The Bank of International Settlements published its latest quarterly review over the weekend
Credit-to-GDP gap, according to the BIS
The BIS is often referred to as the world's central bank and their most recent study highlights that household borrowing is seen among one of the key factors that is putting China, Canada, and Hong Kong at risk of a banking crisis.
While China has taken steps to deleverage their economy, and we have also seen a slowdown (improvement against financial risks) in credit growth, the study says that China's credit-to-GDP gap cannot be taken lightly due to the sheer size of its economy.
The credit-to-GDP gap is one of the key indicators the BIS attributes to a possible financial meltdown. The study shows that China's gap has fallen over the past year, and that is something I've been highlighting for a bit as well previously that Chinese authorities are taking measures to deleverage and reduce financial risks very seriously.
As for Canada, the BIS says that maxed-out credit cards and high debt levels in the wider economy is what is putting the economy at risk for a financial bust.
You can view the full report with the charts here - if you have trouble sleeping that is.
