The outstanding US dollar credit to nonbank borrowers outside the US has jumped from USD 6 trillion to USD 9 trillion since the Global financial crisis. This could expose the corporates in EMEs with large forex exposure to significant interest rate and currency risks unless these positions are adequately hedged.
Greater corporate exposure could, in turn, increase vulnerabilities for both local banks and the financial system more broadly. Shocks to interest or exchange rates could generate adverse feedback loops, especially if credit risks prevented the rollover of existing bank or bond market funding.