Debtor days are over as BIS calls time on world credit binge, by Mehreen Khan

From Mehreen Khan at telegraph.co.uk:

The world’s credit boom is beginning to show dangerous signs of unraveling, ushering in a period of fresh turmoil for the over-indebted global economy, the Bank of International Settlements has warned.

The globe’s top financial watchdog called time on the world’s debt binge, noting that debt issuance and cross border flows in emerging economies slowed for the first time since the aftermath of the global credit crunch at the end of last year.

With financial markets thrown into fresh paroxysms in 2016, oscillating between extremes of “hope and fear”, the over-leveraged world was finally approaching a day of reckoning, said Claudio Borio, the bank’s chief economist.

“We may not be seeing isolated bolts from the blue, but the signs of a gathering storm that has been building for a long time”, he said.

The Swiss authority – known as the “central bank of central banks” – has long rang the alarm bell over the state of global indebtedness, warning that unprecedented monetary policy was storing up problems in a world which still lumbers under weak productivity, insipid growth, and has no appetite for major reforms.

In its latest quarterly review, the BIS said some of its starkest warnings were now coming into fruition.

It noted that international securities issuance turned negative at the end of last year to the tune of -$47bn – the sharpest contraction since the third quarter of 2012. The retrenchment was largely driven by the financial sector, said the BIS.

To continue reading: Debtor days are over as BIS calls time on world credit binge