WKHFULVLV$UJXDEO\QHZULVNVDUHWKXVPRUH
OLNHO\WRHPHUJHLQVRPHGRPHVWLFOHQGLQJ
PDUNHWVWKDQLQWKHDUHDRIFURVVERUGHUOHQGLQJ
ZKHUHSUHYLRXVVWUHVVHVIRUEDQNVHPHUJHG
2YHUWKHODVWILYH\HDUVOHYHUDJHGORDQVKDYH
DUDSLGH[SDQVLRQRIFUHGLWJURZWKVLQFHWKH ERRPHGFigure 13/HYHUDJHGORDQVDUHORDQV
ILQDQFLDOFULVLV7KHVHLQFOXGH&DQDGD6ZHGHQ
$XVWUDOLD+RQJ.RQJDQG6LQJDSRUH2QWKH
RQHKDQGFURVVERUGHUOHQGLQJKDVLQFUHDVHG
UDSLGO\KHUHDVZHOO$WWKHVDPHWLPHGRPHVWLF
FUHGLWJURZWKKDVEHHQVWURQJLQVRPHRIWKHVH
HFRQRPLHVQRWDEO\&DQDGDDQG$XVWUDOLDDQGWR
DOHVVHUH[WHQW6LQJDSRUHDQG6ZHGHQ7RVRPH
PDGHWRERUURZHUVLQJHQHUDOODUJHFRPSDQLHV
ZLWKDKLJKHUGHIDXOWULVNDQGJHQHUDOO\ZLWKD
IORDWLQJUDWH7KHUHDUHWZRW\SHVRIWUDQFKHV
WKHSURUDWDDQGWKHLQVWLWXWLRQDO7KHSURUDWD
WUDQFKHVDUHKHOGE\EDQNVZKLOHWKHLQVWLWXWLRQDO
WUDQFKHVDUHLQYHVWHGLQE\LQVWLWXWLRQDODVVHW
PDQDJHUVVXFKDVFROODWHUDOL]HGORDQREOLJDWLRQ
H[WHQWWKLVOHQGLQJKDVEHHQUHODWHGWRWKHUHDO &/2PDQDJHUVDQGSHQVLRQIXQGV:LWKWKH
HVWDWHERRPVLQVRPHRIWKHVHFRXQWULHVVHH )HGHUDO5HVHUYHWLJKWHQLQJLWVPRQHWDU\SROLF\
&KDSWHURQUHDOHVWDWH7KHHQYLURQPHQWRI OHYHUDJHGORDQVKDYHEHHQSRSXODUDPRQJ

Figure 12: Retrenchment in some, rapid expansion in other countries

%DQNEDODQFHVKHHWVLQRI*'3DQGFKDQJHVLQSHUFHQWDJHSRLQWV

600

6ZLW]HUODQG
500

400
UK +RQJ.RQJ
Sweden &KLQD
300
6LQJDSRUH
(XUR]RQH
$XVWUDOLD &DQDGD
200
Japan

100
USA

0
-150 -100 -50 0 50 100 150

&KDQJHEHWZHHQ Dec 2007 and Dec 2017

6RXUFH7KRPVRQ5HXWHUV&UHGLW6XLVVH

40
 LQYHVWRUVGXHWRWKHLUIORDWLQJUDWHIHDWXUHQRW V\VWHPDWOHDVWVKRXOGHVVHQWLDOO\UHPDLQOLPLWHG
OHDVWWRSURWHFWDJDLQVWULVLQJ\LHOGVLQORQJHU HYHQLIDIODWWHU\LHOGFXUYHUHGXFHVWKHSURILWDELOLW\
PDWXULWLHV:KLOHLQVWLWXWLRQDOLQYHVWRUVDQG&/2 RIWKHPDWXULW\WUDQVIRUPDWLRQEXVLQHVV,QRWKHU
PDQDJHUVLQSDUWLFXODUKDYHEHHQWKHPDLQ UHJLRQVWKDWDUHKLJKO\GHSHQGHQWRQ86GROODU
LQYHVWRUVLQOHYHUDJHGORDQVWKHLVVXDQFHRI OLTXLGLW\EXWZKHUHFXUUHQF\VWDELOLW\LVLQGRXEW
SURUDWDWUDQFKHVKDVDOVREHHQHOHYDWHG,Q
DGGLWLRQWKHVKDUHRIVRFDOOHGFRYHQDQWOLWH
ORDQVLHULVNLHUOHYHUDJHGORDQVKDVLQFUHDVHG
+HQFHIRUEDQNVOHYHUDJHGORDQVZRXOG
UHSUHVHQWDULVNLQWKHHYHQWRIDUHFHVVLRQLQWKH
LHDQXPEHURIHPHUJLQJPDUNHWVVRPH
VWUHVVHVPD\VWLOOUHRFFXUDVGHYHORSPHQWVLQ
VXJJHVW
,WLVQRWMXVWWKHOHYHORILQWHUHVWUDWHVEXWDOVR
86$WKH86PDUNHWLVPXFKODUJHURULIWKH WKHYROXPHRI86GROODUOLTXLGLW\UHTXLUHGE\
)HGHUDO5HVHUYHZHUHWRWLJKWHQLWVPRQHWDU\ EDQNVWKDWLVOLNHO\WRGHWHUPLQHZKHWKHUDQGWR
SROLF\PXFKEH\RQGH[SHFWDWLRQVDVERWK ZKDWH[WHQWVWUHVVHVDULVH7KHEDQNVǵQHHGIRU
GHYHORSPHQWVZRXOGEHDVVRFLDWHGZLWKKLJKHU 86GROODUOLTXLGLW\LVRIFRXUVHDIXQFWLRQRIWKH
GHIDXOWVVHHDOVR&KDSWHURQFRUSRUDWHGHEW
… and potential pressure points
:KLOHZHKDYHSRLQWHGWRLQVXIILFLHQWFDSLWDO
VWUHQJWKDQGWR[LFDVVHWVDVNH\FDXVHVIRUWKH
ODVWEDQNLQJFULVLVWKHFULVLVZDVRQO\DFWXDOO\
WULJJHUHGRQFHWKH)HGHUDO5HVHUYHKDGVXEVWDQ-
WLDOO\WLJKWHQHGPRQHWDU\SROLF\EHJLQQLQJPLG
%DQNULVNDQGGHEWULVNVDUHWKXVLQWL-
PDWHO\UHODWHGWRPRQHWDU\SROLF\GHYHORSPHQWV
6KRXOGRXUEDVHFDVHPDWHULDOL]HLHWKH
)HGHUDO5HVHUYHUDLVHVLQWHUHVWUDWHVE\OHVV
WKDQDQDGGLWLRQDOEDVLVSRLQWVLQWKLVF\FOH
LPSO\LQJWKDWWKHUHDOIHGHUDOIXQGVUDWHZRXOG
YROXPHRI86'GHQRPLQDWHGFUHGLWRXWVWDQGLQJ
0RUHRYHUOLTXLGLW\QHHGVDUHOLNHO\WREHKLJKHU
WRVXSSRUW86'GHQRPLQDWHGFUHGLWRXWVLGHWKH
86$7KH86GROODULVJHQHUDOO\WKHGHIDXOW
FXUUHQF\IRUNH\DUHDVVXFKDVFRPPRGLW\DQG
WUDGHILQDQFHDQGLVRIWHQXVHGDVDIXQGLQJ
FXUUHQF\E\FRUSRUDWHERUURZHUVSDUWLFXODUO\LQ
HPHUJLQJPDUNHWV7KHRXWVWDQGLQJYROXPHRI
86'GHQRPLQDWHGEDQNFUHGLW2LVHVWLPDWHGDW
86'WULOOLRQZKLFKLVPRUHWKDQWKHIRUHLJQ
2. Defined as the cross-border and local USD claims of non-US
banks, as well as the cross-border USD claims of US banks,
according to the Bank for International Settlements (BIS) loca-
tional banking statistics by nationality of reporting banks.
EDUHO\H[FHHGVWUHVVHVLQWKH86EDQNLQJ

Figure 13: Leveraged loan issuance has surged in the post-crisis years
86OHYHUDJHGORDQLVVXDQFHJURVVLQ86'ELOOLRQ

225

200

175

150

125

100

75

50

25

0
2011 2012 2013 2014 2015 2016 2017 2018

,QVWLWXWLRQDO 3URUDWD

6RXUFH6 3*OREDO0DUNHW,QWHOOLJHQFHǵV/HYHUDJHG&RPPHQWDU\ 'DWD/&'

Assessing Global Debt 41

DQGGRPHVWLFDVVHWVRIDOOEDQNVLQWKH86$ UHDVRQVWKHVXSSO\RI86GROODUVDYDLODEOHWR
FRPELQHG86'WULOOLRQ+RZHYHU86 IXQG86GROODUFUHGLWRXWVLGHWKH86$KDV
EDQNVSURYLGHRQO\DERXWRILQWHUQDWLRQDO GURSSHGDQGWKHERUURZLQJFRVWIRUǷLQWHUQDWLRQDOǸ
86GROODUEDQNFUHGLWVZKLOHWKHUHVWLVEHLQJ 86GROODUVKDVULVHQ
OHQWE\QRQ86EDQNVFigure 14:KLOHORZHU
WKDQEHIRUHWKHFULVLVJURZWKRILQWHUQDWLRQDO86 7KLVLQFUHDVHKDVDWWLPHVEHHQYLVLEOHLQWKH
GROODUEDQNFUHGLWKDVEHHQVROLGRYHUWKHODVW ZLGHQLQJRIWKHVSUHDGEHWZHHQWKHPRQWK
IHZ\HDUVDQGDVQRWHGDERYH-DSDQHVHEDQNV 86'/LERUWKHUDWHDWZKLFKEDQNVERUURZ
KDYHEHHQSDUWLFXODUO\NHHQDZDQGDEOHȍWROHQG XQVHFXUHGIXQGVIURPHDFKRWKHUDQGWKH
86GROODUV$VDUHVXOWWKHGHPDQGIRU86GROODU PRQWK2YHUQLJKW,QGH[HG6ZDS2,6UDWH
OLTXLGLW\UHPDLQVYHU\KLJK ZKLFKLVDSUR[\IRUWKHH[SHFWDWLRQVIRUWKH86
)HGHUDO5HVHUYHǵVSROLF\UDWHDQGKHQFHFRVWVDW
,QWKHGRPHVWLF86PDUNHWFXVWRPHUGHSRVLWV ZKLFKEDQNVZLWKDFFHVVWRIHGHUDOIXQGVLH
DUHWKHPDLQ86GROODUIXQGLQJVRXUFHRI86 GRPHVWLFEDQNVLQWKH86$FDQERUURZ86
EDQNV1RQ86EDQNVKRZHYHUGRQRWKDYHD GROODUVFigure 15$QDOWHUQDWLYHIRUQRQ86
ODUJHEDVHRI86GROODUGHSRVLWVDQGPXVW EDQNVLVWRERUURZIXQGVLQORFDOFXUUHQF\RULQ
WKHUHIRUHIXQG86GROODUFUHGLWVIURPRWKHURIWHQ DQRWKHUIXQGLQJFXUUHQF\WKDQ86GROODUVDQG
VKRUWWHUPVRXUFHV86PRQH\PDUNHWIXQGVDV VZDSWKHVHIXQGVIRU86GROODUV2ZLQJWRWKH
ZHOODV86FRUSRUDWHVKDYHEHHQLPSRUWDQW LQWHUQDWLRQDOGHPDQGIRU86GROODUVLQVWLWXWLRQV
IXQGLQJVRXUFHVIRUWKHP+RZHYHUERWKKDYH WKDWERUURZ86GROODUVXVLQJVZDSVPXVWXVXDOO\
EHHQLPSDFWHGE\UHFHQWUHIRUPVWKHPRQH\ SD\DSUHPLXPUHIOHFWHGLQDVRFDOOHGQHJDWLYH
PDUNHWIXQGUHIRUPVDQGWKH86FRUSRUDWHWD[ FURVVFXUUHQF\EDVLVVZDS3&&%67KH&&%6
UHIRUPZKLFKKDYHUHGXFHGWKHLULQFHQWLYHWR
OHQGGROODUVWRQRQ86EDQNV$FWLYLWLHVRIWKH
867UHDVXU\KDYHKDGDVLPLODUHIIHFWDVLWKDV
LQFUHDVHGLWVERUURZLQJIURPEDQNVWKURXJKWKH
LVVXDQFHRI7%LOOV:KHQWKH867UHDVXU\NHHSV
WKHSURFHHGVIURPWKLVERUURZLQJRQLWVDFFRXQW
DWWKH86)HGHUDO5HVHUYHWKHVXSSO\RI86
GROODUVDYDLODEOHWREDQNVGLPLQLVKHV)RUWKHVH
LVKRZHYHUYRODWLOHFigure 16VRWKDWWKHVH
QRQ86EDQNVFDQEHFRQIURQWHGZLWKVXGGHQ
LQFUHDVHVLQWKHLUIXQGLQJFRVWV,QDFRQWH[WLQ
ZKLFKWKH86)HGHUDO5HVHUYHLVWLJKWHQLQJLWV
PRQHWDU\SROLF\WKURXJKLQWHUHVWUDWHKLNHV
3. The premium for US dollar demand is translated into a
negative CCBS

Figure 14: The international supply of US dollar bank credits is dominated by non-US banks
,Q86'WULOOLRQ

18

16

14

12

10

0
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

1RQ86EDQNV 86EDQNV

6RXUFH%,6&UHGLW6XLVVH

42
ZKLFKUDLVHERUURZLQJFRVWVIRUERWK86DQG FHQWUDOEDQNVKDYHDJUHHGRQVZDSOLQHVZLWK
QRQ86EDQNVPRVWQRQ86EDQNVPXVW WKH86)HGHUDO5HVHUYHDOORZLQJWKHPWR
FXUUHQWO\SD\DQDGGLWLRQDOSUHPLXPWR
ERUURZGROODUV%LJEDQNIXQGLQJQHHGVDQG
7UHDVXU\ELOOLVVXDQFHVKDYHODWHO\OHGWRD
ZLGHQLQJRIWKH/LERU2,6VSUHDGDJDLQ
,QLWV*OREDO)LQDQFLDO6WDELOLW\UHSRUWGDWHG$SULO
WKH,QWHUQDWLRQDO0RQHWDU\)XQGSRLQWHG
WRWKHULVNHPDQDWLQJIURPǷWKLQǸ86GROODU
OLTXLGLW\UHVHUYHVRIQRQ86EDQNVZKLFKLQ
DGGLWLRQWRWKHYRODWLOLW\RI86GROODUIXQGLQJ
FRVWVIRUQRQ86EDQNVFRXOGH[DFHUEDWH
IXQGLQJSUREOHPVLQWKHHYHQWRIDFULVLV7KDW
VDLGVLQFHWKH*OREDO)LQDQFLDO&ULVLVPDMRU
SURYLGH86GROODUVDWDSUHPLXPWRWKHLU
GRPHVWLFEDQNLQJV\VWHPWKXVVRPHZKDW
PLWLJDWLQJWKHULVNRI86GROODUIXQGLQJVKRUWDJHV
IRUQRQ86EDQNV,WVKRXOGDOVREHQRWHGWKDW
VLJQVRIVWUHVVLQWKH86GROODUIXQGLQJPDUNHW
DFWXDOO\GLVVLSDWHGLQWKHODWHVXPPHURI
,QWKHDEVHQFHRIPDMRULQWHUHVWUDWHVKRFNVGXH
WR)HGHUDO5HVHUYHSROLF\RUDVHULRXVGHWHULRUD-
WLRQRIDVVHWTXDOLW\GXHWRIRUH[DPSOHD
UHFHVVLRQIXQGLQJVWUHVVHVIRUEDQNVVKRXOG
WKXVDOVRUHPDLQFRQWDLQHG

Figure 15: Libor-OIS spread has widened recently

,QEDVLVSRLQWV

70

60
&RUSRUDWHWD[UHIRUP
50

40
0RQH\ PDUNHWIXQGUHIRUP
30

20

10

0
2011 2012 2013 2014 2015 2016 2017 2018

6SUHDGEHWZHHQWKH086'/LERUDQGWKH086'2,6UDWH
6RXUFH7KH%/220%(5*352)(66,21$/ȅVHUYLFH&UHGLW6XLVVH

Figure 16: Large swings are not unusual for CCBS

PRQWK&&%6LQEDVLVSRLQWV
50

-50

-100

-150

-200

-250
2011 2012 2013 2014 2015 2016 2017 2018

(85 -3< *%3 &+)

6RXUFH7KH%/220%(5*352)(66,21$/ȅVHUYLFH&UHGLW6XLVVH

Assessing Global Debt 43

Conclusion: Bank leverage unlikely to SURGXFWVWKDWLQSDUWUHPDLQRQEDQNEDODQFH
trigger a new crisis VKHHWVKDYHGLPLQLVKHGLVGLIILFXOWWRDVFHUWDLQ
6LPLODUO\LWLVGLIILFXOWWRNQRZWRZKDWH[WHQW
:HKDYHDUJXHGDERYHWKDWWKHULVNVUHVLGLQJ OHQGLQJE\QRQEDQNVǷVKDGRZEDQNVǸKDV
LQWKHEDQNLQJV\VWHPVRINH\UHJLRQVWKH86$ H[SDQGHGDQGZKDWW\SHVRIULVNVUHVLGHWKHUH
DQG(XURSHLQSDUWLFXODUKDYHPRVWOLNHO\
GLPLQLVKHGVLQFHWKHILQDQFLDOFULVLVGXHWRD
FRPELQDWLRQRIVWURQJHUFDSLWDOSRVLWLRQV
UHWUHQFKPHQWIROORZHGE\DPRGHUDWHH[SDQVLRQ
RIEDODQFHVKHHWVEHWWHUDVVHWTXDOLW\DQG
LPSURYHGWUDQVSDUHQF\DQGULVNPDQDJHPHQW
&URVVERUGHUH[SRVXUHKDVDOVRGLPLQLVKHGLQ
NH\PDUNHWVDQGLQWHUEDQNOHQGLQJKDVEHHQ
IDLUO\ZHDN6RPHFRXQWULHVKDYHQHYHUWKHOHVV
VHHQDPRUHUDSLGH[SDQVLRQRIRYHUDOOFUHGLW
DQGRUFURVVERUGHUOHQGLQJ0RUHRYHULQVRPH
RIWKHVHFRXQWULHVWKHH[SDQVLRQRIFUHGLWKDV
EHHQDVVRFLDWHGZLWKERRPLQJUHDOHVWDWH
PDUNHWVZKLFKFRXOGVSHOOWURXEOHLQWKHIXWXUH
7RZKDWH[WHQWWKHULVNVVSHFLILFWRILQDQFLDO
44
VHHIROORZLQJER[:KLOHWKHRYHUDOOOLTXLGLW\
EXIIHUVRIEDQNVKDYHLQFUHDVHGGXHWRD
FRPELQDWLRQRIWLJKWHUUHJXODWLRQVDQGH[SDQ-
VLRQDU\PRQHWDU\SROLF\WKHWLJKWHQLQJRI
PRQHWDU\SROLF\E\WKH86)HGHUDO5HVHUYHLQ
SDUWLFXODUFRXOGVWLOOFDXVHVWUHVVHVLQWKH
EDQNLQJV\VWHPHVSHFLDOO\IRUQRQ86EDQNV
+RZHYHUDVORQJDVWKLVSURFHVVHYROYHV
JUDGXDOO\DZDVVHHPVWREHWKHFDVHDZDQGJLYHQ
LQWHUQDWLRQDODUUDQJHPHQWVWRSURYLGH86GROODU
OLTXLGLW\WRQRQ86EDQNVWKHVHVWUHVVHVDUH
XQOLNHO\WREHODUJHHQRXJKWRFDXVHDUHQHZHG
FULVLVLQRXUYLHZ
New financial stability risks beyond
bank balance sheets
7KHLPPHGLDWHWULJJHURIWKHILQDQFLDOFULVLVLQ
ZDVWKHFROODSVHRIWKH/HKPDQ%URWKHUV
LQYHVWPHQWEDQN7KLVLQWXUQWULJJHUHGDZLGHU
ǷUXQǸRQEDQNVLQWKH86$DQG(XURSH+RZHYHU
WKHUXQZHQWZHOOEH\RQGFRPPHUFLDOEDQNVWR
LQFOXGHDZLGHYDULHW\RIVRFDOOHGǷVKDGRZ
DVSHFWLVWKDWVKDGRZEDQNLQJLQFOXGHVHQWLWLHV
WKDWKDYHVLPLODUYXOQHUDELOLWLHVDVEDQNVEXWWKDW
WKH\DUHOHVVUHJXODWHGDQGOHVVFORVHO\PRQLWRUHG
:KLOHVKDGRZEDQNLQJUHWUHDWHGVKDUSO\DIWHU
WKHILQDQFLDOFULVLVLWEHJDQWRH[SDQGVWURQJO\
EDQNVǸ10RVWVWXQQLQJIRULQYHVWRUVZDVWKHUXQ DJDLQDVRIVHHFigure 17KH)LQDQFLDO
RQVHHPLQJO\VDIHPRQH\PDUNHWIXQGV00)V
7KHUHDVRQZDVWKDWWKHVHIXQGVZHUHWKHP-
VHOYHVH[SRVHGWROLDELOLWLHVRI/HKPDQ%URWKHUV
RURWKHUDVVHWVWKDWZHUHUHJDUGHGDVǷWR[LFǸ
(YHQWKRXJKVXFKDVVHWVFRQVWLWXWHGRQO\DYHU\
VPDOOSDUWRIWKHSRUWIROLRWKH00)VǷEURNHWKH
6WDELOLW\%RDUG)6%HVWLPDWHVWKDWDIDLUO\
QDUURZO\GHILQHGXQLYHUVHRIVKDGRZEDQNVKDG
DFFXPXODWHG86'WULOOLRQRIDVVHWVJOREDOO\E\
WKHHQGRIZKLFKFRUUHVSRQGVWRRI
DOOILQDQFLDODVVHWV0RUHRYHUWKHH[SDQVLRQZDV
DOPRVWH[FOXVLYHO\GULYHQE\FROOHFWLYHLQYHVWPHQW
EXFNǸLHWKH\ZHUHQRORQJHUDEOHWRUHGHHP
WKHLUREOLJDWLRQVDWSDU$VDUHVXOWRIWKHUXQRQ
WKHVHIXQGVWKH)HGHUDO5HVHUYHZDVIRUFHGWR
H[WHQGSURWHFWLRQWRVXFKYHKLFOHVDVZHOO
Post-crisis expansion of new shadow banks
in the USA and China
6LQFHWKHILQDQFLDOFULVLVUHVHDUFKHUVDVZHOODV
UHJXODWRUVKDYHSODFHGIDUPRUHHPSKDVLVRQ
DVVHVVLQJWKHULVNVWRVWDELOLW\WKDWPLJKWUHVLGHLQ
VXFKYHKLFOHV,WVKRXOGEHQRWHGWKDWWKHH[SDQ-
YHKLFOHV&,9VZLWKIHDWXUHVWKDWSRWHQWLDOO\
PDNHWKHPVXVFHSWLEOHWRUXQVLHPRVWO\
LQYHVWPHQWIXQGVWKDWSURYLGHVRPHIRUPRI
OHQGLQJ%\RIVKDGRZEDQNLQJ
DVVHWVZHUHFRQFHQWUDWHGLQWKHVH&,9V$
UHFHQW86VWXG\2SRLQWVRXWIRUH[DPSOHWKDW
RQOLQHOHQGHUVVXFKDV5RFNHW0RUWJDJHLHD
QRQEDQNZHUHH[WHQGLQJRIDOOKRPH
ORDQVE\DWKUHHIROGLQFUHDVHRYHU
DQGWKDWWKHVHDFFRXQWHGIRURIDOOORDQVWR
ORZLQFRPH86ERUURZHUVZKLFKDUHLQVXUHGE\
VLRQRIVKDGRZEDQNVFRXOGLQSULQFLSOHUHGXFH WKH86)HGHUDO+RXVLQJ$GPLQLVWUDWLRQ)+$
VWDELOLW\ULVNVLIWKHLUYXOQHUDELOLWLHVDUHORZHUWKDQ 0RUHRYHUWKHVWXG\GHPRQVWUDWHVWKDWWKH
WKRVHRIEDQNVSDUWLFXODUO\LIWKH\UHO\OHVVRQ GRPLQDQWUHDVRQIRUWKHVXFFHVVRIWKHVHILQWHFK
VKRUWWHUPIXQGVVXFKDVGHSRVLWVWKDWDUH FRPSDQLHVZDVQRWWKHLUWHFKQRORJLFDOHGJHEXW
VXVFHSWLEOHWRUXQVDQGDOVRRIFRXUVHZKHUH WKHLUDGYDQWDJHVGXHWROLJKWUHJXODWLRQ*LYHQ
ULVNVWKH\HQJDJHLQDUHORZHURULIWKHPDWXULW\ WKDWWKHVHFUHGLWVDUHODUJHO\JRYHUQPHQWJXDU-
PLVPDWFKEHWZHHQVKRUWWHUPOLDELOLWLHVDQG DQWHHGWKHH[SRVXUHRIWKHSXEOLFVHFWRUZRXOG
ORQJWHUPDVVHWVLVOLPLWHG$PRUHSUREOHPDWLF EHQRORZHUWKDQLQWKHFDVHRIFRPPHUFLDO
EDQNVLQFDVHRIDUHQHZHGUHDOHVWDWHFULVLV
7KHWHUPǷVKDGRZEDQNVǸZDVFRLQHGE\86HFRQRPLVWLQ
7KHVHFRQGPDUNHWLQZKLFKVKDGRZEDQNVKDYH
3DXO0F&XOOH\LQ,QDVSHHFKLQ1RYHPEHU%HQ
H[SDQGHGYHU\VWURQJO\LQUHFHQW\HDUVLV&KLQD
%HUQDQNHWKHIRUPHUFKDLUPDQRQWKH)HGHUDO5HVHUYH
ZKLFKWRGD\KRVWVDERXWRIDOOVKDGRZ
GHɇQHGWKHPDVǷFRPSULV>LQJ@DGLYHUVHVHWRILQVWLWXWLRQVDQG
EDQNLQJDVVHWVRUDURXQG86'WULOOLRQWKH\KDYH
PDUNHWVWKDWFROOHFWLYHO\FDUU\RXWWUDGLWLRQDOEDQNLQJ
SOD\HGDQLPSRUWDQWUROHLQGRPHVWLFOHQGLQJVLQFH
IXQFWLRQVDzEXWGRVRRXWVLGHRULQZD\VRQO\ORRVHO\OLQNHG
WKH*OREDO)LQDQFLDO&ULVLV&KLQHVHKRXVHKROGV
WRWKHWUDGLWLRQDOV\VWHPRIUHJXODWHGGHSRVLWRU\LQVWLWXWLRQV
DQGFDVKULFKILUPVRIWHQSURYLGHGIXQGVWR
([DPSOHVRILPSRUWDQWFRPSRQHQWVRIWKHVKDGRZEDQNLQJ
V\VWHPLQFOXGHVHFXULWL]DWLRQYHKLFOHDVVHWEDFNHG
FRPPHUFLDOSDSHU$%&3FRQGXLWVPRQH\PDUNHWIXQGV *UHJ%XFKDNHWDO)LQWHFKUHJXODWRU\DUELWUDJHDQGWKH
PDUNHWVIRUUHSXUFKDVHDJUHHPHQWVLQYHVWPHQWEDQNVDQG ULVHRIVKDGRZEDQNV1%(5:RUNLQJ3DSHU0DUFK
PRUWJDJHFRPSDQLHVǸ 

Assessing Global Debt

$VVHVVLQJ*OREDO'HEW 45
FRUSRUDWHVYLDRIIEDODQFHVKHHWLQYHVWPHQW SHQVLRQIXQGVDQGLQVXUDQFHFRPSDQLHVKDYH
YHKLFOHVZKLFKZHUHKRZHYHURIWHQVHWXSE\ DOVRH[SDQGHGVLJQLILFDQWO\LQWROHQGLQJPDUNHWV
EDQNVWKHPVHOYHV7UXVWVDQGVRFDOOHGǷZHDOWK $FFRUGLQJWRWKH)6%WKHDVVHWVRIWKHXQLYHUVH
PDQDJHPHQWSURGXFWVǸ:03VLQYHVWHGLQGHEW RIQRQEDQNILQDQFLDOLQWHUPHGLDULHVWKDWLW
VHFXULWLHVDQGH[WHQGHGORDQV,QVRPHLQVWDQFHV PRQLWRUVUHDFKHG86'WULOOLRQDWWKHHQGRI
WKHVHYHKLFOHVLPSOLFLWO\JXDUDQWHHGUHWXUQV ZKLFKH[WHQGVZHOOEH\RQGDQDUURZHU
PDNLQJWKHPGHSRVLWOLNHSURGXFWV6LQFH GHILQLWLRQRIVKDGRZEDQNVVHHFigure 2
KRZHYHUWKH&KLQHVHDXWKRULWLHVKDYHWLJKWHQHG
UHJXODWLRQVUHVWULFWLQJEDQNVIURPLQYHVWLQJLQRU Remaining “gray zones”
ILQDQFLDOO\VXSSRUWLQJWKHVHLQYHVWPHQWYHKLFOHV
VHH&KDSWHURQ&KLQD$FFRUGLQJWRWKH
,QWHUQDWLRQDO0RQHWDU\)XQGWKLVVKRXOGOHDGWR
DFRQYHUVLRQRIURXJKO\KDOIRIWKHPDUNHWIURP
GHSRVLWOLNHSURGXFWVLQWRPXWXDOIXQGVZKLFKDUH
E\WKHLUQDWXUHOHVVULVN\
*LYHQWKHUHJXODWRU\FRQVWUDLQWVSXWRQEDQNV
DIWHUWKHFULVLVLWLVPD\EHQRWVXUSULVLQJWKDW
QRQEDQNILQDQFHKDVH[SDQGHGVRVWURQJO\VLQFH
WKHQ9HU\ODUJHDQGDVVHWULFKLQVWLWXWLRQVVXFKDV
Figure 1: Growth in global shadow-banking assets driven by investment vehicles
$VQRWHGDERYHWKHLQWHUFRQQHFWHGQHVVRI
QRQEDQNOHQGHUVVXFKDVPRQH\PDUNHWIXQGV
ZLWKKLJKO\OHYHUDJHGILQDQFLDOLQVWLWXWLRQVZDVD
NH\UHDVRQIRUWKHIUDJLOLW\RIWKHILQDQFLDOV\VWHP
LQWKHEXLOGXSWRWKHILQDQFLDOFULVLV,QPDQ\
DUHDVUHJXODWLRQKDVUHGXFHGWKLVLQWHUFRQQHFW-
HGQHVVVLQFHWKHQ,QWKH86$IRUH[DPSOH
PRVWPRQH\PDUNHWIXQGVQRZKROGVKRUWWHUP
JRYHUQPHQWGHEWLQVWHDGRIVKRUWWHUPGHEWRI
ILQDQFLDOLQVWLWXWLRQVRUFRUSRUDWHV
<HDURQ\HDU

20

15

10

-5

-10
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

&ROOHFWLYHLQYHVWPHQWYHKLFOHVSRWHQWLDOO\VXEMHFWWRUXQV 2WKHUVKDGRZEDQNLQJDFWLYLWLHV *URZWKUDWHRIVKDGRZEDQNLQJ

6RXUFH)6%*OREDO6KDGRZ%DQNLQJ0RQLWRULQJ5HSRUW&UHGLW6XLVVH

46
Figure 2: Universe of non-banks extends beyond shadow banks
2YHUDOODVVHWVJOREDOO\DQGVKDUHVRIYDULRXVQRQEDQNFDWHJRULHV

7RWDOɇQDQFLDODVVHWV
86'WULOOLRQ

081),
86'WULOOLRQ

2),V
86'WULOOLRQ

6KDGRZEDQNLQJ
86'WULOOLRQ

6RXUFH)6%*OREDO6KDGRZ%DQNLQJ0RQLWRULQJ5HSRUW
)6%QRWHVǷ081), 0RQLWRULQJ8QLYHUVHRI1RQEDQN)LQDQFLDO,QWHUPHGLDWLRQLQFOXGHVRWKHUɇQDQFLDOLQVWLWXWLRQV2),VSHQVLRQIXQGV
LQVXUDQFHFRUSRUDWLRQVDQGɇQDQFLDODX[LOLDULHV2),VDOVRLQFOXGHFDSWLYHɇQDQFLDOLQVWLWXWLRQVDQGPRQH\OHQGHUVǽ2),VFRPSULVHDOOɇQDQFLDO
LQVWLWXWLRQVWKDWDUHQRWFHQWUDOEDQNVEDQNVLQVXUDQFHFRUSRUDWLRQVSHQVLRQIXQGVSXEOLFɇQDQFLDOLQVWLWXWLRQVRUɇQDQFLDODX[LOLDULHVǸ

,QRWKHUDUHDVILQDQFLDOIUDJLOLW\PD\QRW
KRZHYHUKDYHEHHQUHGXFHGVLJQLILFDQWO\$
UHFHQWUHVHDUFKSDSHU3DUJXHVIRUH[DPSOHWKDW
WKHIUDJLOLW\RIWKHEDQNLQJV\VWHPLVJUHDWHUWKDQ
XVXDOO\PHDVXUHG1RUPDOO\RQO\RQEDODQFH
VKHHWLWHPVDUHWDNHQLQWRDFFRXQWZKHQ
DVVHVVLQJWKHVWDELOLW\RIEDQNVEXWWKHDXWKRUV
DUJXHWKDWIRULQVWDQFHVRFDOOHGǷSOHGJHG
FROODWHUDOǸWKDWLVRIIEDODQFHVKHHWLPSOLHV
VLJQLILFDQWO\KLJKHUYXOQHUDELOLW\7RTXRWHWKH
DXWKRUVǷ)RUH[DPSOHLI:DOPDUWZDQWVWR
H[SDQGLQ7H[DVDQGQHHGVIXQGLQJIURPLWV
UHODWLRQVKLSEDQN&LWLWKHWUHDVXUHURI&LWLFDQ
FKRRVHWRIXQGLWVFOLHQWIURPGHSRVLWVRU
ZKROHVDOHIXQGLQJZKLFKDUHERWKRQEDODQFH
SOHGJHGFROODWHUDOWKXVHIIHFWLYHO\ERRVWVEDQN
OHYHUDJHDQGGHSHQGLQJRQWKHTXDOLW\RIWKH
FROODWHUDOLQFUHDVHVWKHIUDJLOLW\RIEDQNVWRD
JUHDWHURUOHVVHUGHJUHH
$ILQDODUHDRISRWHQWLDOYXOQHUDELOLW\RIWKHILQDQFLDO
V\VWHPFRQFHUQVFHUWDLQH[FKDQJHVLQSDUWLFXODU
H[FKDQJHVIRUOHYHUDJHGSURGXFWVLHGHULYDWLYHV
7KLVLVVXHKDVLQSDUWLFXODUDULVHQLQGLVFXVVLRQV
DERXWWKHSRWHQWLDOULVNVDVVRFLDWHGZLWK%UH[LW
*URVVYROXPHVRQWKHVHH[FKDQJHVDUHKXJHRI
FRXUVHEXWWKHUHVKRXOGQRWEHDQ\QHWOHYHUDJH
IRUH[FKDQJHVDQGDUHJLPHRIGLVFLSOLQHGPDUJLQ
UHTXLUHPHQWVVKRXOGSURYLGHWKHH[FKDQJHVZLWKD
VLJQLILFDQWEXIIHU7KHUHPLJKWKRZHYHUEH
VKHHWRUIURPSOHGJLQJFROODWHUDOLWKDVUHFHLYHG VLWXDWLRQVRIH[WUHPHPDUNHWJ\UDWLRQVZKHUHWKLV
RIIEDODQFHVKHHWWRDQRWKHUEDQNHJ%DU- EXIIHUSURYHVLQVXIILFLHQW7KDWVDLGWKHVHH[-
FOD\V)RUWKHWUHDVXUHUGHSRVLWVRUZKROHVDOH FKDQJHVZHDWKHUHGWKHJOREDOILQDQFLDOFULVLV
IXQGLQJRUSOHGJHGFROODWHUDODIWHUDIHZVWHSV UHODWLYHO\ZHOOVXJJHVWLQJOLPLWHGULVNVHYHQXQGHU
DUHDOOIXQJLEOHUHVRXUFHVWKDWFDQEHPRELOL]HG H[WUHPHPDUNHWFRQGLWLRQV%XWDZLWKGUDZDORIWKH
WRIXQGDFOLHQWǽ%DODQFHVKHHWUHSRUWLQJDWD 8.IURPWKH(XURSHDQ8QLRQZLWKRXWDQ\DJUHH-
QDWLRQDOOHYHOFDQRQO\IRFXVRQDVVHWVDQG
OLDELOLWLHVRIEDQNVLQWKHLUMXULVGLFWLRQDQGQRWRQ
WUDQVDFWLRQVWKDWFDQQRWEHLGHQWLILHGZLWKDQ\
MXULVGLFWLRQ7UDQVDFWLRQVWKDWDUHFURVVERUGHULQ
QDWXUHVXFKDVDODUJHVKDUHRISOHGJHG
FROODWHUDODJUHHPHQWVRUZHDOWKPDQDJHPHQW
PHQWDǷKDUG%UH[LWǸPD\UDLVHVLJQLILFDQWOHJDO
DQGRSHUDWLRQDOULVNV,QGHHGPDQ\RIWKHVH
FRQWUDFWVDUHFOHDUHGLQWKH8.REYLRXVO\DOVR
EHWZHHQFRXQWHUSDUWLHVLQWKH(8$KDUG%UH[LW
FRXOGWKHUHIRUHFUHDWHVWUHVVHVGXHWRDPDMRU
ǷOHJDOJDSǸ&HQWUDOEDQNVILQDQFLDOVXSHUYLVRUVDQG
DFFRXQWVHWFIDOOWKURXJKWKHFUDFNVǸ6XFK PDUNHWSDUWLFLSDQWVDUHRIFRXUVHDZDUHRIWKHVH
LVVXHVDQGDUHZRUNLQJWRSUHYHQWǷDFFLGHQWVǸ
VKRXOGSROLWLFVPRYHLQWKDWGLUHFWLRQ
0DQPRKDQ6LQJKDQG=RKDLU$ODP/HYHUDJHDz$%URDGHU
9LHZ,0):RUNLQJ3DSHU0DUFK

Assessing Global Debt

$VVHVVLQJ*OREDO'HEW 47
48
4. Emerging markets – great
diversity, but few systemic risks
0DULDQR$UULHWDDQG)ORUHQFH+DUWPDQQ

While the financial vulnerability of some emerging economies has

increased since the financial crisis, the risk of a systemic crisis being
triggered by any of these economies seems much lower than in the
late 1990s. After declining, overall debt ratios as well as the govern-
ment debt ratios have increased again in most countries over the past
ten years or so, but so has the ability of most countries to service
debt. Moreover, the quality of policymaking has generally improved
significantly, allowing them to better deal with external shocks.

7KHODVWSHULRGRIPDMRUHPHUJLQJPDUNHWGHEW KLJKHU%RUURZLQJUDWHVKDYHDOVRGHFOLQHG
FULVHVLQYROYLQJDVHULHVRIRXWULJKWGHIDXOWVGDWHV VLJQLILFDQWO\LQPRVWHPHUJLQJHFRQRPLHV
EDFNWRWKHODWHV9DULRXVJRYHUQPHQWV DOWKRXJKWKH\UHPDLQZHOODERYHWKRVHLQDG-
KDGERUURZHGKHDYLO\LQIRUHLJQFXUUHQF\DQG YDQFHGHFRQRPLHVFigure 40RUHRYHUQRQHRI
ZKHQ86PRQHWDU\WLJKWHQLQJEHJDQLQWKH WKHPDMRUHPHUJLQJHFRQRPLHVSHJVLWVFXUUHQF\
PLGVVHHSDJHVDQGILQDQFLQJ
VWUHVVHVHPHUJHGWKDWXOWLPDWHO\UHVXOWHGLQ
YDULRXVJRYHUQPHQWVGHIDXOWLQJDQGUHTXLULQJ
EDLORXWVIURPWKH,QWHUQDWLRQDO0RQHWDU\)XQG
,QDGGLWLRQWRVLJQLILFDQWDQGSHUVLVWHQWILVFDODQG
WRWKH86GROODUDQ\ORQJHUZKLFKDOORZVIRUD
PRUHIOH[LEOHUHVSRQVHZKHQVWUHVVHVHPHUJHLQ
IXQGLQJPDUNHWV$VDUHVXOWZHKDYHZLWQHVVHG
YHU\IHZGHIDXOWVLWXDWLRQVLQWKHSDVWIHZ\HDUV
DOWKRXJKWKHUHKDYHEHHQVRPHWKHKHDY\
FXUUHQWDFFRXQWGHILFLWVFigure 1WKHSHJJLQJ
RIH[FKDQJHUDWHVWRWKH86GROODUSURYRNHG
VSHFXODWLYHDWWDFNVLQILQDQFLDOPDUNHWV:KHQ
WKHSHJVEURNHVKDUSH[FKDQJHUDWHPRYHPHQWV
UHVXOWHGLQPDMRUPLVPDWFKHVEHWZHHQIRUHLJQ
FXUUHQF\OLDELOLWLHVDQGGRPHVWLFFXUUHQF\
GHEWVHUYLFLQJFDSDELOLWLHV
&RPSDUHGWRWKDWSHULRGH[WHUQDOLPEDODQFHVLQ
PRVWHPHUJLQJHFRQRPLHVDUHIDUPRUHOLPLWHG
QRZZLWKWKHPRVWVLJQLILFDQWWXUQDURXQGRFFXU-
ULQJLQ$VLDQHFRQRPLHVDVZHOODVLQ%UD]LO
)ROORZLQJWKHVFULVHVWKHRYHUDOOGHEWUDWLR
ERUURZLQJRIWKH+XQJDULDQSULYDWHVHFWRULQ
IRUHLJQFXUUHQFLHVYLDGRPHVWLFEDQNVIRU
H[DPSOHFDXVHGDFULVLVLQWKDWUHTXLUHGDQ
,0)UHVFXH7KHODWHVWFULVLVRFFXUUHGLQ$UJHQWLQD
LQPLGDQGDOVRUHTXLUHGVLJQLILFDQWPHDQV
IURPWKH,0)WRDFKLHYHVWDELOL]DWLRQ
A more detailed vulnerability scorecard
7RDVVHVVWKHYXOQHUDELOLW\RUUREXVWQHVVRI
HPHUJLQJPDUNHWGHEWZHKDYHGHYHORSHGDPRUH
GHWDLOHGVFRULQJDSSURDFKZKLFKVXSSOHPHQWVWKH
DERYHPHQWLRQHGPHDVXUHVRIILQDQFLDODQG
(Figure 2GURSSHGLQDQXPEHURIFRXQWULHVVXFK H[WHUQDOYXOQHUDELOLW\ZLWKPHDVXUHVRIJURZWK
DV0H[LFR,QGRQHVLD7KDLODQGDQG5XVVLDLQ SHUIRUPDQFHDQGWKHGHJUHHRIVWDELOLW\RULHQWDWLRQ
SDUWLFXODUEXWKDVVLQFHLQFUHDVHGDJDLQ7KH RIILVFDODQGPRQHWDU\SROLF\:HDOVRDGGDVFRUH
VDPHJRHVIRUJRYHUQPHQWGHEWFigure 3 IRUGHYHORSPHQWLQGLFDWRUVVXFKDVWKH*LQL
+RZHYHUJRYHUQPHQWGHEWLVIDUORZHUWKDQLQ FRHIILFLHQWZKLFKPHDVXUHVWKHGHJUHHRI
PRVWDGYDQFHGHFRQRPLHVZKLOHWKHFRXQWULHVǵ LQHTXDOLW\RILQFRPHGLVWULEXWLRQ7KHDVVXPSWLRQ
JURZWKSRWHQWLDOLQPDQ\FDVHVUHPDLQVPDUNHGO\ LVWKDWFRXQWULHVWKDWKDYHDFKLHYHGDǷKLJKHUǸ

Assessing Global Debt 49

Figure 1: Substantial reduction in external imbalances since the 1990s
&XUUHQWDFFRXQWEDODQFHLQRI*'3
20

15

10

-5

-10

5XVVLD
India

0DOD\VLD

0H[LFR
$UJHQWLQD

%UD]LO

6RXWK.RUHD

7XUNH\
6RXWK$IULFD
Indonesia

7KDLODQG
VSUHFULVLV 2006 - 2007 2016-2017

6RXUFH7KH%/220%(5*352)(66,21$/ȅVHUYLFH&UHGLW6XLVVH

Figure 2: Debt ratios generally somewhat higher than ten years ago
7RWDOGHEWLQRI*'3

350

300

250

200

150

100

50

0
$UJHQWLQD %UD]LO India Indonesia .RUHD 0DOD\VLD 0H[LFR 5XVVLD 6RXWK$IULFD 7KDLODQG 7XUNH\

$YHUDJH $YHUDJH 2017

6RXUFH,,)7KRPVRQ5HXWHUV&UHGLW6XLVVH

50
Figure 3: Government debt ratios generally far below those in advanced economies
*RYHUQPHQWGHEWLQRI*'3
80

70

60

50

40

30

20

10

0
$UJHQWLQD %UD]LO India Indonesia 6RXWK.RUHD 0DOD\VLD 0H[LFR 5XVVLD 6RXWK$IULFD 7KDLODQG 7XUNH\

$YHUDJH $YHUDJH 2017

6RXUFH,,)7KRPVRQ5HXWHUV&UHGLW6XLVVH

Figure 4: Emerging market borrowing rates much lower than in the late 1990s
%RQG\LHOGVLQ
16

12

0
1998 2002 2006 2010 2014 2018

(0JRYHUQPHQWERQGV 867UHDVXULHV\HDU

6RXUFH7KH%/220%(5*352)(66,21$/ȅVHUYLFH&UHGLW6XLVVH

Assessing Global Debt 51

OHYHORIGHYHORSPHQWVKRXOGLQJHQHUDODFKLHYH
JUHDWHUVWDELOLW\DQGIXWXUHSROLF\VXFFHVV
7KLVVFRUHFDUGGRHVQRWSURYLGHVWURQJLQVLJKWV
LQWRDEVROXWHULVNVEXWLVPDLQO\JHDUHGWR
PDNLQJFRPSDULVRQVDFURVVFRXQWULHV:H
QHYHUWKHOHVVEHOLHYHLWLVXVHIXO,QGHHGFigure
5 VKRZVWKDWWKHPDUNHWDVVHVVPHQWRIFRXQ-
WULHVFRUUHODWHVIDLUO\FORVHO\WRRXUVFRUHV7KH
PRVWLPSRUWDQWFRXQWULHVWRDQDO\]HLQJUHDWHU
GHSWKDUHVRPHRIWKHODUJHRQHVVXFKDV%UD]LO
DQG5XVVLDZKHUHVRPHRIWKHPDFURDQGLQ
%UD]LOǵVFDVHSROLF\VFRUHVDUHZHDNEXWWKH
LPSOLHVWKDWWKHULVNRIDGHEWFULVLVDIIHFWLQJ
JOREDOPDUNHWVLVYHU\ORZ
,QFRQWUDVWWKHVFRUHFDUGFOHDUO\VKRZVWKDW
YXOQHUDELOLWLHVZHUHKLJKHVWLQWKHWZRFRXQWULHV
WKDWVXIIHUHGDFULVLVRUQHDUFULVLVLQLH
$UJHQWLQDDQG7XUNH\*LYHQLWVKLVWRU\RI
PXOWLSOHGHIDXOWVLWLVSHUKDSVQRWVXUSULVLQJ
WKDWWKHPDUNHWHIIHFWLYHO\DVVLJQVDIDUZRUVH
VFRUHWR$UJHQWLQDWKDQRXUVFRUHFDUGJHQHU-
DWHVDZZKHWKHU$UJHQWLQDǵVODWHVWUHIRUPHIIRUWV
XQGHUWKH,0)SURJUDPZLOODOORZLWWRVKDNHRII
ILQDQFLDOYXOQHUDELOLW\VFRUHLQGLFDWHVFRQVLGHUDEOH
VWUHQJWK7KLVWHQGVWRVXSSRUWRXUYLHZWKDWWKH
OLNHOLKRRGRIDPDMRUGHEWFULVLVLVORZLQNH\
FRXQWULHVGHVSLWHDUDWKHUVXEGXHGHFRQRPLF
RXWORRN$IXUWKHUDPELJXRXVFDVHLV&KLQD
ZKHUHFRUSRUDWHFUHGLWKDVEHHQJURZLQJ
H[WUHPHO\IDVWUHIOHFWHGLQDZHDNVFRUHRQWKH
FUHGLWJDS$WWKHVDPHWLPHWKHFRXQWU\ǵV
H[WUHPHO\VWURQJQHWIRUHLJQDVVHWSRVLWLRQ
LWVRXWOLHUVWDWXVVHHFigure 5UHPDLQVWREH
VHHQ:KLOHERWK7XUNH\DQG$UJHQWLQDDUH
ODUJHFRXQWULHVDQGVXIIHUHGVLJQLILFDQWVHW-
EDFNVLQWKHIDFWWKDWWKHUHZDVEDUHO\
DQ\FRQWDJLRQWRRWKHUHPHUJLQJRUPDMRU
PDUNHWVVXSSRUWVRXUFRQWHQWLRQWKDWV\VWHPLF
ULVNVHPDQDWLQJIURPWKHHPHUJLQJPDUNHW
FRXQWULHVDUHFXUUHQWO\TXLWHOLPLWHG

Figure 5: Overall score correlates fairly closely with debt risk

\HDU&'6LQEDVLVSRLQWV

800
$UJHQWLQD

700

600

500

400
7XUNH\
300
6RXWK$IULFD
%UD]LO
200 5XVVLD
Indonesia India
&RORPELD 0DOD\VLD 0H[LFR
100 3KLOLSSLQHV 5RPDQLD
3HUX &KLQD
&]HFK5HS &KLOH +XQJDU\ 7KDLODQG
3RODQG
0
0 2 4 6 8 10 12 14 16 18 20

0DFURYXOQHUDELOLW\VFRUHFDUGVWURQJZHDN!

6RXUFH7KH%/220%(5*352)(66,21$/ȅVHUYLFH&UHGLW6XLVVH

52
Middle East: The new debt issuers
.ULWKLND6XEUDPDQLDQ
7KHVOXPSLQRLOSULFHVWKDWEHJDQLQ
SURPSWHGRLOH[SRUWLQJFRXQWULHVLQWKH0LGGOH
(DVWWRERUURZLQLQWHUQDWLRQDOERQGPDUNHWVLQ
RUGHUWRVXSSOHPHQWORZHURLOUHYHQXHVDQG
VXSSRUWVSHQGLQJ$FFRUGLQJWRWKH,QWHUQD-
WLRQDO0RQHWDU\)XQG*XOI&RRSHUDWLRQ
7KHLQFOXVLRQRIWKHVHPDUNHWVLQJOREDO
HPHUJLQJPDUNHWERQGLQGLFHVKDVSURYLGHG
QHZLQYHVWPHQWRSSRUWXQLWLHVIRULQYHVWRUV
EXWKDVDOVRUDLVHGTXHVWLRQVDERXWSRWHQWLDO
ULVNVDVVRFLDWHGZLWKWKHVHGHEWV:KLOHPRVW
FRXQWULHVLQWKHUHJLRQKDYHIDLUO\ORZGHEWWR
&RXQFLO*&&FRXQWULHVLVVXHGGHEWZRUWK
DSSUR[LPDWHO\86'ELOOLRQEHWZHHQ
DQG2FWREHUDFFRXQWLQJIRUDSSUR[L-
PDWHO\RIDOORXWVWDQGLQJHPHUJLQJ
PDUNHWERQGV
*'3UDWLRVWKHUHDUHH[FHSWLRQVZLWK
%DKUDLQRQHRIWKHPWKH,QWHUQDWLRQDO
0RQHWDU\)XQGHVWLPDWHVLWVGHEWWR*'3
UDWLRDWLQWKHKLJKHVWDPRQJWKH
*&&FRXQWULHV

Figure 1: Government debt in the Middle East

,QRI*'3

200

180

160

140

120

100

80

60

40

20

0
2000 2002 2004 2006 2008 2010 2012 2014 2016 ( ( (

%DKUDLQ .XZDLW 2PDQ

4DWDU 6DXGL$UDELD 8QLWHG$UDE(PLUDWHV
(J\SW -RUGDQ /HEDQRQ

6RXUFH,0):RUOG(FRQRPLF2XWORRN2FWREHU&UHGLW6XLVVH

1RWHHVWLPDWHVIRU%DKUDLQ.XZDLWDQG/HEDQRQVWDUWDIWHU

Assessing Global Debt

$VVHVVLQJ*OREDO'HEW 53
,Q-XQH%DKUDLQǵVFUHGLWGHIDXOWVZDS ,QGH[EHWZHHQ-DQXDU\DQG6HSWHPEHU
&'6VSUHDGVURVHVKDUSO\WRUHDFKDSHDNRI
EDVLVSRLQWVUHIOHFWLQJFRQFHUQVDERXW
JRYHUQPHQWILQDQFHVFRXSOHGZLWKFRQFHUQV
RYHUWKHFRXQWU\ǵVDELOLW\WRPDLQWDLQLWVFXUUHQF\
SHJWRWKH86GROODU:KLOHIXQGLQJVXSSRUW
ZRUWK86'ELOOLRQIURPLWV*&&SDUWQHUV
2PDQLVDOUHDG\SDUWRIWKHLQGH[7KLVQHZ
LQFOXVLRQLVH[SHFWHGWRDGGDSSUR[LPDWHO\
86'ELOOLRQWRWKHLQGH[ZLWKDZHLJKWRI
DZLQWKHLQGH[DFFRUGLQJWRPDUNHW
HVWLPDWHV7KHPRYHVKRXOGDGGGHSWKWR
*&&ERQGPDUNHWVDQGDOOHOVHHTXDOV
6DXGL$UDELDWKH8$(DQG.XZDLWKHOSHGFDOP
PDUNHWVLQWKHVKRUWWHUPWKHIRFXVZLOOEHRQ
%DKUDLQǵVPHGLXPWHUPILVFDOSODQWRHOLPLQDWH
LWVEXGJHWGHILFLWE\
2YHUDOOGHEWWR*'3UDWLRVRIRWKHU*&&
FRXQWULHVDUHH[SHFWHGWRVWDELOL]HDURXQG
ZKLOHWKRVHRI(J\SWDQG-RUGDQDUH
H[SHFWHGWRPRGHUDWHRYHUWKHQH[WILYH\HDUV
VKRXOGORZHUWKHULVNSUHPLXPLHVSUHDGV
RQGHEWLVVXHGE\ERWKVRYHUHLJQDQGFRUSR-
UDWHERUURZHUVLQWKHUHJLRQ+RZHYHUWKH
SRWHQWLDOLPSURYHGDFFHVVWRLQWHUQDWLRQDO
ERQGPDUNHWVDOVREULQJVZLWKLWDKHLJKWHQHG
IRFXVE\LQWHUQDWLRQDOLQYHVWRUVRQVXVWDLQDEOH
GHEWPDQDJHPHQW
0HDQZKLOH/HEDQRQKDVEHHQDFOHDUH[FHS-
DFFRUGLQJWRWKH,0)VHHFigure 16LJQLIL- WLRQLQWKHUHJLRQDQGUDQNVDPRQJWKHPRVW
FDQWHIIRUWVKDYHEHHQPDGHWRLPSURYHILVFDO LQGHEWHGFRXQWULHVLQWKHZRUOGZLWKD
IXQGDPHQWDOVLQDQXPEHURIFRXQWULHVLQWKH GHEWWR*'3UDWLRHVWLPDWHGDWLQ
UHJLRQQRWDEO\WD[UHIRUPVLQWKH8$(6DXGL
$UDELDDQG-RUGDQDQGVXEVLG\UHIRUPVLQ
(J\SW7KHVHVKRXOGDOOVXSSRUWORQJWHUP
ILVFDOVXVWDLQDELOLW\DQGUHYHQXHGLYHUVLILFDWLRQ
$QLQWHUHVWLQJFKDSWHUIRU*&&GHEWPDUNHWV
EHJLQVLQZLWKWKHSKDVHGLQFOXVLRQRI
%DKUDLQ.XZDLW4DWDU6DXGL$UDELDDQGWKH
8$(LQWKH-30RUJDQ(PHUJLQJ0DUNHW%RQG
54
E\WKH,0)'HOD\VLQWKHIRUPDWLRQRI
DJRYHUQPHQWIROORZLQJWKHHOHFWLRQVLQ0D\
DQGWKHFRQWLQXHGSROLWLFDOLPSDVVHKDYH
RQO\DGGHGWRFRQFHUQVDERXWDOUHDG\VWUDLQHG
IXQGDPHQWDOVRIWKH/HEDQHVHHFRQRP\ZLWK
&'6VSUHDGVSHDNLQJDWEDVLVSRLQWVLQ
'HFHPEHUDQGGLVFXVVLRQVRISRWHQWLDO
GHEWUHVWUXFWXULQJLQWKHILQDQFLDOPHGLD
Assessing Global Debt 55
56
5. China – a challenging path
out of excessive indebtedness
2OLYHU$GOHUDQG9LEKXWL0HKWD

Since the financial crisis, China’s government has tried to maintain

high economic growth rates with aggressive credit expansion. As the
marginal growth impact of credit expansion decreased over time, the
debt-to-GDP ratio surged. Since 2016, the government has cautiously
shifted policies toward limiting leverage. We believe the country’s
growth potential should suffice to gradually reduce the debt-to-GDP
ratio, but some “financial repression” will likely continue to be required
to support the debt.

6LQFH&KLQDǵVGHEWKDVEHHQJURZLQJDW
DQH[WUHPHO\KLJKUDWH7KHLQLWLDOWULJJHUIRUWKH
GHEWH[SDQVLRQZDVWKHJRYHUQPHQWǵVGHWHUPL-
QDWLRQWRLVRODWHWKHHFRQRP\IURPWKHIDOORXW
RIWKHɇQDQFLDOFULVLVLQWKHDGYDQFHGHFRQR-
PLHV+RZHYHUDIWHUDVKRUWVORZGRZQRIWKH
GHEWH[SDQVLRQLQDZWKHJURZWKRIGHEW
DFFHOHUDWHGRQFHDJDLQXQWLOODWHLQ
&KLQDǵVRYHUDOOGHEWUDWLRLVFXUUHQWO\HVWLPDWHG
DWDURXQGRI*URVV'RPHVWLF3URGXFW
IURPDERXWWRDURXQGRYHUWKHSDVW
\HDUV7KHH[SDQVLRQRI62(GHEWPXVW
WKXVEHVHHQDVWKHUHVXOWRIDGHOLEHUDWH
SROLF\WRSURYLGHWKHVHFRPSDQLHVZLWKWKH
PHDQVWRPDLQWDLQRZQHUVKLSRINH\DVVHWVDV
ZHOODVSUHYHQWLQJVSLNHVLQXQHPSOR\PHQWLQ
WKHUHJLRQVLQZKLFKWKHVH62(VUHVLGH
0RUHRYHUWKHGHEWEXLOGXSZDVDOVRERRVWHG
E\WKHIDFWWKDWWKHJRYHUQPHQWSURYLGHG62(V
ZLWKWKHPHDQVWRVKLIWWKHLUIRFXVIURPǷROGǸ
*'3ZKLFKLVWKHKLJKHVWOHYHODPRQJWKH LQGXVWULDOFRPSDQLHVWKDWKDGEHHQLQSDUW
PDMRUHPHUJLQJPDUNHWVH[FHSWIRU.RUHDDQG
LVLQWKHYLFLQLW\RIOHYHOVVHHQLQKLJKGHEW
(XURSHDQHFRQRPLHV$FWXDOGHEWPD\EHHYHQ
KLJKHUJLYHQWKDWFUHGLWIURPVRFDOOHGǷVKDGRZ
EDQNVǸPD\QRWEHIXOO\DFFRXQWHGIRU)RU
HQGHVWLPDWHVRIVKDGRZEDQNLQJ
UHODWHGGHEWYDU\EHWZHHQ86'WULOOLRQRU
ZRXQGGRZQDQGUHVWUXFWXUHGWRQHZDUHDV
VXFKDVɇQDQFHDQGWHOHFRPPXQLFDWLRQV
&RQYHUVHO\WKHSULYDWHFRUSRUDWHVHFWRUKDV
KDGPDMRUGLIɇFXOWLHVREWDLQLQJFUHGLWHYHQ
WKRXJKLWVFRQWULEXWLRQWR*'3DQGHPSOR\-
PHQWE\QRZIDUH[FHHGVWKDWRIWKHODUJH
VWDWHFRPSDQLHV
RI*'30RRG\ǵVDQG86'WULOOLRQ
%DQNIRU,QWHUQDWLRQDO6HWWOHPHQWV :KLOH&KLQHVHKRXVHKROGVXVHGWRFDUU\YHU\ORZ
GHEWOHYHOVKRXVHKROGGHEWKDVDOVRLQFUHDVHG
7KHEXONRIWKHEXLOGXSLQGHEWZDVGXHWR VLJQLɇFDQWO\LQSDVW\HDUVUHDFKLQJDERXWRI
WKHQRQɇQDQFLDOFRUSRUDWHVHFWRUFigure 2 *'3:HHVWLPDWHWKDWGHEWVHUYLFHFXUUHQWO\
DQGPRUHVSHFLɇFDOO\&KLQDǵVODUJHVWDWH DEVRUEVXSWRRIGLVSRVDEOHLQFRPHRI
RZQHGHQWHUSULVHV62(V7KHFRQVXOWLQJɇUP
6WUDIRUHVWLPDWHVWKDW62(VUHFHLYHGRI
DOOQHZORDQVVLQFHZLWKDSHDNRI
EHLQJUHDFKHGLQ7KLVLVDOOWKHPRUH
VXUSULVLQJJLYHQWKDWWKHVKDUHRI62(VLQ
&KLQDǵV*'3LVHVWLPDWHGWRKDYHGHFOLQHG
PLGGOHLQFRPHXUEDQKRXVHKROGV7KHLQFUHDVHLQ
KRXVHKROGGHEWLVHVVHQWLDOO\GXHWR&KLQDǵVUHDO
HVWDWHERRP,QWKHGHFDGHVLQFH&KLQDKDV
VHHQUHDOKRXVHSULFHJURZWKRIDURXQGSHU
DQQXPPDLQO\GULYHQE\ULVLQJODQGYDOXHVZKLFK
DUHHVWLPDWHGWRKDYHULVHQE\DQDYHUDJHRIDOPRVW
Assessing Global Debt 57
Figure 1: China’s debt growth post-2009
(YROXWLRQRIGHEWWR*'3UDWLR

350

300

250

200

150

100

50

0
1997 2000 2003 2006 2009 2012 2015 2018*

+RXVHKROGV 1RQILQDQFLDOFRUSRUDWHV *RYHUQPHQW )LQDQFLDOFRUSRUDWHV

46RXUFH,,)&UHGLW6XLVVH

)LJXUH+XJHH[SDQVLRQRIQRQɇQDQFLDOFRUSRUDWHGHEW
$YHUDJH\HDURQ\HDUJURZWKLQGHEWDVDRI*'3DFURVVVHFWRUV

0
+RXVHKROGV 1RQILQFRUSRUDWHV *RYHUQPHQW )LQDQFLDOFRUSRUDWHV

1997-2007 2008-2018 *

46RXUFH,,)&UHGLW6XLVVH

58
SHUDQQXP17KHDIIRUGDELOLW\RIKRXVLQJKDV Inefficiency of debt build-up
WKXVGLPLQLVKHGUHTXLULQJKRXVHKROGVWRLQFUHDV-
LQJO\ɇQDQFHUHDOHVWDWHSXUFKDVHVZLWKGHEW0RUH %\&KLQDǵVVRFDOOHGǷFUHGLWJDSǸZDVWKH
UHFHQWO\&KLQHVHKRXVHKROGVKDYHVWDUWHGUHO\LQJ
LQFUHDVLQJO\RQFUHGLWFDUGGHEWWRɇQDQFHFRQVXPS-
WLRQSDUWLDOO\DVDUHVXOWRIWKHIDFWWKDWPRUWJDJH
SD\PHQWVKDYHULVHQZLWKKRXVHSULFHV7KLVWUHQG
KDVLQFUHDVHGERWKRYHUDOOKRXVHKROGGHEWDVZHOO
DVLWVVHUYLFLQJFRVWEHFDXVHFUHGLWFDUGEDODQFHV
FDUU\PXFKKLJKHULQWHUHVWUDWHV2QHRIWKH
FRQVHTXHQFHVRIWKHKHLJKWHQHGGHEWH[SRVXUHRI
KRXVHKROGVLQFRPELQDWLRQZLWKUHGXFHGMREVHFXULW\
KLJKHVWZRUVWRIDOOFRXQWULHVWKDWWKH%DQN
IRU,QWHUQDWLRQDO6HWWOHPHQWVDQDO\]HVDOWKRXJK
+RQJ.RQJDQG6ZLW]HUODQGVXUSDVVHG&KLQDE\
4,QUHWURVSHFWWKHH[SDQVLRQRIFUHGLWLQ
&KLQDKDV\LHOGHGYHU\SRRUUHVXOWVLQWHUPVRI
HFRQRPLFJURZWK$VFigure 3aVKRZVWKHJDS
EHWZHHQQRPLQDO*'3DQGFUHGLWJURZWKZLGHQHG
VKDUSO\DIWHUDQGUHPDLQHGYHU\KLJKXQWLO
,QIDFWWKHSLFWXUHLVVRPHZKDWUHPLQLVFHQW
LVWKDWSXUFKDVHVRIRWKHUELJWLFNHWLWHPVVXFKDV RIWKH-DSDQHVHH[SHULHQFHLQWKHSHULRGIURPWKH
DXWRPRELOHVGHFOLQHGPDUNHGO\LQ PLGVWRWKHODWHVFigure 3b

-LQJ:X-RVHSK*\RXUNR<RQJKHQJ'HQJǷ(YDOXDWLQJWKH
5LVNRI&KLQHVH+RXVLQJ0DUNHWV:KDW:H.QRZDQG:KDW:H
1HHGWR.QRZǸ1DWLRQDO%XUHDXRI(FRQRPLF5HVHDUFK

)LJXUHD,QHIɇFLHQWGHEWH[SDQVLRQLQ&KLQDSRVW
'LIIHUHQFHEHWZHHQJURZWKLQRYHUDOOGHEWFUHGLWDQG*'3LQSHUFHQWDJHSRLQWV

10

-5

-10

-15

-20

-25
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

)LJXUHE,QHIɇFLHQWGHEWH[SDQVLRQLQ-DSDQSRVW
'LIIHUHQFHEHWZHHQJURZWKLQRYHUDOOGHEWFUHGLWDQG*'3LQSHUFHQWDJHSRLQWV
6
4
2
0
-2
-4
-6
-8
-10
-12
-14
1966 1976 1986 1996 2006 2016

6RXUFH)LJXUHVDDQGE,0)&UHGLW6XLVVH

Assessing Global Debt 59

External vulnerabilities add to deleveraging ,QWKHPHDQWLPHKRZHYHUH[WHUQDOYXOQHUDELOLWLHV
pressure DOVRLPSRVHVRPHOLPLWVRQSROLF\HDVLQJ7KH
FXUUHQWDFFRXQWVXUSOXVKDVGLPLQLVKHGVKDUSO\
5HFRJQL]LQJWKHXQVXVWDLQDEOHGHEWVLWXDWLRQWKH LQSDVW\HDUVFigure 4ZKLOHIRUHLJQFXUUHQF\
&KLQHVHJRYHUQPHQWKDVEHHQWHQWDWLYHO\PRYLQJ GHQRPLQDWHGGHEWLVHVWLPDWHGWRKDYHLQFUHDVHG
WRZDUGDSROLF\RIGHOHYHUDJLQJRYHUWKHSDVW\HDUV
7KLVKDVQRWEHHQDVWUDLJKWOLQHDIIDLUKRZHYHU
JLYHQWKHJRYHUQPHQWǵVIHDUVDERXWWKHQHJDWLYH
LPSDFWVRQJURZWKWKDWZRXOGUHVXOWIURPWLJKWHU
FUHGLW$IWHUDVKDUSVORZGRZQLQHFRQRPLFJURZWK
LQDZWKHJRYHUQPHQWEHJDQWRHDVHSROLF\
RQO\WRUHYHUVHFRXUVHDJDLQLQDVVLJQVRI
RYHUKHDWLQJHPHUJHG$IWHUWKHHFRQRP\VORZHG
VKDUSO\LQ+WKHJRYHUQPHQWRQFHDJDLQ
FKDQJHGWDFNLQPLGLQWKHGLUHFWLRQRI
HDVLQJQRWOHDVWEHFDXVHRIFRQFHUQVDERXWWKH
QHJDWLYHLPSDFWIURP86WDULIISROLFLHV
Figure 4: China’s current account surplus has almost vanished
&XUUHQWDFFRXQWEDODQFHLQRI*'3
12
-4
-8
1980 1984 1988 1992 1996
6RXUFH,0)&UHGLW6XLVVH
Figure 5: China’s foreign borrowing has increased considerably
TXLWHFRQVLGHUDEO\Figure 5(YHQWKRXJK
IRUHLJQH[FKDQJHUHVHUYHVKDYHVWDELOL]HGVLQFH
DQGUHPDLQYHU\KLJKWKHDXWKRULWLHVVHHP
LQWHQWRQSUHYHQWLQJDVLJQLɇFDQWGHSUHFLDWLRQRI
WKH&KLQHVHUHQPLQELLQRUGHUWRPDLQWDLQ
FRQɇGHQFHDQGOLPLWFDSLWDORXWɈRZV7KDWVDLG
UHOLDQFHRQIRUHLJQFDSLWDOUHPDLQVTXLWHORZLQ
&KLQDFRPSDUHGWRRWKHUHPHUJLQJPDUNHWV7KH
UDWLRRIIRUHLJQFXUUHQF\GHQRPLQDWHGGHEWWR
WRWDOGHEWZDVHVWLPDWHGDWRQO\LQ
ZHOOEHORZWKHHPHUJLQJPDUNHWDYHUDJHRI
DURXQG,QFRPELQDWLRQZLWKFDSLWDO
2000 2004 2008 2012 2016
)RUHLJQFXUUHQF\GHEWRXWVWDQGLQJLQ86'WULOOLRQ












2001 2003 2005 2007 2009 2011 2013 2015 2017

&KLQD
VIRUHLJQGHEWEDODQFH

6RXUFH7KH%/220%(5*352)(66,21$/ȅVHUYLFH&UHGLW6XLVVH

60
 FRQWUROVWKLVPDNHVWKHFRXQWU\OHVVVXVFHSWLEOH
WRFDSLWDOɈLJKWDQGSURYLGHVWKHDXWKRULWLHVZLWK
JUHDWHUSROLF\DXWRQRP\ZLWKUHJDUGWRIRU
H[DPSOHPRQHWDU\SROLF\HDVLQJ
Clampdown on shadow banking
,QOLQHZLWKLWVSROLFLHVLQVXSSRUWRI62(VWKH
PDLQGHOHYHUDJLQJHIIRUWVRIWKH&KLQHVH
7KH3HRSOHǵV%DQNRI&KLQD3%R&DGRSWHGD
QHZPDFURSUXGHQWLDODVVHVVPHQWLQE\
LQFOXGLQJ:03VLQLWVFDOFXODWLRQVRIEDQNVǵ
FDSLWDODGHTXDF\UDWLRV$VVKRZQLQFigure 6
VRPHHIIHFWVDUHDOUHDG\YLVLEOHLQWKHGHFOLQLQJ
JURZWKRIVKDGRZEDQNLQJSURGXFWVLQ
7KHDXWKRULWLHVKDYHDOVRIRFXVHGRQOLPLWLQJ
LQGLUHFWERUURZLQJE\ORFDOJRYHUQPHQWV
WKURXJKVRFDOOHGǷORFDOJRYHUQPHQWɇQDQFLQJ
DXWKRULWLHVKDYHWRGDWHEHHQJHDUHGWRZDUG
OLPLWLQJSULYDWHVHFWRUGHEWǷH[FHVVHVǸ&XUEVRQ
WKHUHDOHVWDWHLQGXVWU\KDYHIRUH[DPSOHEHHQ
LPSRVHGLQWKHIRUPRIKLJKHUGRZQSD\PHQWV
DQGRWKHUUHVWULFWLRQVRQGHEWɇQDQFHGKRPH
YHKLFOHV/*)9VǸ7KDWVDLGWRWDOQHZORFDO
JRYHUQPHQWERUURZLQJLQWKHWKUHH\HDUVXSWR
VWLOOVWRRGDURXQG50%WULOOLRQRU
RI*'32)LQDOO\SUHVVXUHIURPWKH
JRYHUQPHQWRQWKHSULYDWHVHFWRUFDQDOVREH
RZQHUVKLS&KLQDKDVDOVRZLWQHVVHGDFODPS- VHHQLQWKHULVHLQERQGGHIDXOWVFigure 7
GRZQRQVKDGRZEDQNLQJ)RUH[DPSOHWKH $VWKHVHGHIDXOWVZHUHJHQHUDOO\RQQRQOLVWHG
JRYHUQPHQWKDVWULHGWROLPLWLPSOLFLWJRYHUQPHQW ERQGVWKH\KDYHQRWVLJQLɇFDQWO\DIIHFWHG
JXDUDQWHHVIRUVRFDOOHGǷZHDOWKPDQDJHPHQW &KLQDǵVRYHUDOOFUHGLWUDWLQJKRZHYHU
SURGXFWV:03VǸDQGPRUHVSHFLɇFDOO\
JXDUDQWHHVRIɇ[HGKLJKHULQWHUHVWUDWHVZKLFK
&UHGLW6XLVVHUHSRUWǷ5HJXODWRU\RYHUKDXOWXUQVLQWR
ZHUHWKHWZRIHDWXUHVWKDWDWWUDFWHGLQYHVWRUVWR
XQLQWHQGHGWLJKWHQLQJ",PSDFWRQHFRQRP\DQGEDQNVǸ
WKHVHSURGXFWVLQWKHɇUVWSODFH


Figure 6: Pressure on shadow-banking products

0RQWKO\LQFUHDVHLQ50%ELOOLRQ

1500

1000

500

-500

-1000
2015 2016 2017 2018

(QWUXVWHGORDQ 7UXVWORDQ %DQNHU

VDFFHSWDQFHELOO

6RXUFH&(,&&UHGLW6XLVVH

Assessing Global Debt 61

Figure 7: 2018 saw a marked rise in corporate bond defaults in China
&RUSRUDWHERQGGHIDXOWVSHUPRQWK

20

18

16

14

12

10

0
2016 2017 2018

6RXUFH7KH%/220%(5*352)(66,21$/ȅVHUYLFH&UHGLW6XLVVH

Figure 8: Credit growth remains fairly vigorous

*URZWKRIEDQNOHQGLQJ\HDURQ\HDULQ

40

35

30

25

20

15

10

0
2005 2007 2009 2011 2013 2015 2017

6RXUFH7KRPVRQ5HXWHUV&UHGLW6XLVVH

62
,QWKHPHDQWLPHEDQNOHQGLQJFRQWLQXHVWR 'HEWVXVWDLQDELOLW\DOVRGHSHQGVRQWKHSUHYDLOLQJ
JURZDWDUDWHLQH[FHVVRI*'3JURZWK LQWHUHVWUDWHRIFRXUVH7KHODWWHUZLOOGHSHQGRQ
(Figure 8&UHGLWFRQWLQXHVWRɈRZWRLQIUD-
VWUXFWXUHSURMHFWVLQSDUWLFXODUZKLFKDUHLQ
ODUJHSDUWJXLGHGE\ORFDOJRYHUQPHQWV7KLV
DOVRUDLVHVVRPHTXHVWLRQVUHJDUGLQJWKH
HIɇFLHQWDOORFDWLRQRIFDSLWDO
Muddling out of the debt trap by means of
financial repression
&KLQDǵVFUHGLWEDVHGJURZWKVWUDWHJ\KDV
VDGGOHGWKHFRXQWU\ZLWKDYHU\KLJKOHYHORI
GHEWZLWKWKHEXONRIWKLVGHEWRZHGE\62(V
LHHIIHFWLYHO\WKH&KLQHVHJRYHUQPHQW:LOOWKH
FRXQWU\EHDEOHWRIUHHLWVHOIIURPWKLVEXUGHQ
DQGLIVRKRZ":HEHOLHYHWKDW&KLQDVWLOOKDV
FRQVLGHUDEOHJURZWKSRWHQWLDO:KLOHLWVGHPR-
JUDSKLFRXWORRNLVTXLWHEOHDNZLWKWKHODERUIRUFH
FXUUHQWO\FORVHWRSHDNOHYHOVWKHSRWHQWLDOIRU
SURGXFWLYLW\FDWFKXSLVVWLOOFRQVLGHUDEOH$FWXDO
SURGXFWLYLW\JURZWKZLOORIFRXUVHGHSHQGRQ
WKHFRQFUHWHSROLFLHVWKDWDUHSXUVXHG8QGHUD
SROLF\RIUHIRUPDQGPDUNHWOLEHUDOL]DWLRQJURZWK
ZRXOGOLNHO\EHKLJKHUWKDQXQGHUWKHFXUUHQWVHW
RISROLFLHV+RZHYHUHYHQLIVWDWHJXLGHG
SROLFLHVUHPDLQGRPLQDQWZHVWLOOH[SHFWWKH
FRXQWU\ǵV*'3WRJURZDWDUHDOUDWHRIDSSUR[L-
ERWKWKHHYROXWLRQRIGRPHVWLFVDYLQJVDQGWKH
GHJUHHRIFDSLWDOPDUNHWOLEHUDOL]DWLRQ*LYHQWKH
OLPLWHGGHYHORSPHQWRIVWDWHSHQVLRQDQGKHDOWK
FDUHV\VWHPVDVZHOODVWKHSRSXODWLRQǵVLQFUHDVLQJ
ORQJHYLW\ZHEHOLHYHWKDWWKHSUHVVXUHRQ
LQGLYLGXDOVWRVDYHZLOOUHPDLQVWURQJ3:HDOVR
EHOLHYHWKDWWKHDXWKRULWLHVZLOOUHPDLQUHOXFWDQW
IRUDQH[WHQGHGSHULRGRIWLPHWRIXOO\OLEHUDOL]H
&KLQDǵVFDSLWDOPDUNHW$VDUHVXOWDODUJH
SURSRUWLRQRI&KLQDǵVVDYLQJVZLOOUHPDLQǷERWWOHGǸ
XSGRPHVWLFDOO\ZKLFKZLOOWHQGWRGHSUHVVUHDO
LQWHUHVWUDWHV7KHFRPELQDWLRQRIPRGHVWO\
GHFHOHUDWLQJEXWVWLOOUREXVWLQFRPHJURZWKZLWK
VWURQJLQFHQWLYHVWRVDYHDQGORZUHDOLQWHUHVW
UDWHVVKRXOGWKXVDOORZ&KLQDǵVODUJHGHEWUDWLRWR
VWDELOL]HDQGSRVVLEO\WRIDOOHYHQWXDOO\DVVXPLQJ
WKLVUHPDLQVDKLJKSULRULW\RISROLF\PDNHUV
*LYHQ&KLQDǵVVWLOOYHU\VWURQJH[WHUQDODVVHW
SRVLWLRQDGHEWFULVLVZLWKJOREDOUHSHUFXVVLRQV
LQDQ\FDVHVHHPVTXLWHXQOLNHO\
(VWLPDWHVRIFXUUHQWKRXVHKROGVDYLQJVUDWHVLQ&KLQDYDU\
VLJQLɇFDQWO\WKHHFRQRPLFFRQVXOWDQF\2[IRUG(FRQRPLFV
HVWLPDWHGWKHVDYLQJVUDWLRDWDKLJKLQ
0HDQZKLOH&KLQDǵV6RXWKZHVWHUQ8QLYHUVLW\RI)LQDQFHDQG
(FRQRPLFV6:8)(KRXVHKROGVXUYH\VXJJHVWVWKDWWKH
PDWHO\SHUDQQXPRYHUWKHQH[WGHFDGH
VDYLQJVUDWHRIPRUHWKDQRI&KLQDǵVKRXVHKROGVKDV
ZLWKVRPHGRZQVLGHULVNVWRWKLVIRUHFDVW
GHFOLQHGWRFORVHWR]HUR

Assessing Global Debt 63

China’s debt overhang may constrain
the Belt and Road Initiative

$WLWVWK1DWLRQDO3DUW\&RQJUHVVLQ GRPHVWLFHFRQRP\RYHUWKHFRPLQJ\HDUUDWKHU
&KLQDRIɇFLDOO\DGRSWHGWKHVRFDOOHGǷ%HOWDQG WKDQLQYHVWLQJDEURDG0RUHRYHUJHRSROLWLFDO
5RDG,QLWLDWLYH%5,ǸLHWKHSODQWREXLOGDQHZ
(FRQRPLF6LON5RDGE\ODQGDQGVHDWRFRQQHFW
&KLQDWRLWVNH\PDUNHWVLQ$VLD$IULFDDQG
(XURSH7KHLQLWLDWLYHVHWRXWWRLQYHVWDSSUR[L-
PDWHO\86'WULOOLRQDFURVVDVHWRIDWOHDVW
FRXQWULHV+RZHYHUWKHG\QDPLFVRIGHEWLQVLGH
DQGRXWVLGHRI&KLQDDVZHOODVJHRSROLWLFDO
WHQVLRQVEHWZHHQWKH86$DVZHOODVRWKHU
DGYDQFHGHFRQRPLHVDQG&KLQDRYHUWUDGHDV
ZHOODVIRUHLJQLQYHVWPHQWLVVXHVFRXOGLPSO\WKDW
WKHSDUWLFLSDWLRQRIWKHIRUPHULQ%5,SURMHFWV
PD\EHOLPLWHGWRVRPHH[WHQWQRWOHDVWZLWK
UHJDUGWRIXQGLQJYLDWKH$VLDQ,QIUDVWUXFWXUH
,QYHVWPHQW%DQN$,,%QRWHWKDWQHLWKHUWKH
VWUDLQVPD\FRQVWUDLQWKHVHSODQV 86$RU-DSDQKDYHMRLQHGWKH$,,%WRGDWH
)LQDOO\WKHFUHGLWUDWLQJRIDQXPEHURISRWHQWLDO
$VQRWHGSUHYLRXVO\&KLQDǵVGHIDFWRJRYHUQ- UHFLSLHQWVRI%5,IXQGVLVZHDNFigure 1ZKLOH
PHQWGHEWKDVLQFUHDVHGVKDUSO\VLQFHWKH WKHLUGHEWEXUGHQKDVLQPDQ\FDVHVZRUVHQHG
ɇQDQFLDOFULVLVZKLOHHFRQRPLFJURZWKKDV
VORZHGDQGWKHH[WHUQDOEDODQFHKDVGHWHULRUDW-
HG&RQVWUDLQWVRQDGGLWLRQDOVSHQGLQJKDYHWKXV
WLJKWHQHGDQGDGGHGJRYHUQPHQWVSHQGLQJPD\
EHFRPHPRUHIRFXVHGRQVXSSRUWLQJWKH
Figure 1: Credit ratings of BRI countries
%HORZLQYHVWPHQWJUDGH
LQUHFHQW\HDUVFigure 27KDWPD\FRQVWUDLQ
ERWKWKHZLOOLQJQHVVRIFUHGLWRUVWROHQGDGGLWLRQDO
IXQGVWRWKHVHFRXQWULHVDVZHOODVWKHDSSHWLWH
RIVXFKFRXQWULHVIRUWDNLQJRQDGGLWLRQDO
QRQFRQFHVVLRQDOGHEW
,QYHVWPHQWJUDGH%DDDZ$
,QYHVWPHQWJUDGHDERYH$
&RXQWULHVQRWFRYHUHGLQ%5,

6RXUFH0RRG\ǵV&UHGLW6XLVVH

64
Figure 2: Debt of many BRI countries has increased substantially
*RYHUQPHQWGHEWRXWVWDQGLQJLQRI*'3

120

100

80

60

40

20

-20
5RPDQLD

/DRV
,VUDHO

Macedonia
1HSDO
%RVQLD+HU]HJRYLQD

6HUELD

$]HUEDLMDQ
(VWRQLD

5XVVLD

3DNLVWDQ

0DOGLYHV

7XUNPHQLVWDQ
%XOJDULD

(J\SW
%DQJODGHVK

0DOD\VLD

8NUDLQH
.\UJ\]VWDQ

*HRUJLD

%HODUXV
+XQJDU\

6UL/DQND

$UPHQLD

0RQJROLD
3KLOLSSLQHV

3RODQG

7XUNH\

9LHWQDP
&URDWLD

8]EHNLVWDQ

7DMLNLVWDQ
&DPERGLD

$OEDQLD

7KDLODQG
0\DQPDU

Indonesia

0ROGRYD

.D]DNKVWDQ
0RQWHQHJUR
*RYHUQPHQWGHEWRI*'3 &KDQJHLQJRYHUQPHQWGHEWUDWLRVLQFHSRLQWV

1RWH&RXQWULHVIRUZKLFKJHQHUDOJRYHUQPHQWGHEWGDWDZDVQRWDYDLODEOHFHQWUDOJRYHUQPHQWGHEWGDWDLVVKRZQ
6RXUFH,0)*OREDOGHEWGDWDEDVH&UHGLW6XLVVH

Assessing Global Debt

$VVHVVLQJ*OREDO'HEW 65
66
6. Corporate debt – declining
quality on the growing fringes
6\OYLH*ROD\DQG0LFKDHO2ǵ6XOOLYDQ

Globally, and especially in the USA, leverage of non-financial corporates

has increased significantly since 2014 and has now surpassed the
pre-crisis peak. Average measures of credit quality have in the meantime
decreased. Within the investment grade bond segment, some highly
indebted “old economy” companies are under significant pressure. In
high yield, financial discipline has increased since 2015, but lower-quality
leveraged loans have surged. An economic downturn would likely provoke
a marked rise in defaults. The moderate exposure of banks to leveraged
loans limits systemic risks, however.

:KHUHDVKRXVLQJUHODWHGGHEWDQGH[FHVVLYH
OHYHUDJHLQWKHɇQDQFLDOVHFWRUZHUHWKHNH\
FDXVHVRIWKHɇQDQFLDOFULVLVGHEWRI
QRQɇQDQFLDOFRUSRUDWHVGLGQRWFUHDWHPDMRU
VWUHVVHVDWWKHWLPH:KLOHGHIDXOWVRQERQGVDV
ZHOODVFUHGLWVSUHDGVGLGVSLNHVKDUSO\LQERWKWKH
LQYHVWPHQWJUDGHDQGVSHFXODWLYHJUDGHKLJK
EHJDQWRVWHDGLO\LQFUHDVHWKHLUOHYHUDJHDQG
WKHGHEWWR*'3UDWLRURVHEDFNWRDQGHYHQ
VOLJKWO\DERYHWKHSHDNUHDFKHGLQ
/RRNLQJIRUZDUGWKHNH\TXHVWLRQLVZKHWKHU
DQGWRZKDWH[WHQWFRUSRUDWHGHEWTXDOLW\KDV
GHWHULRUDWHGDQGLIVRZKHWKHUWKLVGHWHULRUD-
WLRQSRVHVVLJQLɇFDQWULVNV7KHEDFNXSLQ
\LHOGDUHDGXULQJWKHFULVLVWKHLQFUHDVHZDVIDLUO\ VSUHDGVLQVXJJHVWVWKDWWKHPDUNHWLV
VKRUWOLYHG+LJK\LHOGGHIDXOWUDWHVZHUHOHVV SULFLQJLQDGHWHULRUDWLRQRIFUHGLWIXQGDPHQWDOV
H[WHQVLYHWKDQLQWKHUHFHVVLRQRIWKHHDUO\V EXWDOVRDQLQFUHDVHLQOLTXLGLW\ULVNDZWKH
DQGIDUORZHUWKDQLQWKHDZSHULRGVHH LOOLTXLGLW\SUHPLXPLVWKHGRPLQDQWGULYHURI
Figure 1GHVSLWHWKHIDFWWKDWWKHUHFHVVLRQRI FUHGLWVSUHDGZLGHQLQJLQSHULRGVRIKHLJKWHQHG
ZDVPXFKGHHSHUWKDQWKHWZRSUHFHGLQJ ULVNDYHUVLRQ2YHUDOOWKHULVHLQVSUHDGVZDV
GRZQWXUQVDQGWKHIDFWWKDWWKHUDWLRRI86 KRZHYHUPRGHUDWHLQDQGVSUHDGV
QRQɇQDQFLDOFRUSRUDWHGHEWWR*'3KDGUHDFKHG QDUURZHGDJDLQPRUHUHFHQWO\
DQHZSHDNLQFigure 27KLVVXJJHVWV
WKDWWKHTXDOLW\RIQRQɇQDQFLDOFRUSRUDWHGHEWKDG
LQFUHDVHGPDUNHGO\LQWKHSRVWSHULRGLH
LQWKH\HDUVEHIRUHWKHɇQDQFLDOFULVLV
,QWKHLPPHGLDWHDIWHUPDWKRIWKHFULVLVWLJKW
FUHGLWFRQGLWLRQVDQGWKHIRFXVRIEXVLQHVVHVRQ
UHHVWDEOLVKLQJSURɇWDELOLW\OHGWRVRPH\HDUVRI
PDUNHGFRUSRUDWHGHOHYHUDJLQJWKHUDWLRRI
QRQɇQDQFLDOFRUSRUDWHGHEWWR*'3GHFOLQHG
A big shift from banks to bonds since
the crisis
$VDUHVXOWRIEDQNGHOHYHUDJLQJLQFRPELQD-
WLRQZLWKWKHVHDUFKIRU\LHOGE\LQYHVWRUV
QRQɇQDQFLDOFRUSRUDWLRQVKDYHLQFUHDVLQJO\
IXQGHGWKHPVHOYHVLQERQGPDUNHWVUDWKHU
WKDQYLDORDQV$FFRUGLQJWRWKHFRQVXOWLQJ
ɇUP0F.LQVH\1WKHVKDUHRIERQGVLQJOREDO
VKDUSO\Figure 2DQGFUHGLWVSUHDGVQDUURZHG
FRQVLGHUDEO\DOEHLWQRWTXLWHWRWKHORZVUHDFKHG
Ƿ5LVLQJ&RUSRUDWH'HEW3HULORU3URPLVH"Ǹ0F.LQVH\
LQWKHPLGVFigure 3+RZHYHUVLQFH
*OREDO,QVWLWXWH'LVFXVVLRQ3DSHU-XQH
DURXQG86QRQɇQDQFLDOFRUSRUDWHV

Assessing Global Debt 67

)LJXUH'HIDXOWVRIQRQɇQDQFLDOFRUSRUDWHVZHUHOLPLWHGGXULQJWKHɇQDQFLDOFULVLV
'HIDXOWUDWHVLQJOREDOO\
12

10

0
1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017

7RWDO ,QYHVWPHQWJUDGH 6SHFXODWLYHJUDGH

6RXUFH6 3&UHGLW6XLVVH

)LJXUH86QRQɇQDQFLDOOHYHUDJHKDVULVHQEDFNWRSHDNOHYHOV
5DWLRRI86QRQɇQDQFLDOFRUSRUDWHGHEWWR*'3
85

75

65

55

45

35

25
1952 1960 1968 1976 1984 1992 2000 2008 2016

86UHFHVVLRQV 86QRQILQDQFLDOFRUSRUDWHGHEWRI*'3

6RXUFH%,6&UHGLW6XLVVH

Figure 3: Corporate bond spreads dropped to almost mid-2000 levels in the post-crisis period
,QWHUHVWGLIIHUHQWLDOEHWZHHQYDULRXV86ERQGUDWLQJFDWHJRULHVDQG867UHDVXULHV

700 1200

600 1000

500 800
400
600
300
400
200

100 200

0 0
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

AAA AA A %%% +LJK\LHOGUKV

6RXUFH7KH%/220%(5*352)(66,21$/ȅVHUYLFH&UHGLW6XLVVH

68
 QRQɇQDQFLDOFRUSRUDWHGHEWUHDFKHGDW RIULVNV0RUHRYHUEDQNɇQDQFHPD\LPSO\
WKHHQGRIXSIURPLQDQG KLJKHUOHYHUDJHLQWKHV\VWHP$WWKHVDPH
,QWKH86$WKHVKDUHURVHIURPLQ WLPHRQHRIWKHSXUSRUWHGDGYDQWDJHVRIEDQN
WRLQ ɇQDQFHLHWKHFORVHUVXSHUYLVLRQRIǷDJHQWVǸ
ERUURZHUVE\WKHǷSULQFLSDOǸWKHEDQNPD\
7KHVKDUHLVVWLOOORZHULQ:HVWHUQ(XURSHZKHUH EHORVWRUDWOHDVWGLPLQLVKHG:LWKWKHVKDUH
EDQNɇQDQFHUHPDLQVGRPLQDQWEXWKHUHWRR
WKHVKDUHRIERQGɇQDQFLQJKDVDOVRDOPRVW
GRXEOHGIURPWR,Q&KLQDDQGRWKHU
HPHUJLQJPDUNHWVWKHVDPHWUHQGFDQEH
REVHUYHG,Q%UD]LOWKHVKDUHKDVIRUH[DPSOH
UHDFKHGDURXQG,WWKHUHIRUHFRPHVDVQR
VXUSULVHWKDWFRUSRUDWHERQGLVVXDQFHKDV
LQFUHDVHGVKDUSO\VLQFHWKHɇQDQFLDOFULVLV
RILQVWLWXWLRQDOLQYHVWRUVLHQRQEDQNV
SURYLGLQJORDQɇQDQFHKDYLQJUHFHQWO\UHDFKHG
UHFRUGKLJKVWKLVVWURQJHUVXSHUYLVLRQUROHKDV
DUJXDEO\DOVRGLPLQLVKHGLQWKHDUHDRIORDQ
IXQGLQJ,QZKDWIROORZVZHORRNDWWKHVKLIWV
ZLWKLQWKH86FRUSRUDWHERQGPDUNHWLQ
JUHDWHUGHWDLODQGWU\WRDVVHVVKRZWKHVH
KDYHDIIHFWHGɇQDQFLDOULVNV
(Figure 4,QIDFWERQGLVVXDQFHJUHZDWDQ
DQQXDOUDWHRIPRUHWKDQEHWZHHQ
DQGZLWKWKH86$:HVWHUQ(XURSHDQG
&KLQDGRPLQDWLQJWKHYROXPHV,QWKHUHPDLQGHU
RIWKLVFKDSWHUZHZLOOODUJHO\IRFXVRQ86GHYHO-
RSPHQWVJLYHQWKDWWKH\WHQGWRǷOHDGǸWKRVHLQ
RWKHUDGYDQFHGHFRQRPLHVZKHUHDVWKH
HYROXWLRQDQGULVNVDVVRFLDWHGZLWK&KLQDǵV
FRUSRUDWHGHEWDUHDGGUHVVHGLQ&KDSWHU
$VWKH0F.LQVH\UHSRUWVXJJHVWVDVKLIWIURP
EDQNWRFDSLWDOPDUNHWɇQDQFHGRHVQRWLQ
LWVHOIKDYHDQ\LPSOLFDWLRQVLQWHUPVRI
V\VWHPLFULVN,QSULQFLSOHɇQDQFLQJYLDERQG
PDUNHWVFRXOGDOORZIRUDEHWWHUGLYHUVLɇFDWLRQ
Surge in US issuance followed by slowdown
,QDGGLWLRQWRWKHIDFWRUVPHQWLRQHGDERYHD
QXPEHURIRWKHUVOLNHO\GURYHWKHVXUJHLQERQG
LVVXDQFHDVRIODWHɇUVWEXVLQHVV
VHQWLPHQWJUDGXDOO\LPSURYHGDVWKH(XUR]RQH
FULVLVGUHZWRDQHQGVHFRQGIROORZLQJWKH
VRFDOOHGǷWDSHUWDQWUXPǸERUURZHUVEHJDQWR
UHDOL]HWKDWWKHSHULRGRIH[WUHPHO\ORZLQWHUHVW
UDWHVZRXOGHYHQWXDOO\FRPHWRDQHQGZKLFK
HQWLFHGWKHPWRORFNLQVWLOOORZLQWHUHVWUDWHV
WKLUG0 $DQGRWKHUǷVKDUHKROGHUIULHQGO\Ǹ
DFWLYLWLHVLQFUHDVHGDVWKHUHFRYHU\WRRNKROG
DQGɇQDOO\KLJKHQHUJ\SULFHVOHGWRDVXUJHRI

Figure 4: Corporate bond issuance has increased massively since the crisis
&RUSRUDWHERQGVRXWVWDQGLQJLQPDMRUUHJLRQVDQGJOREDOO\

86'WUQ RI*'3
14 18

16
12
14
10
12

8 10

6 8

6
4
4
2
2

0 0
2000 2003 2007 2010 2013 2017*

2WKHUDGYDQFHGHFRQRPLHV 2WKHUGHYHORSLQJHFRQRPLHV &KLQD :HVWHUQ(XURSH United States *OREDOQRQILQDQFLDOFRUSRUDWH

ERQGVRXWVWDQGLQJUKV

6RXUFH0F.LQVH\*OREDO,QVWLWXWH

Assessing Global Debt 69

Figure 5a: US investment grade corporate leverage surged after 2013
'HEW(%,7'$IRULQYHVWPHQWJUDGHQRQɇQDQFLDOV
[

[

[

[

[

[

[

[
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

86',*WRWDOGHEWWR(%,7'$

6RXUFH)DFWVHW&UHGLW6XLVVH

)LJXUHE5LVLQJOHYHUDJHIRU86QRQɇQDQFLDOFRUSRUDWHVVLQFHWKHFULVLV
'HEWHTXLW\UDWLRIRU6 3FRPSDQLHV
2 6

0 0
2003 2005 2007 2009 2011 2013 2015 2017

6 3([)LQDQFLDOV 6 3)LQDQFLDOVUKV

6RXUFH7KH%/220%(5*352)(66,21$/ȅVHUYLFH&UHGLW6XLVVH

Figure 6: Decline in interest coverage within investment grade

5DWLRRI(%,7'$WRLQWHUHVWSD\PHQWV
[
[
[
[
[
[
[
[
[
[
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

86',*LQWHUHVWFRYHUDJH

6RXUFH)DFWVHW&UHGLW6XLVVH

70
 GHEWɇQDQFHGLQYHVWPHQWLQWKH86VKDOH
LQGXVWU\,QGHHGIURPRQZDUGFRUSRUDWH
OHYHUDJHVXUJHGRQWKHPHDVXUHVVKRZQLQ
Figures 5a and 5bQRQɇQDQFLDOJURVV
FRUSRUDWHOHYHUDJHLVQRZDERYHOHYHOVVHHQLQ
WKHSUHɇQDQFLDOFULVLVSHULRGDQGOLHVDWOHYHOV
VLPLODUWRWKHODWHVLHWKHSHULRGWKDW
ZDVIROORZHGE\VLJQLɇFDQWFRUSRUDWHGHEW
VWUHVV0RUHRYHUWKHLQFUHDVHLQOHYHUDJHLQWKH
WKDQLQWKHSUHSHULRG2IFRXUVH
DYHUDJHVSUREDEO\GRQRWIXOO\FDSWXUHWKHULVNV
,QGHHGVRPHODUJHFRPSDQLHVLQDUHDVVXFKDV
LQGXVWULDOVDXWRVUHWDLODQGXWLOLWLHVDUHXQGHU-
JRLQJVLJQLɇFDQWVWUXFWXUDOFKDQJHDQGKLJKO\
OHYHUDJHGUHDOHVWDWHFRPSDQLHVDUHVWUXJJOLQJ
ZLWKKLJKGHEWEXUGHQVVRWKDWLQGLYLGXDO
GHIDXOWVFDQQRWEHUXOHGRXW
LQYHVWPHQWJUDGH,*DUHDDOVRVKRZVXSLQD Gradual deterioration of credit quality in
GHFOLQHLQLQWHUHVWFRYHUDJHFigure 6
7KDWVDLGLQWHUHVWFRYHUDJHLVVWLOOZHOODERYH
WKHSHULRGRIKLJKFRUSRUDWHERQGVWUHVVDURXQG
WKHWXUQRIWKHPLOOHQQLXP$OVRFigure 5a
VKRZVWKDWQHWOHYHUDJHUHPDLQVVLJQLɇFDQWO\
ORZHUWKDQLQWKHSUHWRGRWFRP
EXEEOHSHULRGEHFDXVHPDQ\86FRUSRUDWLRQV
VWLOOKROGYHU\ODUJHFDVKSRVLWLRQV7KDWVDLG
WKHVXUJHLQVKDUHEX\EDFNVLQKDV
UHGXFHGFDVKSRVLWLRQVDQGERRVWHGOHYHUDJH
WRVRPHH[WHQW$WWKHVDPHWLPHWKHULVHLQ
RYHUDOOFRUSRUDWHERQGLVVXDQFHDEDWHGLQWKH
FRXUVHRIDVPRQHWDU\DQGɇQDQFLDO
investment grade area, but improvements
in high yield
$WDJOREDOOHYHOLWLVIRUQRZGLIɇFXOWWRGLVFRYHU
DQ\VLJQLɇFDQWGHWHULRUDWLRQRIFUHGLWTXDOLW\,Q
IDFWUDWLQJFKDQJHVVKRZDFORVHWRQHXWUDO
SLFWXUHZLWKWKHUDWHRIGRZQJUDGHVWRXSJUDGHV
KDYLQJPRUHRUOHVVHTXDOL]HGDIWHUDSHULRGRI
GHWHULRUDWLRQLQDZ7KDWVDLGUDWLQJ
FKDQJHVDUHDODJJLQJLQGLFDWRUDVUDWLQJ
DJHQFLHVRQO\WHQGWRDFWDIWHUFKDQJHVLQGHEW
VHUYLFLQJFDSDFLW\KDYHEHHQREVHUYHG6WLOODV
FRPSDUHGWRWKHSHULRGVDURXQGRU
DZWKHWUHQGLVVWLOOIDUOHVVGUDPDWLF
FRQGLWLRQVWLJKWHQHGZLWKWKHUDWHRIFRUSRUDWH
ERQGLVVXDQFHGHFOLQLQJEHORZWKHJURZWKRI
QRPLQDO*'3,QVXPDYHUDJHFUHGLWTXDOLW\KDV
LQGHHGGHWHULRUDWHGZLWKLQWKHLQYHVWPHQWJUDGH
DUHDEXWWKHGHYHORSPHQWORRNVOHVVGUDPDWLF
(Figure 7'LJJLQJVRPHZKDWGHHSHUTXDOLW\
GHWHULRUDWLRQLVKRZHYHUPRUHFOHDUO\YLVLEOH)RU
H[DPSOHZLWKLQWKHLQGXVWULDOVDUHDWKHVKDUHRI
%%%DQG$UDWHGERQGVZDVDERXWHTXDOLQ
DWHDFKEXWLQWKHPHDQWLPHWKH

Figure 7: More or less neutral picture with regard to rating changes

5DWLRRIGRZQJUDGHVWRXSJUDGHVJOREDOO\











0
1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017

6RXUFH6 3&UHGLW6XLVVH

Assessing Global Debt 71

Figure 8: Quality deterioration in US investment grade
6KDUHVRI86LQGXVWULDOVHFWRUERQGVRXWVWDQGLQJZLWKLQ86LQYHVWPHQWJUDGHXQLYHUVH






 



2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

$UDWHGLQGXVWULDOVDVRI86',QYHVWPHQW*UDGH,QGH[
%DDUDWHGLQGXVWULDOVDVRI86',QYHVWPHQW*UDGH,QGH[

6RXUFH)DFWVHW&UHGLW6XLVVH

Figure 9: Declining leverage in the high yield area

'HEW(%,7'$IRUKLJK\LHOGFRPSDQLHV
[

[

[

[

[

[

[

[

[
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

86'+<QHWGHEWWR(%,7'$

6RXUFH)DFWVHW&UHGLW6XLVVH

Figure 10: Recovery in high yield interest coverage since 2015

[
[
[
[
[
[
[
[
[
[
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

86'+<LQWHUHVWFRYHUDJH

6RXUFH)DFWVHW&UHGLW6XLVVH

72
VKDUHRI%%%UDWHGERQGVKDGLQFUHDVHGWR Rising risks in leveraged loans
DERYHLQPLGZKLOHWKDWRI$UDWHG
ERQGVGHFOLQHGWRDURXQGFigure 8
,QFRQWUDVWWRLQYHVWPHQWJUDGHLVVXHUVKLJK
\LHOGFRPSDQLHVKDYHGHOHYHUDJHGVXEVWDQWLDOO\
VLQFHWKHFRPPRGLW\OHGGRZQWXUQFigure
0RUHZRUU\LQJWKDQGHYHORSPHQWVLQWKH
LQYHVWPHQWJUDGHDQGKLJK\LHOGERQGDUHDV
LVWKHLQFUHDVHLQQRQVWDQGDUGIRUPVRI
FRUSRUDWHGHEW,QGHHGDIWHUDVKDUSGURSRI
QRQFDSLWDOPDUNHWIRUPVRIIXQGLQJLQWKH
9DQGLQWHUHVWFRYHUKDVLQFUHDVHGFigure 10 DIWHUPDWKRIWKHɇQDQFLDOFULVLV86QRQɇQDQFLDO
LQDEVROXWHWHUPVERWKUDWLRVRIFRXUVHLQGLFDWH FRPSDQLHVKDYHVLQFHRQFHDJDLQ
IDUJUHDWHUYXOQHUDELOLW\WKDQIRULQYHVWPHQWJUDGH EHJXQWRWDSVXFKVRXUFHVPRVWQRWDEOHLVWKH
FRPSDQLHV%XWRQWKHZKROHKLJK\LHOGLVVXHUV VXUJHLQOHYHUDJHGORDQLVVXDQFHFigure 11
VHHPWRKDYHPDQDJHGWKHLUEDODQFHVKHHWVLQD 7KHODWWHUKDVEHHQVXSSRUWHGE\LQYHVWRUV
PRUHGHIHQVLYHPDQQHULQUHFHQW\HDUV DWWUDFWHGE\WKHɈRDWLQJUDWHVWUXFWXUHRIVXFK
LQVWUXPHQWVDVWKH)HGHUDO5HVHUYHEHJDQWR

Figure 11: Surge in non-capital-market borrowing

9ROXPHVRXWVWDQGLQJLQ86'ELOOLRQ









800

600

400

200

0
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

86+<ERQGV 86OHYHUDJHGORDQV

6RXUFH)DFWVHW6 3/&'&UHGLW6XLVVH

Figure 12: Increasing leverage in the corporate loan market

'HEW(%,7'$UDWLRV












2001 2003 2005 2007 2009 2011 2013 2015 2017 3Q18

'HEW(%,7'$RI[RUKLJKHU 'HEW(%,7'$RI[RUKLJKHU

6RXUFH6 3/&'&UHGLW6XLVVH

Assessing Global Debt 73

UDLVHLQWHUHVWUDWHV6LQFHPRUHWKDQ Defaults to rise, but systemic risks
RIWKHODUJHFRUSRUDWHORDQVKDYHEHHQ seem limited
LVVXHGE\FRPSDQLHVZLWKOHYHUDJHGHEW
(%,7'$DERYH[DQGPRUHWKDQZLWK &UHGLWTXDOLW\LQWKHLQYHVWPHQWJUDGHDUHDKDV
OHYHUDJHRI[RUKLJKHU)RUVPDOOHUFRPSD- GHWHULRUDWHGDQGWKHVXUJHLQKLJKO\OHYHUDJHG
QLHVRIWKHLVVXDQFHVWHPVIURPFRPSD- ORDQVZLWKZHDNFRYHQDQWVVXJJHVWVWKDWGRZQ-
QLHVZLWKOHYHUDJHDERYH[Figure 12 JUDGHVIURPLQYHVWPHQWJUDGHWRVXELQYHVWPHQW
0RUHRYHULVVXHUVKDYHEHHQDEOHWRVHFXUH
IXQGLQJDWYHU\DWWUDFWLYHFRQGLWLRQV,QGHHG
ORDQLVVXHUVKDYHLQWKHSDVW\HDUVRIWHQEHHQ
DEOHWRUHQHJRWLDWHWKHLUFUHGLWWHUPVUHGXFLQJ
WKHVSUHDGVRYHU/LERU,QDGGLWLRQVRFDOOHG
ǷFRYHQDQWOLWHORDQVǸKDYHVXUJHGLQFUHDVLQJ
IURPOHVVWKDQLQWRPRUHWKDQ
LQ$OVRH[FOXGLQJFRYHQDQWOLWH
ORDQVORDQLVVXDQFHKDVVHHQDVKDUSGURSLQ
WKHQXPEHURIFRYHQDQWVLPSRVHGRQLVVXHUV
JUDGHVWDWXVFRXOGULVHVLJQLɇFDQWO\LIDQGZKHQD
UHFHVVLRQRFFXUVORDQUHFRYHU\UDWHVZRXOGDOVR
GHFOLQHPHDQLQJIXOO\0XFKZLOORIFRXUVHGHSHQG
RQZKHWKHUDQGWRZKDWH[WHQWLQWHUHVWUDWHVZLOO
FRQWLQXHWRULVH6KRXOGJURZWKVLPSO\PRGHUDWH
DQGWKH)HGVORZGRZQRUHYHQKDOWLWVUDWH
KLNLQJF\FOHWKHULVNRIDVLJQLɇFDQWLQFUHDVHLQ
GHIDXOWVZRXOGUHPDLQPRUHOLPLWHG0RUHRYHUWKH
PDUNHWVWUHVVHVRIODWHKDYHGDPSHQHG
LQYHVWRUHXSKRULDZKLFKZLOOOLNHO\OHDGWRPXFK
)LQDOO\WKHDEVHQFHRUYHU\ORZXVDJHRI
VXERUGLQDWHGGHEWɇQDQFLQJLQWKHSDVWIHZ
\HDUVKDVDOVRUHGXFHGWKHQHHGWRKDYH
VSHFLɇFFRYHQDQWVIRUVHQLRUGHEWPHWULFV
VORZHUJURZWKLQOHYHUDJHɇQDQFHLVVXDQFHLQ
7KDWZRXOGDOVRPRGHUDWHULVNVJRLQJ
IRUZDUG)LQDOO\86EDQNVDSSHDUWRKDYH
VLJQLɇFDQWO\UHGXFHGWKHLUSDUWLFLSDWLRQLQWKH
SULPDU\ORDQPDUNHW*LYHQJHQHUDOO\VWURQJHU
EDQNFDSLWDOSRVLWLRQVWKLVLVDUJXDEO\WKHPRVW
LPSRUWDQWUHDVRQZK\V\VWHPLFULVNVORRNPRUH
OLPLWHGQRWMXVWWKDQLQEXWDOVRWKHSRVW
SHULRGVHHDOVR&KDSWHU

74
Performance of debt markets over
the economic cycle

6DWLVK&KDQGUD$OXUL

7KHXQGHUO\LQJIXQGDPHQWDOVRIGHEWPDUNHWV YDULRXVFRPSRQHQWVRIWKHFRPSRVLWHOHDGLQJ
DUHFORVHO\OLQNHGWRHFRQRPLFF\FOHVZLWKWKH LQGLFDWRUVIRUWKH86$ZKLFKWKH2(&'SXEOLVKHV
EHKDYLRURIPDMRUVXEDVVHWFODVVHVGLIIHULQJ RQDPRQWKO\EDVLV1:HLGHQWLI\IRXUF\FOH
GHSHQGLQJRQWKHVWDJHRIWKHF\FOH7KH&UHGLW UHJLPHVLHRYHUKHDWLQJVORZGRZQFRQWUDFWLRQ
6XLVVH&\FOH&ORFNVHHNVWRLGHQWLI\WXUQLQJ DQGUHFRYHU\EDVHGRQSUHGHɇQHGUXOHV2DQGPDS
SRLQWVLQEXVLQHVVF\FOHVDQGWRSURYLGHJXLGDQFH
RQLQYHVWPHQWRSSRUWXQLWLHVEDVHGRQW\SLFDO
2XUF\FOHLQGLFDWRULVDQDYHUDJHRIQRUPDOL]HGOHDGLQJ
SHUIRUPDQFHSDWWHUQVRIDVVHWVLQWKHSDVW
LQGLFDWRUVIRUFRQVXPHUVHQWLPHQWQHWQHZRUGHUVIRU
GXUDEOHJRRGVZHHNO\KRXUVZRUNHGLQWKHPDQXIDFWXULQJ
:KLOHWKH86$UHSUHVHQWVRQO\VOLJKWO\RYHU
VHFWRULQGXVWULDOVHQWLPHQWDQG\LHOGVSUHDGV
RIWKHZRUOGHFRQRP\LWFRQVWLWXWHVRIWKH
JOREDOHTXLW\PDUNHWDQGRIWKHJOREDOERQG
Ƿ2YHUKHDWLQJǸLVGHɇQHGDVWKHVWDJHZKHQWKHLQGLFDWRULV
PDUNHWDVQRWHGLQWKLVFKDSWHUWKHZHLJKWRIWKH
DERYHORQJWHUPDYHUDJHDQGULVLQJǷVORZGRZQǸLVZKHQWKH
86QRQɇQDQFLDOFRUSRUDWHERQGVHJPHQWLQJOREDO
LQGLFDWRULVDERYHORQJWHUPDYHUDJHDQGIDOOLQJǷFRQWUDFWLRQǸ
PDUNHWVLVDFWXDOO\IDUODUJHU)RUWKLVUHDVRQZH
LVZKHQWKHLQGLFDWRULVEHORZORQJWHUPDYHUDJHDQGIDOOLQJ
KDYHGHYHORSHGDǷ&\FOH&ORFNǸIRUɇ[HGLQFRPH
DQGǷUHFRYHU\ǸLVZKHQWKHLQGLFDWRULVEHORZORQJWHUP
PDUNHWVEDVHGRQWKHHYROXWLRQRIWKH86
DYHUDJHDQGULVLQJ
HFRQRPLFF\FOH0RUHVSHFLɇFDOO\ZHKDYHXVHG

Figure 1: The US cycle indicator

102

101

100

99

98

97

86UHFHVVLRQVSHDNWRWKURXJK ,QGLFDWRU \HDUPRYLQJDYHUDJH

6RXUFH1%(52(&'&UHGLW6XLVVH

Assessing Global Debt

$VVHVVLQJ*OREDO'HEW 75
WKHPDJDLQVWUHFHVVLRQVDVGHɇQHGE\WKH1DWLRQDO DQGGRIDLUO\ZHOODFURVVPRVWUHJLPHV
%XUHDXRI(FRQRPLF5HVHDUFK1%(5VHH ,QWHUHVWLQJO\ERWKKLJK\LHOGDQGVLQJOH$
Figure 1:HWKHQDQDO\]HWKHSHUIRUPDQFHRI FRUSRUDWHVSHUIRUPIDLUO\ZHOOLQDVORZGRZQ
ɇ[HGLQFRPHVXEDVVHWFODVVHVVLQFHWKHV3 SHULRGPRVWOLNHO\EHFDXVHFHQWUDOEDQNHDVLQJ
LQWKHGLIIHUHQWUHJLPHV DQGWKHGHFOLQHLQJRYHUQPHQWERQG\LHOGV
UHPDLQVXSSRUWLYH$VEHQFKPDUN\LHOGVWHQGWR
7\SLFDOO\WKHULVNLHVWɇ[HGLQFRPHDVVHWFODVV KDYHULVHQLQSHULRGVRIVWURQJJURZWKDPRGHU-
KLJK\LHOGGRHVEHVWLQWKHUHFRYHU\SKDVHEXW DWHVSUHDGZLGHQLQJWKDWEHJLQVZKHQLQYHVWRUV
SHUIRUPDQFHUHPDLQVUREXVWLQRYHUKHDWLQJDV IHDUDVORZGRZQGRHVQRWVHULRXVO\KDUPFUHGLW
ZHOODVVORZGRZQSKDVHV,QFRQWUDFWLRQSKDVHV )LQDOO\DQGVRPHZKDWFRQWUDU\WRLQWXLWLRQ
WKHKLJKHVWTXDOLW\ERQGVJRYHUQPHQWGREHVW LQɈDWLRQSURWHFWHGVHFXULWLHV7,36GRQRWGR
DVLQYHVWRUVWHQGWRVHHNSURWHFWLRQIURPULVN EHVWLQDQRYHUKHDWLQJSHULRGIRUWZRUHDVRQV
KLJK\LHOGLVZHDNHVWLQWKLVUHJLPH6LQJOH$ ɇUVWKLJKHUULVNDQGJURZWKVHQVLWLYHERQGV
UDWHGFRUSRUDWHERQGVDUHLQDPLGGOHSRVLWLRQ RXWSHUIRUPDQGVHFRQGLQɈDWLRQWHQGVWREHD
FRXQWHUF\FOLFDOYDULDEOHLWULVHVPRVWLQVORZ-
GRZQSKDVHVDVZHOODVDWWKHEHJLQQLQJRI
7LPHVHULHVIRUDOOWKHJRYHUQPHQWERQGDQG$UDWHG
FRQWUDFWLRQSKDVHV
FRUSRUDWHERQGVHULHVVWDUWLQWKH)L[HG,QFRPH),
$JJUHJDWHLQ+LJK<LHOG+<LQ&DVKLQ
DQG7,36LQ

Figure 6: Decline in interest coverage within investment grade

2YHUKHDWLQJ 6ORZGRZQ

 
 
 







 
),$JJUHJDWH
+LJK<LHOG

&RUSRUDWH%RQGV$

3M cash
7,36
*RYW/RQJ

*RYW,QW
*RYW$JJUHJDWH


),$JJUHJDWH
+LJK<LHOG

3M cash
&RUSRUDWH

7,36

*RYW/RQJ
*RYW,QW

*RYW$JJUHJDWH
%RQGV$

&RQWUDFWLRQ 5HFRYHU\

 
 

 
 

 
 


),$JJUHJDWH
+LJK<LHOG

&RUSRUDWH%RQGV$

3M cash
7,36

*RYW/RQJ
*RYW,QW

*RYW$JJUHJDWH
),$JJUHJDWH

&RUSRUDWH%RQGV$

3M cash
7,36

+LJK<LHOG
*RYW/RQJ

*RYW,QW
*RYW$JJUHJDWH

6RXUFH7KRPVRQ5HXWHUV&UHGLW6XLVVH
$OOSHUIRUPDQFHQXPEHUVDUHDYHUDJHVRIWKHPRQWKO\WRWDOUHWXUQVLQWKHYDULRXVSKDVHVIURPWKHLQFHSWLRQRIWKHYDULRXVGDWDVHULHV

),$JJUHJDWH%DUFOD\V8QLWHG6WDWHV$JJUHJDWH*RYW$JJUHJDWH%DUFOD\V8QLWHG6WDWHV$JJUHJDWH*RYHUQPHQW*RYW/RQJ%DUFOD\V8QLWHG6WDWHV7UHDVXU\/RQJ
*RYW,QW%DUFOD\V8QLWHG6WDWHV7UHDVXU\,QWHUPHGLDWH&RUSRUDWH%RQGV$%DUFOD\V8QLWHG6WDWHV$JJUHJDWH&RUSRUDWH$+LJK<LHOG%DUFOD\V8QLWHG6WDWHV&RUSRUDWH
+LJK<LHOG0FDVK-30RUJDQ8QLWHG6WDWHV&DVK07,36%DUFOD\V8QLWHG6WDWHV7UHDVXU\,QɈDWLRQ/LQNHG6HFXULWLHV

76
Assessing Global Debt 77
78
7. Real estate – some overheated
markets, but less toxic debt
0D[LPH%RWWHURQDQG=ROWDQ6]HO\HV

“Toxic” mortgage debt that financed overpriced real estate lay at the
heart of the financial crisis. While the crisis markets such as the USA,
Ireland and Spain have rebalanced and households have deleveraged
to a significant degree, a number of other real estate markets have
been heading for a boom since the financial crisis as declining interest
rates have encouraged borrowing and real estate investment.

2ZLQJWRKLJKYDOXDWLRQVVRPHRIWKHVH
PDUNHWVDUHTXLWHYXOQHUDEOHWRVHWEDFNVLQRXU
YLHZ+RZHYHUJLYHQWLJKWHUUHJXODWLRQDQGULVN
DYHUVLRQRIOHQGHUVWKHɇQDQFLQJVWUXFWXUHV
KDYHJHQHUDOO\EHFRPHOHVVULVN\LQERWKSULYDWH
DVZHOODVFRPPHUFLDOUHDOHVWDWHZKLOHD
VLJQLɇFDQWLQWHUHVWUDWHVKRFNWULJJHULQJDVKDUS
VHOORIIVHHPVTXLWHXQOLNHO\(YHQLQFRXQWULHV
ZKHUHULVNVKDYHEXLOWXSVLQFHWKHJOREDO
ɇQDQFLDOFULVLVWKHǷODQGLQJǸVKRXOGWKXVEH
VRIWHU,QHPHUJLQJPDUNHWVGHEWOHYHOV
JHQHUDOO\VHHPORZHUWKDQLQDGYDQFHGHFRQR-
PLHVEXW&KLQDVWDQGVRXWDVDSRWHQWLDOULVN
7KDWVDLGLPSOLFLWJRYHUQPHQWJXDUDQWHHV
UHGXFHFULVLVULVNVLQ&KLQDDVLVWKHFDVHLQ
WKH86$ZKHUHWKHJRYHUQPHQWDJHQFLHV
VXSSRUWDODUJHVKDUHRIUHVLGHQWLDOPRUWJDJHV
Key factors to consider
7RDVVHVVWKHULVNVZHORRNDWWKHHYROXWLRQRI
WKHNH\IDFWRUVWKDWSRWHQWLDOO\JHQHUDWHDFULVLV
LHWKHHYROXWLRQRI
ȩ 5HDOHVWDWHPDUNHWVDQGWKHLUYDOXDWLRQV
ȩ 5HDOHVWDWHUHODWHGFUHGLW
ȩ 'HEWOHYHOVRIKRXVHKROGVDQGRWKHU
 ERUURZHUV
ȩ 7KHGHEWVHUYLFLQJFDSDFLW\RIKRXVHKROGV
ȩ 7KHUREXVWQHVVRIUHDOHVWDWHILQDQFLQJ
 LQVWUXPHQWV
6XPPDU\GDWDIRUWKHɇUVWIRXURIWKHVHIDFWRUV
DUHSUHVHQWHGLQTable 1
A downshift in credit and property price
growth, with some exceptions

7KHSRVWUHDOHVWDWHERRPLQWKH86$DQG
VRPH(XURSHDQFRXQWULHVOD\DWWKHKHDUWRIWKH
ɇQDQFLDOFULVLVKRXVHKROGVZLWKOLPLWHGGHEW
VHUYLFLQJFDSDFLW\ERUURZHGKHDYLO\ZKLOHEDQNV
SURYLGHGFUHGLWWRRFKHDSO\7KHUHSDFNDJLQJRI
7KHSHULRGEHIRUHWKH*OREDO)LQDQFLDO&ULVLV
ZLWQHVVHGERWKYHU\VWURQJFUHGLWJURZWKDQG
VRDULQJSURSHUW\SULFHVLQPDQ\DGYDQFHG
HFRQRPLHV+RZHYHUVLQFHWKHFULVLVERWKFUHGLW
JURZWKDQGSURSHUW\SULFHJURZWKKDYHJHQHUDOO\
ULVN\PRUWJDJHVLQWROHYHUDJHGɇQDQFLDOSURGXFWV
DZZKLFKLQSDUWUHPDLQHGRQWKHEDODQFHVKHHWV
RIEDQNVWKDWDUHWKHPVHOYHVE\QDWXUHOHYHUDJHG
DZDPSOLɇHGWKHFULVLVDVWKHULVHLQLQWHUHVWUDWHV
WULJJHUHGDVKDUSFRUUHFWLRQLQUHDOHVWDWHYDOXHV
DQGDVXEVHTXHQWUHFHVVLRQ:KHUHGRZHVWDQG
WRGD\LQWHUPVRIWKHULVNVHPDQDWLQJIURPWKH
VORZHGGRZQVXEVWDQWLDOO\VHHFigure 1$W
RQO\SHUDQQXPWKHJURZWKRIKRXVHKROG
FUHGLWZDVYHU\VXEGXHGLQWKH86$LQSDUWLFXODU
EHWZHHQDQGLWUDQIDUEHORZWKH
UDWHRIQRPLQDO*'3JURZWKRI2YHUDOO
KRXVHKROGGHEWGHFOLQHGVLJQLɇFDQWO\UHODWLYHWR
*'3DQGWKHGHEWVHUYLFHUDWLRGURSSHGRII
UHDOHVWDWHPDUNHWDQGLWVIXQGLQJ" VKDUSO\VHHWKHODVWWZRFROXPQVLQTable 1

Assessing Global Debt 79

Table 1: Property prices, credit growth and household debt metrics
Nominal Last data point Price-to-rent Credit growth Last data point Debt-to-GDP Debt service Debt service
property prices ratio ratio 2008 ratio 2017

New Zealand       - -

Canada        
Sweden        
Norway        
Australia        
Belgium        
United Kingdom        
Israel       - -
Denmark        
Ireland       - -
France        
Spain        
Netherlands        
Finland        
Austria       - -
United States        
Switzerland       - -
Korea        
Germany        
Portugal        
Greece       - -
Italy        
Japan        

1RPLQDOSURSHUW\SULFHV&RPSRXQGDQQXDOJURZWKUDWHLQIRUWKHSHULRGIURPWR/DVWGDWDSRLQW<R<JURZWKUDWHRIQRPLQDOSURSHUW\SULFHVLQ4
3ULFHWRUHQWUDWLR2(&'VWDQGDUGL]HGSULFHWRUHQWUDWLRZKHUHLVWKHORQJWHUPDYHUDJH&UHGLWJURZWK&RPSRXQGDQQXDOUDWHRIQRPLQDOFUHGLWJURZWKWRKRXVHKROGVLQ
IRUWKHSHULRGIURPWR/DVWGDWDSRLQW<R<JURZWKUDWHRIFUHGLWVWRKRXVHKROGVLQ4'HEWWR*'3+RXVHKROGGHEWLQRI*'3
6RXUFH%,62(&'&UHGLW6XLVVH

0HDQZKLOH86UHVLGHQWLDOSURSHUW\SULFHVKDYH UHFHQWO\LQWKHVHHFRQRPLHVKRXVHKROGV
UHFRYHUHGVXEVWDQWLDOO\VLQFHWKHFULVLVULVLQJ FRQWLQXHWRERUURZDWDIDLUO\UDSLGSDFH)XUWKHU
VOLJKWO\IDVWHUWKDQ*'3SHUFDSLWDLPSURYLQJWKH FRUUHFWLRQVLQWKHVHUHDOHVWDWHPDUNHWVFRXOG
DVVHWYDOXHVRIERUURZHUVVHHFigure 2:KLOH
LWLVZHOONQRZQWKDWSURSHUW\PDUNHWGHYHORS-
PHQWVKDYHGLIIHUHGVLJQLɇFDQWO\EHWZHHQ
UHJLRQVZLWK&DOLIRUQLDDQG1HZ<RUN&LW\IRU
H[DPSOHZLWQHVVLQJPDMRUERRPVWKDWFRXOGOHDG
WRORFDOVWUHVVHVIRUVRPHERUURZHUVWKHRYHUDOO
PDUNHWVHHPVZHOOEDODQFHGDQGOHYHUDJHPXFK
OHVVRIDQLVVXH,QWKHFRXQWULHVPRVWDIIHFWHG
E\WKH(XUR]RQHFULVLVSDUWLFXODUO\6SDLQ,UHODQG
DQG3RUWXJDOFUHGLWJURZWKKDVFRPHGRZQ
VKDUSO\DQGSURSHUW\PDUNHWVKDYHUHEDODQFHGDV
ZHOO7KHVDPHJRHVIRUWKH1HWKHUODQGVDQG
'HQPDUNZKLFKDOVRH[SHULHQFHGDERRPSULRU
WRWKHFULVLV0HDQZKLOHWKHUHEDODQFLQJSURFHVV
LVVWLOOXQGHUZD\LQ*UHHFHDQG,WDO\
$VQRWHGDERYHDQXPEHURIFRXQWULHVKDYHKDG
WKHRSSRVLWHH[SHULHQFH1HZ=HDODQG&DQDGD
6ZHGHQ1RUZD\DQG$XVWUDOLDKDYHDOOUHFRUGHG
UHODWLYHO\IDVWSURSHUW\SULFHJURZWKDQGUDSLG
FUHGLWH[SDQVLRQVLQFH0RUHRYHUSURSHUW\
SULFHVDUHHOHYDWHGLQFRPSDULVRQWRWKHLU
KLVWRULFDODYHUDJHDQGKRXVHKROGGHEWLVKLJK
:KLOHSURSHUW\SULFHJURZWKKDVVORZHGGRZQ
80
WKHUHIRUHFDXVHORFDOVWUHVVVLWXDWLRQV7KDWVDLG
ULVNVVWHPPLQJIURPWKHVHPDUNHWVDUHTXLWH
OLPLWHGIRUWKHJOREDOHFRQRP\LQRXUYLHZ7KH
ɇYHHFRQRPLHVUHSUHVHQWRQO\DURXQGRI
JOREDO*'3DQGDFFRUGLQJWRGDWDIURPWKH
%DQNIRU,QWHUQDWLRQDO6HWWOHPHQWVOHVVWKDQ
RIJOREDOKRXVHKROGGHEW0RUHRYHUWKHLU
UHVSHFWLYHKRXVLQJPDUNHWVDUHXQOLNHO\WREH
VWURQJO\FRUUHODWHG7KHULVNVDUHWKHUHIRUH
FRQFHQWUDWHGDWWKHUHJLRQDORUQDWLRQDOOHYHO
A closer look at Germany, Switzerland
and the UK
:KLOHWKHLUGDWDVWDQGRXWOHVVSURPLQHQWO\WKUHH
PDUNHWVGHVHUYHFORVHUDWWHQWLRQLQRXUYLHZ
7KHɇUVWLV*HUPDQ\ZKLFKKDVDOVRH[SHULHQFHG
DPDUNHGUHDOHVWDWHERRPLQUHFHQW\HDUVDV
LQWHUHVWUDWHVGURSSHGVKDUSO\LQWKHZDNHRIWKH
(XUR]RQHFULVLV7KDWVDLGUHDOHVWDWHYDOXDWLRQV
DUHVWLOOPXFKOHVVVWUHWFKHGWKDQLQRWKHU
FRXQWULHVWKDWH[SHULHQFHGVXFKERRPVQRW
OHDVWEHFDXVHWKH*HUPDQPDUNHWKDGEHHQ
VWDJQDQWIRUPDQ\\HDUVEHIRUH0RUHRYHU
Figure 1: Both credit growth and property price growth have slowed down

1RPLQDOSURSHUW\SULFHVFRPSRXQGDQQXDOJURZWKUDWHLQ
















1RPLQDOFUHGLWJURZWKFRPSRXQGDQQXDOJURZWKUDWHLQ

                 

2009-2017 2004-2007 /LQHDU /LQHDU

6DPSOH$XVWUDOLD$XVWULD%HOJLXP&DQDGD'HQPDUN)LQODQG)UDQFH*HUPDQ\*UHHFH+RQJ.RQJ,UHODQG,VUDHO,WDO\-DSDQ.RUHD/X[HPERXUJ1HWKHUODQGV1HZ
=HDODQG1RUZD\3RUWXJDO6LQJDSRUH6SDLQ6ZHGHQ6ZLW]HUODQG8.86$H[FO,UHODQG/X[HPERXUJ*UHHFH6SDLQ3RUWXJDO-DSDQ)LQODQG%HOJLXP
6RXUFH%,6&UHGLW6XLVVH

)LJXUH6LJQLɇFDQWGLYHUJHQFHVLQWKHHYROXWLRQRIKRXVLQJDIIRUGDELOLW\
,QGH[ 

160

140

120

100

80

60

40

20

0
1RUZD\

)LQODQG

Japan
,VUDHO

1HZ=HDODQG

3RUWXJDO

Spain
$XVWUDOLD

6ZLW]HUODQG

8QLWHG.LQJGRP

*HUPDQ\

'HQPDUN

,UHODQG
,WDO\
)UDQFH

*UHHFH
Sweden

&DQDGD

United States

%HOJLXP
$XVWULD

1HWKHUODQGV

.RUHD

+RXVHSULFHVWR*'3SHUFDSLWD 2008

6RXUFH%,62(&'&UHGLW6XLVVH

Assessing Global Debt 81

KRXVHKROGGHEWPHWULFVDUHYHU\PRGHUDWHE\
LQWHUQDWLRQDOVWDQGDUGV1HYHUWKHOHVVLIWKH
*HUPDQPDUNHWZHUHWRWXUQGRZQFRQWUDU\WR
RXUH[SHFWDWLRQVWKHHIIHFWVZRXOGRIFRXUVH
EHIHOWEH\RQG*HUPDQ\JLYHQLWVFHQWUDOUROH
LQWKH(XUR]RQH
7KHVHFRQGPDUNHWLV6ZLW]HUODQG7KH6ZLVV
SURSHUW\PDUNHWKDVH[SHULHQFHGDQDOPRVW
XQLQWHUUXSWHGXSF\FOHVLQFHGULYHQE\D
FRPELQDWLRQRIVWURQJLPPLJUDWLRQDQGHPSOR\-
PHQWDVZHOODVWKHGHFOLQHLQLQWHUHVWUDWHV
GXULQJPRVWRIWKHSHULRG6RPHYDOXDWLRQ
LQGLFDWRUVVXFKDVWKHUDWLRRIFKDQJHVLQ
SURSHUW\SULFHVUHODWLYHWR*'3SHUFDSLWDDUH
FOHDUO\VWUHWFKHG0RUHRYHU6ZLVVKRXVHKROGV
KDYHWKHKLJKHVWGHEWWR*'3UDWLRLQRXU
VDPSOHDQGFUHGLWLVVWLOOJURZLQJDOEHLWQR
ORQJHUDWUDWHVWKDWVLJQLɇFDQWO\H[FHHG*'3
JURZWK$WWKHVDPHWLPHDIIRUGDELOLW\PHDVXUHV
VXFKDVWKHUDWLRRIKRXVHSULFHVWRUHQWV
UHPDLQVXSSRUWLYHDQGDQ\VLJQLɇFDQWEDFNXS
LQLQWHUHVWUDWHVVHHPVTXLWHXQOLNHO\LQWKH
IRUHVHHDEOHIXWXUH0RUHRYHUPRVWPRUWJDJHV
LQ6ZLW]HUODQGDUHDWɇ[HGUDWHVVRWKDWWKH
LPSDFWRIULVLQJUDWHVRQKRXVHKROGH[SHQGLWXUH
ZRXOGEHGHOD\HG7KHELJJHVWULVNWRWKH6ZLVV
SURSHUW\PDUNHWVWHPVPRUHIURPDGHFOLQHLQ
JOREDODQG6ZLVVHFRQRPLFDFWLYLW\DQGD
UHGXFWLRQRILPPLJUDWLRQ+RZHYHUHYHQLI
SURSHUW\YDOXHVZHUHWRGHFOLQHZHZRXOGQRW
H[SHFWDFULVLVOLNHGHYHORSPHQW,QGHEWHG
KRXVHKROGVZRXOGWHQGWRUHGXFHVSHQGLQJ
LQVWHDGWKXVZHDNHQLQJWKHHFRQRP\$FWXDO
GHIDXOWVRILQGLYLGXDOKRXVHKROGVDUHXQOLNHO\WR
RFFXUWRDQ\PHDQLQJIXOH[WHQWDZHYHQLQWKH
UHDOHVWDWHFULVLVRIWKHHDUO\VVXFK
GHIDXOWVZHUHUDUHDOWKRXJKWKHRYHUDOOORVVHV
RIWKHEDQNLQJV\VWHPVWHPPLQJIURPWKH
GRZQWXUQLQEXVLQHVVSURSHUWLHVDPRXQWHGWR
RI*'3DYDOXHVLPLODUWRWKHORVVHV
JHQHUDWHGE\WKH86VXESULPHFULVLV
5LVNVDUHFXUUHQWO\KLJKHULQWKHDUHDRIUHQWDO
DSDUWPHQWVZKHUHQHJDWLYHLQWHUHVWUDWHVKDYH
WULJJHUHGDVXUJHRILQYHVWPHQWDQGDVD
UHVXOWRYHUVXSSO\9DFDQF\UDWHVFRQWLQXHWR
ULVHDVWKHSLSHOLQHRIFRQVWUXFWLRQSURMHFWV
UHPDLQVHOHYDWHG$WWKHVDPHWLPHFDSLWDOL]D-
WLRQUDWHVDUHDWYHU\ORZOHYHOVRIDZDQG
ZRXOGLQFUHDVHLQWKHFDVHRIKLJKHULQWHUHVW
UDWHV7KLVZRXOGPHDQORZHUSURSHUW\YDOXHV
7KDWVDLGPXFKRIWKLVLQYHVWPHQWZDV
XQGHUWDNHQE\LQVWLWXWLRQDOLQYHVWRUVVXFKDV
SHQVLRQIXQGVDQGLQVXUDQFHFRPSDQLHVZLWK
YHU\OLPLWHGLIDQ\OHYHUDJH)RUFRPPHUFLDO
UHDOHVWDWHSURSHUWLHVZKHUHYDOXHVUHDFW
PXFKPRUHVWURQJO\WRɈXFWXDWLRQVLQWKH
EXVLQHVVF\FOHWKDQLQUHVLGHQWLDOUHDOHVWDWH
ZHZRXOGVHHVRPHGRZQVLGHULVNVLQWKH
HYHQWRIDQHFRQRPLFGRZQWXUQLQOLJKWRI
KLJKHUYDFDQF\UDWHVLQUHFHQW\HDUV+RZHYHU
GDWDLQ+WHQGHGWRSRLQWPRUHWRD
82
VWDELOL]DWLRQRIWKLVPDUNHWVHJPHQW0RUHRYHU
OHYHUDJHLVDOVROLPLWHGKHUHLQFOXGLQJIRUWKH
YDULRXVUHDOHVWDWHIXQGV
/DVWO\LQWKH8.YDOXDWLRQVRIUHVLGHQWLDOSURSHUW\
DUHLQXQFRPIRUWDEOHWHUULWRU\FRQVLGHULQJWKHULVNV
HPDQDWLQJIURP%UH[LW7KDWVDLGWKHRYHUDOO8.
KRXVLQJVXSSO\LVVWLOOODJJLQJLQGHPDQGQRW
OHDVWGXHWRUHVWULFWLYHEXLOGLQJUHJXODWLRQV
0RUHRYHURYHUYDOXDWLRQLVODUJHO\FRQFHQWUDWHG
LQSDUWVRI/RQGRQZKHUHKRXVHSULFHVKDYH
DOUHDG\VWDUWHGWRFRUUHFWGRZQZDUG
7KHVLWXDWLRQLVPXFKPRUHGLIɇFXOWWRDVVHVVLQ
HPHUJLQJHFRQRPLHVGXHWRWKHODFNRISUHFLVH
GDWD%XWLQJHQHUDOGHEWOHYHOVRISURSHUW\
RZQHUVDUHORZHUWKDQLQDGYDQFHGHFRQRPLHV
PLWLJDWLQJWKHULVNVDVVRFLDWHGZLWKUHDOHVWDWH
7KDWVDLGWKHVWURQJJURZWKRIKRXVHKROG
ERUURZLQJLQ&KLQDFRXOGEHDULVNVKRXOGDVVHW
YDOXHVIDOOIRUDSURORQJHGSHULRG,QVRPH
UHJLRQVRYHUVXSSO\FRXOGOHDGWRVXEVWDQWLDO
SULFHFRUUHFWLRQV0RUHRYHULQUHFHQW\HDUV
&KLQHVHKRXVHKROGVKDYHDOVRERUURZHGVLJQLɇ-
FDQWO\DQGWKHEXUGHQIURPGHEWVHUYLFHKDV
ULVHQVLJQLɇFDQWO\$IXOO\ɈHGJHGGHEWFULVLV
VHHPVXQOLNHO\KRZHYHUDVPXFKRIWKHFUHGLW
KDVHIIHFWLYHO\EHHQSURYLGHGE\VWDWHRZQHG
EDQNV7KHLPSDFWRIDIXUWKHUGRZQWXUQLQWKH
UHDOHVWDWHVHFWRUZRXOGWKXVERRVWJRYHUQPHQW
OLDELOLWLHVDQGPLJKWDOVRFRQVWUDLQFRQVXPHU
VSHQGLQJ:HGLVFXVVWKHGHEWVLWXDWLRQLQ&KLQD
LQJUHDWHUGHWDLOLQFKDSWHU
Evaluating stability risks from the
creditor’s perspective
5HDOHVWDWHɇQDQFHPDNHVXSDVLJQLɇFDQWSRUWLRQ
RIRYHUDOOOHQGLQJLQWKHHFRQRP\+HQFHVLJQLɇ-
FDQWɈXFWXDWLRQVRIUHDOHVWDWHSULFHVFDQKDYHD
PDMRULPSDFWRQWKHEDODQFHVKHHWVRIɇQDQFLDO
LQVWLWXWLRQVDVZHOODVLQVWLWXWLRQDODQGSULYDWH
LQYHVWRUVDQGLQH[WUHPHVLWXDWLRQVXQGHUPLQH
RYHUDOOɇQDQFLDOVWDELOLW\+RZHYHUWKHIDFWWKDW
UHDOHVWDWHUHODWHGGHEWLVYHU\KLJKVLPSO\VKRZV
WKDWUHDOHVWDWHDVVHWVDUHKXJHDVZHOOUHDO
HVWDWHLVWKHODUJHVWDVVHWFODVVLQWKHZRUOG$W
WKHHQGRIWKHWRWDOYDOXHRIUHDOHVWDWH
JOREDOO\VWRRGDWDURXQG86'WULOOLRQDFFRUG-
LQJWKHHVWLPDWHVE\6DYLOOV1DQLQWHUQDWLRQDOUHDO
HVWDWHDGYLVRU\ɇUP7KHFRUUHVSRQGLQJJOREDO
YDOXHIRUVWRFNVDQGERQGVZDVDURXQG86'
WULOOLRQDQG86'WULOOLRQUHVSHFWLYHO\ZKLOH
JOREDO*'3ZDVDW86'WULOOLRQ0RUHRYHUWKH
IDFWWKDWUHDOHVWDWHLVXQGHUQRUPDOFLUFXPVWDQF-
HVDUHODWLYHO\VDIHǷUHDOǸDVVHWFODVVHQFRXUDJHV
OHQGLQJDJDLQVWWKHVHDVVHWV5HVLGHQWLDOUHDO
HVWDWHGHEWPDNHVXSWKHOLRQǵVVKDUHRIGHEW
RXWVWDQGLQJLQPRVWDGYDQFHGHFRQRPLHV,Q
KWWSZZZVDYLOOVFRPLPSDFWVHFRQRPLFWUHQGV
WKLQJV\RXQHHGWRNQRZDERXWWKHYDOXHRIJOREDOUHDOHV-
WDWHKWPO
Table 2: Real estate debt outstanding in the USA, UK, Germany and Switzerland at end-2017
,Q86'ELOOLRQ

"Volume of loans Residential real CRE and multi- Total real estate Total mortgage debt
outstanding at the end estate debt* family debt debt as % of GDP
of 2017 (in USD bn)"

USA    

UK  259  

*HUPDQ\  289  

6ZLW]HUODQG 733 240 973 

)RUWKH8.6ZLW]HUODQGDQG*HUPDQ\WKHEUHDNGRZQEHWZHHQUHVLGHQWLDODQGFRPPHUFLDOUHOLHVRQHVWLPDWLRQVDQGDVVXPSWLRQV 5HVLGHQWLDOUHDOHVWDWHLQFOXGHVRQO\
RZQHURFFXSLHGUHDOHVWDWH6RXUFH93')HG%R(61%

Table 2ZHEUHDNGRZQWKHDJJUHJDWHYROXPH Covered bonds and securitization markets

IRUWKH86$8.*HUPDQ\DQG6ZLW]HUODQG
7KH86$LVWKHODUJHVWDQGPRVWGHYHORSHGUHDO
HVWDWHGHEWFDSLWDOPDUNHWJOREDOO\ZLWKRYHU
86'WULOOLRQRIUHDOHVWDWHGHEWRXWVWDQGLQJ
7KH8.LVWKHODUJHVWDQGPRVWWUDQVSDUHQW
since the Global Financial Crisis
5HDOHVWDWHORDQVKDYHWUDGLWLRQDOO\EHHQ
KHOGRQWKHEDODQFHVKHHWVRIEDQNVDQGZHUH
IXQGHGE\VKRUWWHUPOLDELOLWLHVPRVWO\UHWDLO
(XURSHDQUHDOHVWDWHPDUNHWZLWKDURXQG86'
WULOOLRQRIPRUWJDJHGHEWRXWVWDQGLQJ5HODWLYH
WRLWVVL]H6ZLW]HUODQGDOVRKDVDYHU\KLJK
VWRFNRIUHDOHVWDWHUHODWHGGHEWRIDOPRVW86'
WULOOLRQRURI*'3
+LJKUHDOHVWDWHYDOXHVDVZHOODVORZLQWHUHVW
GHSRVLWVRUPRQH\PDUNHWOLDELOLWLHV:LWK
PRUWJDJHVW\SLFDOO\H[KLELWLQJORQJHUPDWXU-
LWLHVDQDVVHWDQGOLDELOLW\PLVPDWFKKDVRIWHQ
UHVXOWHG7KHPRWLYDWLRQWRUHGXFHWKLVPLV-
PDWFKKDVOHGWRWZRDOWHUQDWLYHIXQGLQJ
PRGHOVLQ(XURSHDQGWKH86$,QFRQWLQHQWDO
(XURSHEDQNVKDYHUHVRUWHGWRWKHFRQFHSWRI
UDWHVDQGWD[LQFHQWLYHVWKDWUHGXFHWKHQHHGIRU
GLUHFWDPRUWL]DWLRQRIPRUWJDJHGHEWKDYH
ERRVWHGGHEWRYHUWKH\HDUV*HUPDQ\FRQWLQXHV
WRODJPDQ\RWKHUDGYDQFHGHFRQRPLHVLQWHUPV
RIGHEWWR*'3UDWLRV%XWLQUHFHQW\HDUVWKH
ERRPLQUHVLGHQWLDOUHDOHVWDWHKDVOHGWRD
VXEVWDQWLDOLQFUHDVHLQWKHGHEWVWRFNDVZHOO
$VLPLODUO\SUHFLVHDQDO\VLVLVQRWSRVVLEOHIRU
&KLQDGXHWROLPLWHGGDWDDYDLODELOLW\+RZHYHU
HVWLPDWHVVXJJHVWWKDWRIWKH86'WULOOLRQ
FRYHUHGERQGVDOVRNQRZQDV3IDQGEULHIHWR
IXQGWKHLUPRUWJDJHOHQGLQJDFWLYLW\$WWKHHQG
RIWKHUHZDVDWRWDOYDOXHRIPRUHWKDQ
(85WULOOLRQRIVXFKERQGVRXWVWDQGLQJ
ZLWKLQVWLWXWLRQVIURP*HUPDQ\'HQPDUN
6ZLW]HUODQG8.6SDLQDVZHOODV,UHODQG
LVVXLQJFRYHUHGERQGVEDFNHGE\PRUWJDJHV
,QWKH86$DQLPSRUWDQWVKDUHRIPRUWJDJH
OHQGLQJLVIXQGHGE\PHDQVRIVHFXULWL]DWLRQV
2QHFDQJHQHUDOO\GLVWLQJXLVKEHWZHHQSULYDWH
RURI*'3RIGHEWRXWVWDQGLQJDWWKH
HQGRILQ&KLQDǵVQRQɇQDQFLDOVHFWRURQO\
DERXWSHUFHQWDJHSRLQWVZHUHRZHGE\
KRXVHKROGV6WLOOPRUWJDJHGHEWKDVEHHQULVLQJ
IDVWVLQFHWKHɇQDQFLDOFULVLVHVSHFLDOO\LQXUEDQ
VHFWRUVHFXULWL]DWLRQVZKHUHLQYHVWRUVDUHIXOO\
H[SRVHGQRWMXVWWRLQWHUHVWUDWHDQGSUHSD\PHQW
ULVNVEXWDOVRWRPRUWJDJHORVVHVDQGFUHGLW
EDFNHGE\H[SOLFLWRULPSOLFLWJRYHUQPHQWDO
JXDUDQWHHV7KHODWWHUDOVRNQRZQDVDJHQF\
DUHDV0RUWJDJHGHEWQRZDPRXQWVWRDERXW PRUWJDJHEDFNHGVHFXULWLHV0%6DUHW\SLFDOO\
RIXUEDQGLVSRVDEOHLQFRPHDQGLQWHUHVW LVVXHGE\JRYHUQPHQWUHODWHGHQWLWLHVVXFKDV
SD\PHQWVDVDVKDUHRIGLVSRVDEOHLQFRPHKDYH )DQQLH0DHRU)UHGG\0DF
DOVRLQFUHDVHGVLJQLɇFDQWO\7KDWVDLGDVLQRWKHU
FRXQWULHVWKHULVNRIGHIDXOWLVDUJXDEO\KLJKHULQ
RWKHUVHJPHQWVHJDPRQJSURSHUW\GHYHORSHUV
WKDWDUHKLJKO\OHYHUDJHG

Assessing Global Debt 83

Figure 3: Evolution of mortgage securitization issuances
,Q86'ELOOLRQ

3000

2500

2000

1500

1000

500

0
2000 2002 2004 2006 2008 2010 2012 2014 2016

86&0%6 861RQDJHQF\5HVLGHQWLDO (XURSHDQ&0%6 (XURSHDQ50%6 86$JHQF\VHFXULWL]DWLRQV

6RXUFH$VVRFLDWLRQIRU)LQDQFLDO0DUNHWVLQ(XURSH$)0(6HFXULWLHV,QGXVWU\DQG)LQDQFLDO0DUNHWV$VVRFLDWLRQ6,)0$

Figure 3VKRZVWKHHYROXWLRQRIDQQXDO PDQ\86EDQNVODUJHO\IXQGWKHRULJLQDWLRQRI

LVVXDQFHYROXPHVRISULYDWHDQGDJHQF\ UHVLGHQWLDOPRUWJDJHVYLDWKHVXEVHTXHQWVDOH
VHFXULWL]DWLRQV3ULYDWHPRUWJDJHVHFXULWL]DWLRQ WRWKHJRYHUQPHQWVSRQVRUHGHQWHUSULVHV
JUHZUDSLGO\LQWKH\HDUVEHIRUHWKH*OREDO *6(V
)LQDQFLDO&ULVLVWKHPRVWGRPLQDQWHYROXWLRQ
ZDVWKHVWURQJULVHLQWKHLVVXDQFHRISULYDWH $VQRWHGRQSDJHVKDGRZEDQNVKDYH
ODEHOUHVLGHQWLDOPRUWJDJHVHFXULWLHVZKLFK DOVRH[SDQGHGVWURQJO\LQWKHORZHULQFRPH
RYHUWRRNWKDWRIDJHQFLHVLQDQG )HGHUDO+RXVLQJ$GPLQLVWUDWLRQ)+$
7KHOLRQǵVVKDUHRIWKRVHRULJLQDWLRQVZDV JXDUDQWHHGVHJPHQW$JHQF\0%6ZHUHDOVR
EDFNHGE\ORZHUTXDOLW\ǷVXESULPHǸDQGǷ$OW$Ǹ
PRUWJDJHVZKHUHXQGHUZULWLQJVWDQGDUGV
GHWHULRUDWHGPDVVLYHO\EHWZHHQDQG
6HFXULWL]DWLRQVDOVRVSUHDGWR(XURSH
$IWHULVVXDQFHRISULYDWHVHFWRUVHFXUL-
WL]DWLRQVYLUWXDOO\FROODSVHG2QWKHRQHKDQG
EDQNVEHFDPHPRUHULVNDYHUVH2QWKHRWKHU
KDQGVXEVHTXHQWEDQNLQJDQGLQVXUDQFH
PDUNHWUHJXODWLRQZDVLQWURGXFHGWKDWUHGXFHG
WKHLQFHQWLYHVIRUVHFXULWL]LQJSULYDWHO\LVVXHG
PRUWJDJHV2YHUWKHODVWWKUHH\HDUV86
FRPPHUFLDOPRUWJDJHEDFNHGVHFXULW\
VXSSRUWHGE\86)HGHUDO5HVHUYH)HG
SXUFKDVHVGXULQJLWV4(SURJUDPLQPLG
WKH)HGKHOG86'WULOOLRQRIWKH
WRWDODPRXQWRIRXWVWDQGLQJDJHQF\VHFXULWL]D-
WLRQVRI86'WULOOLRQ(IIHFWLYHO\DVLJQLIL-
FDQWVKDUHRIUHDOHVWDWHUHODWHGUHVLGHQWLDO
GHEWULVNKDVEHHQWUDQVIHUUHGIURPWKHSULYDWH
VHFWRUWRWKH86JRYHUQPHQW7KDWVDLGDIWHU
KDYLQJVXIIHUHGKHDY\ORVVHVLQWKHILQDQFLDO
FULVLVWKH*6(VKDYHEHFRPHLQFUHDVLQJO\
SURILWDEOHDQGQRORQJHUUHSUHVHQWDPDMRU
EXUGHQRQWKHSXEOLFVHFWRU
&0%6DQGSULYDWHODEHOUHVLGHQWLDOPRUW- ,Q(XURSHPRUWJDJHVHFXULWL]DWLRQZDVHYHQPRUH
JDJHEDFNHGVHFXULW\50%6LVVXDQFH
YROXPHVKDYHVWDUWHGWRLQFUHDVHDJDLQEXW
WKHLVVXDQFHYROXPHVLQERWKVHJPHQWVVWLOO
UHDFKHGRQO\DURXQG86'ELOOLRQLQ
0HDQZKLOH86DJHQF\VHFXULWL]DWLRQVKDYH
JDLQHGPDUNHWVKDUHVLQFH,QIDFW
84
PDUJLQDOL]HGDVEDQNVVKLIWHGEDFNWRWUDGLWLRQDO
PRUWJDJHOHQGLQJ,QDURXQG86'ELOOLRQ
RIUHVLGHQWLDOPRUWJDJHVHFXULWL]DWLRQVZHUHSODFHG
ZLWKLQYHVWRUV&0%6LVVXDQFHZDVRQO\DW86'
ELOOLRQLQDOWKRXJKVRPHLQYHVWPHQW
EDQNVWULHGWRUHODXQFKWKHPDUNHWLQ
Figure 4: Private real estate debt funds are a growing segment
Ƿ'U\SRZGHUǸLQ86'ELOOLRQ

250

200

150

100

50

0
2000 2002 2004 2006 2008 2010 2012 2014 2016 Sep-18

3ULYDWH5((TXLW\)XQGV 3ULYDWH5HDO(VWDWH'HEW)XQGV

6RXUFH3UHTLQ

Quality improvement of lending instruments PRUWJDJHVKDYHWLJKWHQHGLQUHFHQW\HDUV$WWKH

HQGRI+WKHPDUJLQVRQVHQLRUORDQVDW
0RUHUHVWULFWLYHɇQDQFLDOUHJXODWLRQDQGUHGXFHG /79VEDFNHGE\SULPHFRPPHUFLDOUHDOHVWDWH
ULVNDSSHWLWHRIEDQNVVLJQLɇFDQWO\LPSDFWHGGHEW
XQGHUZULWLQJ7KH86DJHQFLHVLQSDUWLFXODU
KDYHWLJKWHQHGWKHLUXQGHUZULWLQJVWDQGDUGVVLQFH
WKHFULVLV:LWKWKHVKDUHRIDJHQF\0%6ULVLQJ
WKHTXDOLW\RIGHEWKDVWKXVLQFUHDVHG,QPDQ\
RWKHUFRXQWULHVWKDWKDGH[SHULHQFHGSUREOHPVLQ
UHVLGHQWLDOUHDOHVWDWHVXFKDV6SDLQ,UHODQGDQG
WKH8.XQGHUZULWLQJVWDQGDUGVKDYHEHHQ
VLJQLɇFDQWO\WLJKWHQHGDVZHOO
)RUFRPPHUFLDOUHDOHVWDWHLQWKH86$DQG
(XURSHZHDOVRREVHUYHDWLJKWHQLQJLQXQGHU-
ZULWLQJVWDQGDUGV0D[LPXPORDQWRYDOXHUDWLRV
DUHW\SLFDOO\DZORZHUWKDQEHIRUHWKH
*OREDO)LQDQFLDO&ULVLVDQGGHEWVHUYLFHFRYHUDJH
UDWLRVDUHQRZVXEVWDQWLDOO\KLJKHU0RVWEDQNV
RQO\RULJLQDWHFRPPHUFLDOPRUWJDJHVXSWR
DWFHQWUDOEXVLQHVVGLVWULFW&%'ORFDWLRQVZHUHDW
RQO\EDVLVSRLQWVLQ*HUPDQ\EDVLVSRLQWV
LQ)UDQFHDQGWKH1HWKHUODQGVYHUVXVEDVLV
SRLQWVLQWKH8.DQG86$LHWKH\DUHQRWPXFK
KLJKHUWKDQWKHGHSUHVVHGPDUJLQVRIEHORZ
EDVLVSRLQWVWKDWZHUHREVHUYHGLQPDQ\FRXQWULHV
EHIRUHWKH*OREDO)LQDQFLDO&ULVLV+RZHYHUZKLOH
WKHVHWLJKWVSUHDGVVXJJHVWWKDWUHWXUQVZLOOEH
PXFKORZHUJRLQJIRUZDUGWKH\GRQRWQHFHVVDULO\
LQGLFDWHWKHULVNRIDPDMRUVHWEDFNRUFULVLV
+LJKHUSULFHVLQWKHORZHU/79VHJPHQWKDYH
FUHDWHGDPDUNHWSRWHQWLDOIRUQRQOLVWHGSULYDWH
UHDOHVWDWHGHEWIXQGVZKLFKDUHVLPLODULQ
VWUXFWXUHWRSULYDWHUHDOHVWDWHHTXLW\IXQGV
7KHLUDVVHWVDUHFRPPHUFLDOUHDOHVWDWHORDQV
ZLWKGLIIHUHQWULVNSURɇOHVVXFKDVVHQLRU
ORDQWRYDOXH/79UDWLRVRIRU VHFXUHGPRUWJDJHVMXQLRUPRUWJDJHVZKROH
GHSHQGLQJRQWKHFRXQWU\7KH\KDYHDOVREHFRPH ORDQVRUPH]]DQLQHGHEW7KHUHH[LVWERWKGHEW
PRUHVHOHFWLYHUHJDUGLQJWKHORFDWLRQEXLOGLQJ IXQGVZLWKKLJKLQWHUQDOUDWHRIUHWXUQ,55
FKDUDFWHULVWLFVDVZHOODVFUHGLWULVNVRIWKHWHQDQWV WDUJHWVRIRYHUDQGORZULVNIXQGVWDUJHWLQJ
ORZGLVWULEXWLRQ\LHOGVRUVSHFLɇFVSUHDGOHYHOV
7KHGHFOLQHLQ/79VKDVOLPLWHGLVVXDQFHDQG :KLOHWKHVHIXQGVKDYHJURZQLQSDVW\HDUVDQG
UHGXFHGULVNVLHUDLVHGWKHTXDOLW\RIGHEW DUHOLNHO\WRFRQWLQXHWRJURZLQWKHDEVHQFHRID
0HDQZKLOHSULFHVKDYHLQFUHDVHGDQGPDUJLQV FULVLVWKHLUVL]HLVVWLOOPRGHUDWHDQGIDUORZHUWKDQ
VSUHDGVRYHUVZDSUDWHVIRUVHQLRUVHFXUHG SULYDWHUHDOHVWDWHHTXLW\IXQGVVHHFigure 4

Assessing Global Debt 85

Risks also reduced in commercial real
estate lending
'HVSLWHWKHIDFWWKDWWKHɇQDQFLDOFULVLVZDV
WULJJHUHGE\VXESULPHOHQGLQJIRUUHVLGHQWLDOUHDO
HVWDWHLWZDVLQPRVWFDVHVWKHLUH[SRVXUHWR
FRPPHUFLDOUHDOHVWDWHWKDWEURXJKWGRZQPRUH
WKDQVPDOOHUUHJLRQDO86EDQNVLQWKH
FRXUVHRIWKHɇQDQFLDOFULVLV2
:LWKFRPPHUFLDOUHDOHVWDWHSULFHVIDOOLQJE\
PRUHWKDQIURPWKHSHDNLQWRWKH
WURXJKLQPDQ\FRPPHUFLDOUHDOHVWDWH
DQGFRQVWUXFWLRQSURMHFWORDQVEHFDPHǷWR[LFǸ
+RZHYHUIURPRQZDUG86FRPPHUFLDO
UHDOHVWDWHSULFHVVWDJHGDVWURQJUHFRYHU\
WKDWJHQHUDWHGGRXEOHGLJLWWRWDOUHWXUQVIRU
LQYHVWRUVEHWZHHQDQG6LQFH
Less leverage in commercial real estate
as well
)LQDOO\WKHFXUUHQWF\FOHLQFRPPHUFLDOUHDO
HVWDWHGLIIHUVFRQVLGHUDEO\IURPWKHODVWRQH
,QWKHFXUUHQWF\FOHEX\HUVVXFKDVSHQVLRQ
IXQGVVRYHUHLJQZHDOWKIXQGVRURWKHUVRXUFHV
RILQVWLWXWLRQDOFDSLWDOKDYHGRPLQDWHGWUDQVDF-
WLRQDFWLYLW\DQGPDQ\WUDQVDFWLRQVKDYHEHHQ
FRQFOXGHGZLWKRXWUHVRUWWRGHEW7KHULVLQJ
DOORFDWLRQRIWKHVHLQYHVWRUVWRUHDOHVWDWHLVWKH
FRQVHTXHQFHRIDODFNRIUHWXUQWKDWFDQEH
JHQHUDWHGZLWKWUDGLWLRQDOɇ[HGLQFRPHDVVHWV
EXWLWLVQRWGXHWRWKHVHDUFKIRUOHYHUHG
UHWXUQV,WWKHUHIRUHDOVRVHHPVOLNHO\WRXVWKDW
ZKHQWKHF\FOHWXUQVWKHSRWHQWLDOGHFOLQHLQ
YDOXHZLOOEHVKDOORZHU0RUHRYHULWVHHPVOLNHO\
WKDWHTXLW\LQYHVWRUVUDWKHUWKDQWUDGLWLRQDO
WKHQ86UHWXUQVKDYHPRGHUDWHGWRDURXQG
SD,Q(XURSHFRPPHUFLDOUHDOHVWDWH
PDUNHWVHVVHQWLDOO\VXIIHUHGWZRVHWEDFNV
ɇUVWFRPPHUFLDOUHDOHVWDWHSULFHVZHDNHQHG
GXHWRWKHHIIHFWVRIWKHɇQDQFLDOFULVLVDOEHLW
WRDOHVVHUH[WHQWWKDQLQWKH86$$VHFRQG
GLSZDVFDXVHGLQDZE\WKHHXURFULVLV
HVSHFLDOO\LQ6RXWKHUQ(XURSH,UHODQGDQGWKH
1HWKHUODQGV$VDFRQVHTXHQFHWKHUHFRYHU\
LQ&RQWLQHQWDO(XURSHRQO\EHJDQWRJDWKHU
SDFHLQDQGLWFRQWLQXHVWRODJEHKLQG
WKH86F\FOH+RZHYHULQPRVWPDMRUJOREDO
JDWHZD\FLWLHVLQ(XURSH$VLDDQGWKH
OHYHUDJHGOHQGHUVZLOOEHDIIHFWHG:KLOHDVVHW
YDOXHVZRXOGVXIIHUDV\VWHPLFFULVLVHPDQDWLQJ
IURPUHDOHVWDWHWKXVVHHPVIDLUO\XQOLNHO\WRXV
,PSRUWDQWO\DPDMRUULVHLQLQWHUHVWUDWHVDOVR
ORRNVXQOLNHO\IURPWKHFXUUHQWYDQWDJHSRLQW
7KHORZPDUJLQVIRUORZ/79GHEWVXJJHVWRQ
WKHRWKHUKDQGWKDWWKHUHLVQRWPXFKYDOXHOHIW
IRULQYHVWRUVLQWKLVVHJPHQW0RUHRYHUZH
EHOLHYHLQYHVWRUVDUHQRWDGHTXDWHO\FRPSHQ-
VDWHGIRUWKHODFNRIOLTXLGLW\&RQYHUVHO\WKHUH
PD\EHRSSRUWXQLWLHVLQKLJKHUULVNVHJPHQWV
VXFKDVVRFDOOHGǷZKROHORDQVǸRUǷVWUHWFK
VHQLRUPRUWJDJHVǸZKHUH/79VJRXSWRD
$PHULFDVWKHSULFHVRIRIɇFHSURSHUWLHVKDYH PD[LPXPRIKHUHPDUJLQVDUHVRPH-
VLJQLɇFDQWO\VXUSDVVHGWKHOHYHOVRIWKHODVW ZKDWKLJKHUDOVREHFDXVHWKHUHLVOHVVFRPSH-
SHDNZKLOH\LHOGVKDYHUHDFKHGDOOWLPHORZV WLWLRQLQWKLVVHJPHQW,IZHDUHFRUUHFWLQVD\LQJ
WKDWSHDNWRWURXJKORVVHVZLOOEHPRUHPXWHG
:KLOHFRPPHUFLDOUHDOHVWDWHDOVRORRNV LQWKHFXUUHQWF\FOHWKLVVHJPHQWVKRXOGQRW
RYHUYDOXHGRQDEVROXWHSULFLQJDQG\LHOG VXIIHUVLJQLɇFDQWVKRUWIDOOV
OHYHOVWKHUHODWLYHYDOXDWLRQVDUHJHQHUDOO\
OHVVVWUHWFKHGZLWKULVNSUHPLXPVVWLOOVLJQLIL-
FDQWO\DERYHWKHSRVWDYHUDJHLQ
-DSDQYDOXDWLRQVDOVRUHPDLQVXSSRUWHGE\
WKHRQJRLQJ]HURLQWHUHVWUDWHHQYLURQPHQW
'XHWROLPLWHGFRQVWUXFWLRQDFWLYLW\UHQWVKDYH
DOVRWHQGHGWREHVXSSRUWHG5LVNVDUH
JUHDWHVWLQWKRVHPDUNHWVZKHUHSURSHUW\
\LHOGVGRQRWRIIHUDFOHDUSUHPLXPYHUVXV
JRYHUQPHQWERQGVDQGZKHUHWKHUHQWDOF\FOH
LVZHDN7KLVLVLQRXUYLHZWKHFDVHLQVRPH
86FLWLHVVXFKDV1HZ<RUNDQG6DQ)UDQFLVFR
ZKHUH\LHOGVKDYHGHFOLQHGVLJQLILFDQWO\ZKLOH
LQWHUHVWUDWHVKDYHULVHQ,Q,WDO\WKHULVHLQ
WKHULVNSUHPLXPRQJRYHUQPHQWERQGVVLJQLIL-
FDQWO\UHGXFHGWKHSUHPLXPRIFRPPHUFLDO
UHDOHVWDWHLQWKHFRXUVHRIEXWJRYHUQ-
PHQWERQG\LHOGVGHFOLQHGDJDLQWRZDUGWKH
HQGRI

)RUPRUHGHWDLOVVHHWKHDEVWUDFWRIKWWSVZZZELVRUJ
SXEOZRUNSGIǷ7KHPDLQǷWR[LFǸH[SRVXUHRIWKHEDQN
IDLOXUHVZDVFUHGLWWRQRQKRXVHKROGUHDOHVWDWHERUURZHUV
QRWWUDGLWLRQDOKRPHPRUWJDJHVRUDJHQF\0%6Ǹ

86
Table 3: Real estate debt outstanding in the USA, UK, Germany and Switzerland at end-2017
,Q86'ELOOLRQ

Prime office NY Tokyo London Berlin Paris Milano Zurich

markets

Currency USD -3< *%3 (85 (85 (85 &+)

Prime office       

yield

Current office
risk premia 60 235 230 250 210 -10 240
in bp

Historical
average office 199 291 133 217 193 140 180
of risk premia

Rental market /DWHF\FOH /DWHF\FOH 2QJRLQJ )XUWKHU )XUWKHU /DWHF\FOH 6WDELOL]DWLRQ

cycle UHQWDO UHQWDOXSVLGH UHQWDOXSVLGH DIWHUUHQWDO
GHFOLQH GHFOLQH
6RXUFH30$&UHGLW6XLVVH

Assessing Global Debt 87

About the authors
Oliver Adler LV&KLHI(FRQRPLVWIRU&UHGLW
6XLVVHLQ6ZLW]HUODQGFRYHULQJERWK6ZLVV
DQGJOREDOHFRQRPLFLVVXHV+HMRLQHG&UHGLW
6XLVVHLQDIWHUDOPRVW\HDUVDW8%6
+LVZRUNH[SHULHQFHLQFOXGHVDFRQVXOWLQJ
DVVLJQPHQWDWWKH:RUOG%DQNZKHUHKH
ZRUNHGRQWKH:RUOG'HYHORSPHQW
5HSRUWRQJOREDOGHEW2OLYHU$GOHUKROGVD%
6F(FRQRPLFVGHJUHHIURPWKH/RQGRQ
6FKRRORI(FRQRPLFVDQGD3K'LQ(FRQRP-
LFVIURP&ROXPELD8QLYHUVLW\LQ1HZ<RUN
Satish Chandra AlurLLVDQLQYHVWPHQW
VWUDWHJLVWDWWKH&,2,QWHUQDWLRQDO:HDOWK
0DQDJHPHQWRIILFHLQ&UHGLW6XLVVH+HLV
SDUWRIWKH(PHUJLQJ0DUNHWV6WUDWHJ\WHDP
Florence HartmannLVDQLQYHVWPHQWVWUDWH-
JLVWLQWKH,QYHVWPHQW6WUDWHJ\ 5HVHDUFK
GHSDUWPHQWRIWKH,QWHUQDWLRQDO:HDOWK
0DQDJHPHQWGLYLVLRQEDVHGLQ=XULFK6KHLV
SDUWRIWKH(PHUJLQJ0DUNHWV5DWHV );
6WUDWHJ\WHDP6KHKROGVDQ06FLQ(FR-
QRPLFVIURPWKH8QLYHUVLW\RI%HUQ
Sylvie Golay MarkovichLV+HDGRI)LQDQFLDO
0DUNHWV6WUDWHJ\DW&UHGLW6XLVVH,QWHUQDWLRQDO
:HDOWK0DQDJHPHQW'LYLVLRQ+HUWHDPRI
DVVHWFODVVVSHFLDOLVWVLVUHVSRQVLEOHIRU
SURYLGLQJLQSXWWRWKH&UHGLW6XLVVH,QYHVWPHQW
&RPPLWWHHGHɇQLQJLQYHVWPHQWVWUDWHJLHVIRU
WKHEDQNDQGDGYLVLQJFOLHQWVDQGIURQWRIɇFHV
6\OYLHVWDUWHGKHUFDUHHUDW&UHGLW6XLVVHLQ
+HKROGVDQ06F+RQVLQ(FRQRPLFVDQG DVDQHFRQRPLVW6KHWKHQMRLQHGWKH
D%(+RQVLQ0HFKDQLFDO(QJLQHHULQJ
IURP%,763LODQL
Mariano ArrietaLV+HDGRI(PHUJLQJ
0DUNHWV)L[HG,QFRPHDQG);VWUDWHJ\DWWKH
&,2,QWHUQDWLRQDO:HDOWK0DQDJHPHQW2IILFH
LQ&UHGLW6XLVVHEDVHGLQ=XULFK+HMRLQHG
&UHGLW6XLVVHLQDVDQHPHUJLQJPDUNHW
IL[HGLQFRPHVWUDWHJLVW3ULRUWRMRLQLQJ&UHGLW
6XLVVHKHZRUNHGDWGLIIHUHQWVHOOVLGH
ILQDQFLDOLQVWLWXWLRQVLQ$UJHQWLQD+HVWXGLHG
(FRQRPLFVDQG%XVLQHVV$GPLQLVWUDWLRQDW
)L[HG,QFRPH &UHGLW5HVHDUFKWHDPɇUVWDV
DFUHGLWDQDO\VWDQGWKHQFUHGLWVWUDWHJLVW
EHIRUHKHDGLQJWKH)L[HG,QFRPH6WUDWHJ\
WHDP6KHKDVD0DVWHULQ(FRQRPLFVDQG
)LQDQFHIURPWKH8QLYHUVLW\RI6W*DOOHQDQG
LVD&KDUWHUHG)LQDQFLDO$QDO\VW
Vibhuti Mehta LVDQHFRQRPLVWDQGLQYHVW-
PHQWVWUDWHJLVWZLWKLQWKH,QWHUQDWLRQDO:HDOWK
0DQDJHPHQWGLYLVLRQRI&UHGLW6XLVVH6KHLV
FXUUHQWO\SDUWRIWKH5HDO(VWDWHDQG3ULYDWH
(TXLW\VWUDWHJ\WHDP6KHKROGVD06F
8$'(DQG$GYDQFHG)LQDQFHDW87'7LQ
%XHQRV$LUHV$UJHQWLQD
Maxime BotteronLVD6HQLRU(FRQRPLVWDW
&UHGLW6XLVVHPDLQO\FRYHULQJWKH6ZLVV
HFRQRP\+LVUHVHDUFKIRFXVLQFOXGHVPRQH-
WDU\SROLF\LQIODWLRQDQGWKHEDQNLQJV\VWHP
+HMRLQHG&UHGLW6XLVVHLQ=XULFKLQDVD
JOREDOUHDOHVWDWHDQDO\VW+HREWDLQHGD
0DVWHUǵVGHJUHHLQTXDQWLWDWLYHHFRQRPLFVDQG
ILQDQFHIURPWKH8QLYHUVLW\RI6W*DOOHQ
6ZLW]HUODQG
88
+RQVLQ(FRQRPLFVIURP%LUOD,QVWLWXWHRI
7HFKQRORJ\DQG6FLHQH%,763LODQL
Michael O’SullivanLVD0DQDJLQJ'LUHFWRURI
&UHGLW6XLVVHLQWKH3ULYDWH%DQNLQJ :HDOWK
0DQDJHPHQW'LYLVLRQEDVHGLQ=XULFK+HLV
&KLHI,QYHVWPHQW2IILFHUIRUWKH,QWHUQDWLRQDO
:HDOWK0DQDJHPHQW'LYLVLRQ+HMRLQHG
&UHGLW6XLVVHLQ-XO\IURP6WDWH6WUHHW
*OREDO0DUNHWV3ULRUWRMRLQLQJ&UHGLW6XLVVH
0LFKDHOVSHQWRYHUWHQ\HDUVDVDJOREDO
VWUDWHJLVWDWDQXPEHURIVHOOVLGHLQVWLWXWLRQV
DQGKDVDOVRWDXJKWILQDQFHDW3ULQFHWRQDQG
2[IRUG8QLYHUVLWLHV+HZDVHGXFDWHGDW
8QLYHUVLW\&ROOHJH&RUNLQ,UHODQGDQG%DOOLRO
&ROOHJHLQ2[IRUGZKHUHKHREWDLQHG03KLO
DQG'3KLOGHJUHHVDVD5KRGHV6FKRODU
Krithika SubramanianLVDPDFURVWUDWHJLVW
DWWKH&,2,QWHUQDWLRQDO:HDOWK0DQDJHPHQW
2IILFHLQ&UHGLW6XLVVH6KHLVDUHJXODU
FRQWULEXWRUWRWKH&UHGLW6XLVVH5HVHDUFK
,QVWLWXWHDQGFRDXWKRURILWVDQG
SXEOLFDWLRQVRQ*OREDOL]DWLRQDQG0XOWLSRODU
ZRUOG3ULRUWRMRLQLQJ&UHGLW6XLVVHKHUUROHV
KDYHIRFXVHGRQPDFURHFRQRPLFUHVHDUFKLQ
GLIIHUHQWLQGXVWULHVLQFOXGLQJFUHGLWUDWLQJV
DQGPDUNHWUHVHDUFK6KHLVDJROGPHGDOLVW
LQHFRQRPLFVDQGKROGVD0DVWHUǵVGHJUHH
IURPWKH8QLYHUVLW\RI0XPEDL

Zoltan SzelyesLV+HDGRI*OREDO5HDO
(VWDWH5HVHDUFKIRU&UHGLW6XLVVH$VVHW
0DQDJHPHQW*OREDO5HDO(VWDWHLQ=XULFK
+HUHMRLQHG&UHGLW6XLVVHLQ)HEUXDU\
IURPWKH6ZLVV1DWLRQDO%DQNZKHUHKHZDV
DPHPEHURIWKH([HFXWLYH0DQDJHPHQWRI
61%6WDELOLVDWLRQ)XQGDQGWKXVLQFKDUJHRI
WKHVXFFHVVIXOZLQGGRZQRIWKHEDGEDQN
FUHDWHGGXULQJWKHILQDQFLDOFULVLV3ULRUWR
WKLVKHKHOGVHYHUDOUHVHDUFKSRVLWLRQVDWWKH
61%DVZHOODV&UHGLW6XLVVH+HLV&)$DQG
&$,$FKDUWKROGHUDQGKROGVDOLFUHUSRO
GHJUHHIURPWKH8QLYHUVLW\RI%HUQ

Acknowledgments

:HZRXOGOLNHWRWKDQN'DYLG:DQJ&UHGLW
6XLVVH6HQLRU&KLQD(FRQRPLVWIRUKLV
YDOXDEOHFRPPHQWVDQGLQSXWUHJDUGLQJ
&KDSWHURQ&KLQD

:HZRXOGOLNHWRWKDQN&UHGLW6XLVVH)L[HG
,QFRPH6WUDWHJLVW-HVVLH*LVLJHUIRUKHUVXSSRUW
LQSUHSDULQJ&KDSWHURQFRUSRUDWHGHEW

Assessing Global Debt 89

General disclaimer /
important information

7KLVGRFXPHQWZDVSURGXFHGE\DQGWKHRSLQLRQV /LPLWHGDQG&UHGLW6XLVVH6HFXULWLHV(XURSH/LPLWHG

H[SUHVVHGDUHWKRVHRI&UHGLW6XLVVH*URXS$*DQGRULWV &UHGLW6XLVVH6HFXULWLHV(XURSH/LPLWHGDQG&UHGLW
DIɇOLDWHVǷ&6ǸDVRIWKHGDWHRIZULWLQJDQGDUHVXEMHFWWR 6XLVVH8./LPLWHGERWKDXWKRUL]HGE\WKH3UXGHQWLDO
FKDQJH7KLVGRFXPHQWPXVWQRWEHUHDGDVLQGHSHQGHQW 5HJXODWLRQ$XWKRULW\DQGUHJXODWHGE\WKH)LQDQFLDO
LQYHVWPHQWUHVHDUFK,WKDVEHHQSUHSDUHGZLWKWKH &RQGXFW$XWKRULW\DQGWKH3UXGHQWLDO5HJXODWLRQ$XWKRULW\
JUHDWHVWRIFDUHDQGWRWKHEHVWRILWVNQRZOHGJHDQG DUHDVVRFLDWHGEXWLQGHSHQGHQWOHJDOHQWLWLHVZLWKLQ&UHGLW
EHOLHIDQGVROHO\IRULQIRUPDWLRQSXUSRVHVDQGIRUWKHXVH 6XLVVHGermany&UHGLW6XLVVH6HFXULWLHV(XURSH
RIWKHUHFLSLHQW,WGRHVQRWFRQVWLWXWHDQRIIHURUDQ /LPLWHG1LHGHUODVVXQJ)UDQNIXUWDP0DLQUHJXODWHGE\WKH
LQYLWDWLRQE\RURQEHKDOIRI&6WRDQ\SHUVRQWREX\RUVHOO %XQGHVDQVWDOWIXHU)LQDQ]GLHQVWOHLVWXQJVDXIVLFKW
DQ\VHFXULW\RUEDQNLQJVHUYLFHDQGGRHVQRWUHOHDVHWKH Ƿ%D)LQǸUnited States and Canada&UHGLW6XLVVH
UHFLSLHQWIURPH[HUFLVLQJKLVKHURZQMXGJPHQW1RWKLQJLQ 6HFXULWLHV86$//&Switzerland&UHGLW6XLVVH$*
WKLVPDWHULDOFRQVWLWXWHVLQYHVWPHQWOHJDODFFRXQWLQJRU DXWKRUL]HGDQGUHJXODWHGE\WKH6ZLVV)LQDQFLDO0DUNHW
WD[DGYLFHRUDUHSUHVHQWDWLRQWKDWDQ\LQYHVWPHQWRU 6XSHUYLVRU\$XWKRULW\),10$Brazil%DQFRGH
VWUDWHJ\LVVXLWDEOHRUDSSURSULDWHWR\RXULQGLYLGXDO ,QYHVWLPHQWRV&UHGLW6XLVVH%UDVLO6$RULWVDIɇOLDWHV
FLUFXPVWDQFHVRURWKHUZLVHFRQVWLWXWHVDSHUVRQDO Mexico%DQFR&UHGLW6XLVVH0«[LFR6$WUDQVDFWLRQV
UHFRPPHQGDWLRQWR\RX7KHSULFHDQGYDOXHRILQYHVW- UHODWHGWRWKHVHFXULWLHVPHQWLRQHGLQWKLVUHSRUWZLOORQO\
PHQWVPHQWLRQHGDQGDQ\LQFRPHWKDWPLJKWDFFUXHPD\ EHHIIHFWHGLQFRPSOLDQFHZLWKDSSOLFDEOHUHJXODWLRQ
ɈXFWXDWHDQGPD\IDOORUULVH$Q\UHIHUHQFHWRSDVW JapanE\&UHGLW6XLVVH6HFXULWLHV-DSDQ/LPLWHG)LQDQ-
SHUIRUPDQFHLVQRWDJXLGHWRWKHIXWXUH FLDO,QVWUXPHQWV)LUP'LUHFWRU*HQHUDORI.DQWR/RFDO
)LQDQFH%XUHDX.LQVKR1RDPHPEHURI-DSDQ
7KHLQIRUPDWLRQDQGDQDO\VLVFRQWDLQHGLQWKLVGRFXPHQW 6HFXULWLHV'HDOHUV$VVRFLDWLRQ7KH)LQDQFLDO)XWXUHV
KDYHEHHQFRPSLOHGRUDUULYHGDWIURPVRXUFHVEHOLHYHGWR $VVRFLDWLRQRI-DSDQ-DSDQ,QYHVWPHQW$GYLVHUV
EHUHOLDEOHEXW&6GRHVQRWPDNHDQ\UHSUHVHQWDWLRQDVWR $VVRFLDWLRQ7\SH,,)LQDQFLDO,QVWUXPHQWV)LUPV$VVRFLD-
WKHLUDFFXUDF\RUFRPSOHWHQHVVDQGGRHVQRWDFFHSW WLRQHong Kong&UHGLW6XLVVH+RQJ.RQJ/LPLWHG
OLDELOLW\IRUDQ\ORVVDULVLQJIURPWKHXVHKHUHRI$&UHGLW Australia&UHGLW6XLVVH(TXLWLHV$XVWUDOLD/LPLWHG
6XLVVH*URXSFRPSDQ\PD\KDYHDFWHGXSRQWKH
LQIRUPDWLRQDQGDQDO\VLVFRQWDLQHGLQWKLVSXEOLFDWLRQ
EHIRUHEHLQJPDGHDYDLODEOHWRFOLHQWVRI&6,QYHVWPHQWV
LQHPHUJLQJPDUNHWVDUHVSHFXODWLYHDQGFRQVLGHUDEO\
PRUHYRODWLOHWKDQLQYHVWPHQWVLQHVWDEOLVKHGPDUNHWV
Thailand&UHGLW6XLVVH6HFXULWLHV7KDLODQG/LPLWHG
UHJXODWHGE\WKH2IɇFHRIWKH6HFXULWLHVDQG([FKDQJH
&RPPLVVLRQ7KDLODQGKDYLQJUHJLVWHUHGDGGUHVVDW
$EGXOUDKLP3ODFHWK)ORRU8QLW5DPD,95RDG
6LORP%DQJUDN%DQJNRN7KDLODQG7HO
6RPHRIWKHPDLQULVNVDUHSROLWLFDOULVNVHFRQRPLFULVNV Malaysia&UHGLW6XLVVH6HFXULWLHV0DOD\VLD6GQ
FUHGLWULVNVFXUUHQF\ULVNVDQGPDUNHWULVNV,QYHVWPHQWV %KG&UHGLW6XLVVH$*6LQJDSRUH%UDQFKIndia&UHGLW
LQIRUHLJQFXUUHQFLHVDUHVXEMHFWWRH[FKDQJHUDWH 6XLVVH6HFXULWLHV,QGLD3ULYDWH/LPLWHG&,1QR
ɈXFWXDWLRQV$Q\TXHVWLRQVDERXWWRSLFVUDLVHGLQWKLV 80+37&UHJXODWHGE\WKH6HFXULWLHV
SLHFHRU\RXULQYHVWPHQWVVKRXOGEHPDGHGLUHFWO\WR\RXU DQG([FKDQJH%RDUGRI,QGLDDV5HVHDUFK$QDO\VW
ORFDOUHODWLRQVKLSPDQDJHURURWKHUDGYLVHUV%HIRUH UHJLVWUDWLRQQR,1+DQGDV6WRFN%URNHU
HQWHULQJLQWRDQ\WUDQVDFWLRQ\RXVKRXOGFRQVLGHUWKH UHJLVWUDWLRQQR,1%,1)
VXLWDELOLW\RIWKHWUDQVDFWLRQWR\RXUSDUWLFXODUFLUFXPVWDQF- ,1%,1)KDYLQJUHJLVWHUHG
HVDQGLQGHSHQGHQWO\UHYLHZZLWK\RXUSURIHVVLRQDO DGGUHVVDWWK)ORRU&HHMD\+RXVH'U$%5RDG:RUOL
DGYLVHUVDVQHFHVVDU\WKHVSHFLɇFɇQDQFLDOULVNVDVZHOO 0XPEDL,QGLD7South
DVOHJDOUHJXODWRU\FUHGLWWD[DQGDFFRXQWLQJFRQVH- Korea&UHGLW6XLVVH6HFXULWLHV(XURSH/LPLWHG6HRXO
TXHQFHV7KLVGRFXPHQWPD\SURYLGHWKHDGGUHVVHVRIRU %UDQFKTaiwan&UHGLW6XLVVH$*7DLSHL6HFXULWLHV
FRQWDLQK\SHUOLQNVWRZHEVLWHV([FHSWWRWKHH[WHQWWR %UDQFK,QGRQHVLD37&UHGLW6XLVVH6HFXULWLHV,QGRQHVLD
ZKLFKWKHUHSRUWUHIHUVWRZHEVLWHPDWHULDORI&6&6KDV Philippines&UHGLW6XLVVH6HFXULWLHV3KLOLSSLQHV,QF
QRWUHYLHZHGDQ\VXFKVLWHDQGWDNHVQRUHVSRQVLELOLW\IRU DQGHOVHZKHUHLQWKHZRUOGE\WKHUHOHYDQWDXWKRUL]HGDIɇOL-
WKHFRQWHQWFRQWDLQHGWKHUHLQ6XFKDGGUHVVRUK\SHUOLQN DWHRIWKHDERYH
LQFOXGLQJDGGUHVVHVRUK\SHUOLQNVWR&6ǵVRZQZHEVLWH
PDWHULDOLVSURYLGHGVROHO\IRU\RXUFRQYHQLHQFHDQG
Additional regional disclaimers
LQIRUPDWLRQDQGWKHFRQWHQWRIDQ\VXFKZHEVLWHGRHVQRW
Hong Kong&UHGLW6XLVVH+RQJ.RQJ/LPLWHG
LQDQ\ZD\IRUPSDUWRIWKLVGRFXPHQW$FFHVVLQJVXFK
Ƿ&6+.ǸLVOLFHQVHGDQGUHJXODWHGE\WKH6HFXULWLHVDQG
ZHEVLWHRUIROORZLQJVXFKOLQNWKURXJKWKLVUHSRUWRU&6ǵV
)XWXUHV&RPPLVVLRQRI+RQJ.RQJXQGHUWKHODZVRI
ZHEVLWHVKDOOEHDW\RXURZQULVN
+RQJ.RQJZKLFKGLIIHUIURP$XVWUDOLDQODZV&6+./
GRHVQRWKROGDQ$XVWUDOLDQɇQDQFLDOVHUYLFHVOLFHQVH
7KLVUHSRUWLVLVVXHGDQGGLVWULEXWHGLQWKHEuropean
$)6/DQGLVH[HPSWIURPWKHUHTXLUHPHQWWRKROGDQ
Union (except Switzerland)E\&UHGLW6XLVVH8.
$)6/XQGHUWKH&RUSRUDWLRQV$FWWKH$FWXQGHU

90
&ODVV2UGHUSXEOLVKHGE\WKH$6,&LQUHVSHFWRI FOLHQWDQGPD\EHVXEMHFWWRFKDQJHVLQIXWXUHUSA7KLV
ɇQDQFLDOVHUYLFHVSURYLGHGWR$XVWUDOLDQZKROHVDOHFOLHQWV PDWHULDOLVLVVXHGDQGGLVWULEXWHGLQWKH86E\&668D
ZLWKLQWKHPHDQLQJRIVHFWLRQ*RIWKH$FW5HVHDUFK
RQ7DLZDQHVHVHFXULWLHVSURGXFHGE\&UHGLW6XLVVH$*
7DLSHL6HFXULWLHV%UDQFKKDVEHHQSUHSDUHGE\D
UHJLVWHUHG6HQLRU%XVLQHVV3HUVRQMalaysia5HVHDUFK
SURYLGHGWRUHVLGHQWVRI0DOD\VLDLVDXWKRUL]HGE\WKH
PHPEHURI1<6(),15$6,3&DQGWKH1)$DQG&668
DFFHSWVUHVSRQVLELOLW\IRULWVFRQWHQWV&OLHQWVVKRXOG
FRQWDFWDQDO\VWVDQGH[HFXWHWUDQVDFWLRQVWKURXJKD&UHGLW
6XLVVHVXEVLGLDU\RUDIɇOLDWHLQWKHLUKRPHMXULVGLFWLRQ
XQOHVVJRYHUQLQJODZSHUPLWVRWKHUZLVHEU7KLVUHSRUW
+HDGRI5HVHDUFKIRU&UHGLW6XLVVH6HFXULWLHV0DOD\VLD
6GQ%KGWRZKRPWKH\VKRXOGGLUHFWDQ\TXHULHVRQ
Singapore7KLVUHSRUWKDVEHHQSUHSDUHG
DQGLVVXHGIRUGLVWULEXWLRQLQ6LQJDSRUHWRLQVWLWXWLRQDO
LQYHVWRUVDFFUHGLWHGLQYHVWRUVDQGH[SHUWLQYHVWRUVHDFK
KDVEHHQSURGXFHGE\VXEVLGLDULHVDQGDIɇOLDWHVRI&UHGLW
6XLVVHRSHUDWLQJXQGHULWV*OREDO0DUNHWV'LYLVLRQDQGRU
,QWHUQDWLRQDO:HDOWK0DQDJHPHQW'LYLVLRQ
7KLVGRFXPHQWPD\QRWEHUHSURGXFHGHLWKHULQZKROHRU
DVGHɇQHGXQGHUWKH)LQDQFLDO$GYLVHUV5HJXODWLRQVRQO\ LQSDUWZLWKRXWWKHZULWWHQSHUPLVVLRQRIWKHDXWKRUVDQG
DQGLVDOVRGLVWULEXWHGE\&UHGLW6XLVVH$*6LQJDSRUH &UHGLW6XLVVH,WLVH[SUHVVO\QRWLQWHQGHGIRUSHUVRQV
EUDQFKWRRYHUVHDVLQYHVWRUVDVGHɇQHGXQGHUWKH ZKRGXHWRWKHLUQDWLRQDOLW\RUSODFHRIUHVLGHQFHDUHQRW
)LQDQFLDO$GYLVHUV5HJXODWLRQV%\YLUWXHRI\RXUVWDWXVDV
DQLQVWLWXWLRQDOLQYHVWRUDFFUHGLWHGLQYHVWRUH[SHUWLQYHVWRU
RURYHUVHDVLQYHVWRU&UHGLW6XLVVH$*6LQJDSRUHEUDQFK
LVH[HPSWHGIURPFRPSO\LQJZLWKFHUWDLQFRPSOLDQFH
UHTXLUHPHQWVXQGHUWKH)LQDQFLDO$GYLVHUV$FW&KDSWHU
SHUPLWWHGDFFHVVWRVXFKLQIRUPDWLRQXQGHUORFDOODZ
k&UHGLW6XLVVH*URXS$*DQGRULWVDIɇOLDWHV$OO
ULJKWVUHVHUYHG
RI6LQJDSRUHWKHǷ)$$ǸWKH)LQDQFLDO$GYLVHUV
5HJXODWLRQVDQGWKHUHOHYDQW1RWLFHVDQG*XLGHOLQHV
LVVXHGWKHUHXQGHULQUHVSHFWRIDQ\ɇQDQFLDODGYLVRU\
VHUYLFHZKLFK&UHGLW6XLVVH$*6LQJDSRUHEUDQFKPD\
SURYLGHWR\RX8$(7KLVLQIRUPDWLRQLVEHLQJGLVWULEXWHG
E\&UHGLW
6XLVVH$*',)&%UDQFKGXO\OLFHQVHGDQGUHJXODWHGE\
WKH'XEDL)LQDQFLDO6HUYLFHV$XWKRULW\Ƿ')6$Ǹ5HODWHG
ɇQDQFLDOVHUYLFHVRUSURGXFWVDUHRQO\PDGHDYDLODEOHWR
3URIHVVLRQDO&OLHQWVRU0DUNHW&RXQWHUSDUWLHVDVGHɇQHG
E\WKH')6$DQGDUHQRWLQWHQGHGIRUDQ\RWKHUSHUVRQV
&UHGLW6XLVVH$*',)&%UDQFKLVORFDWHGRQ/HYHO
(DVW7KH*DWH%XLOGLQJ',)&'XEDL8QLWHG$UDE
(PLUDWHVUK7KHSURWHFWLRQVPDGHDYDLODEOHE\WKH
)LQDQFLDO&RQGXFW$XWKRULW\DQGRUWKH3UXGHQWLDO
5HJXODWLRQ$XWKRULW\IRUUHWDLOFOLHQWVGRQRWDSSO\WR
LQYHVWPHQWVRUVHUYLFHVSURYLGHGE\DSHUVRQRXWVLGHWKH
8.QRUZLOOWKH)LQDQFLDO6HUYLFHV&RPSHQVDWLRQ6FKHPH
EHDYDLODEOHLIWKHLVVXHURIWKHLQYHVWPHQWIDLOVWRPHHWLWV
REOLJDWLRQV7RWKHH[WHQWFRPPXQLFDWHGLQWKH8QLWHG
.LQJGRPǷ8.ǸRUFDSDEOHRIKDYLQJDQHIIHFWLQWKH8.
WKLVGRFXPHQWFRQVWLWXWHVDɇQDQFLDOSURPRWLRQZKLFKKDV
EHHQDSSURYHGE\&UHGLW6XLVVH8./LPLWHGZKLFKLV
DXWKRUL]HGE\WKH3UXGHQWLDO5HJXODWLRQ$XWKRULW\DQG
UHJXODWHGE\WKH)LQDQFLDO&RQGXFW$XWKRULW\DQGWKH
3UXGHQWLDO5HJXODWLRQ$XWKRULW\IRUWKHFRQGXFWRI
LQYHVWPHQWEXVLQHVVLQWKH8.7KHUHJLVWHUHGDGGUHVVRI
&UHGLW6XLVVH8./LPLWHGLV)LYH&DERW6TXDUH/RQGRQ
(453OHDVHQRWHWKDWWKHUXOHVXQGHUWKH8.ǵV
)LQDQFLDO6HUYLFHVDQG0DUNHWV$FWUHODWLQJWRWKH
SURWHFWLRQRIUHWDLOFOLHQWVZLOOQRWEHDSSOLFDEOHWR\RXDQG
WKDWDQ\SRWHQWLDOFRPSHQVDWLRQPDGHDYDLODEOHWRǷHOLJLEOH
FODLPDQWVǸXQGHUWKH8.ǵV)LQDQFLDO6HUYLFHV&RPSHQVD-
WLRQ6FKHPHZLOODOVRQRWEHDYDLODEOHWR\RX7D[
WUHDWPHQWGHSHQGVRQWKHLQGLYLGXDOFLUFXPVWDQFHVRIHDFK

Assessing Global Debt 91

Also published by the
Research Institute

CS Global Investment Emerging Consumer CSRI Special Report: Switzerland: A Financial The CS Family 1000
Returns Yearbook 2017 Survey 2017 The Chinese Consumer Market History 6HSWHPEHU
)HEUXDU\ 0DUFK in 2017 -XQH
$SULO

The Swiss Family Global Wealth Report The Future of Politics Eradicating Extreme Summary Edition:
Business Model 2017 – Davos edition Poverty – Davos edition CS Global Investment
6HSWHPEHU 1RYHPEHU -DQXDU\ -DQXDU\ Returns Yearbook 2018
)HEUXDU\

Emerging Consumer The Future of GDP The CS Family 1000 Global Wealth Report Asia in Transition
Survey 2018 0D\ in 2018 2018 1RYHPEHU
0DUFK 6HSWHPEHU 2FWREHU

CREDIT SUISSE AG
5HVHDUFK,QVWLWXWH
3DUDGHSODW]&+=XULFK6ZLW]HUODQG
UHVHDUFKLQVWLWXWH#FUHGLWVXLVVHFRP
credit-suisse.com/researchinstitute

92