And we are using our stress tests to ensure banks’ resilience even in severely adverse business conditions. The Rise of Business Leverage Let’s start with the basic facts. Many measures confirm that the business sector has significantly increased its borrowing as the economy has expanded over the past decade. Business debt relative to the size of the economy is at historic highs.
Corporate debt relative to the book value of assets is at the upper end of its range over the past few decades (figure 1). And investment-grade corporate debt has shifted closer to the edge of speculative grade. At the moment, the business sector is quite healthy overall. Business income is strong, reflecting healthy profit margins.