Global stability threats posed by widespread debt, leveraged loans, BIS researcher says

18 September 2018 8:09pm
A top central-bank researcher flagged “new weaknesses” in international financial stability that echo concerns raised last week about the American economy by a senior US Federal Reserve official.

Hyun Song Shin, Bank for International Settlements research chief, said total debt of companies, households and governments now tops levels before the Lehman Brothers crash a decade ago.

Asset managers chasing yield amid persistent low interest rates have invested heavily in risky bonds such as “leveraged loans” to companies already holding considerable debt, he said.

In addition, bonds from company and sovereign borrowers in emerging markets “boomed” after the financial crisis, though they are showing signs of a possible reversal, Shin said.