CFO: Systemic Financial Crisis on the Horizon?
A recent article on CFO.com noted that according to the Bank for International Settlements (BIS), when the amount of credit granted by banks and nonbanks is out of proportion with economic growth, a systemic financial crisis is on the horizon.
CFO reported that the metric to watch is a country’s total credit-to-GDP ratio, according to the BIS. When this ratio is high, it reflects an unhealthy gap between economic growth and the amount of credit provided to private non-financial businesses and households.
Citing a new study released the BIS, CFO reported that “a country’s total credit-to-GDP gap is ‘a valuable early warning indicator for systemic banking crises.'”
To read the full CFO article click here.