Looking ahead, however, corporations could face problems absorbing further shocks to their balance sheets as net income growth could be levelling off and financing costs and leverage have continued to  4  BIS Review 75/2008  edge up over the recent past.
2 In particular, also in the euro area a fringe of highly-leveraged firms with very low profitability are expected to face much higher refinancing costs than before. As already mentioned, rating agencies currently expect an increase in default rates by European speculative-grade firms in the period ahead as shown in the left chart of slide 9.