The dramatic climb in corporate borrowing echoes the rise in US sub-prime mortgages that triggered the 2008 banking crisis, the BIS warns. Photograph: Reed Saxon/AP

Corporate debt is growing alarmingly leading to the next sub-prime crisis

Aminy Andawi
Market & Investment
Stocks & Bonds
Jul 02, 2019
2125
Corporate debt has brought danger to the global financial system which could to a crisis which was happened in 2008, where the financial and banking system crashed down. This situation has been issued by the world’s central banks organization.

The borrowing rate by businesses with low credit rates is now showing a dramatic rise based on the Bank for International Settlements on its annual health check of the global financial system. This situation could lead to an unstable corporate debt.

Corporations had used complex debt products to increase the level of loan, which has caused concerns for BIS’s general manager, Agustín Carstens and leads to her giving warnings towards the issue. The issue was brought up as the increasing of the leveraged loan market which has reached $3tn. While in the US and in the UK, holdings are spread out widely. Corporations with low credit scores are growing rapidly which has caused more concern more than the sovereign sectors. Moreover, Carstens also said that regulators have to stay vigilant to limit the potential impact from the slowdown in global economic growth.

The governments also got called by the BIS to boost the investment spending and pushing through businesses and tax to lessen the pressure of the central banks as a response to the slowing global economy.

Source: https://www.theguardian.com/business/2019/jun/30/corporate-debt-could-be-the-next-subprime-crisis-warns-banking-body

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