Data from the Bank for International Settlements show that, as of the first quarter of 2017, total credit to the non-financial sector (in all reporting countries) stood at 219% of GDP compared to 185% at the end of 2008.6 While the credit to households has stabilised relative to GDP, the financing extended to general government and nonfinancial corporations has steadily increased.
If unchecked, this rising trend has the potential to trigger phases of financial instability in the future, weighing on growth and undermining financial assets. In fact, in many cases the market valuations of these assets already appear elevated relative to long-run norms, which increases their vulnerability to any potential repricing of risk.