LENDING & CREDIT | Staff Reporter, Hong Kong

Hong Kong and China amongst the most vulnerable to a banking crisis

Hong Kong has one of the worst credit-to-GDP gaps globally.

Hong Kong and China are amongst the economies that are at the highest risk to a banking crisis, according to the Bank for International Settlements.

The BIS is a Swiss-based international organisation which aims to foster monetary and financial stability and acts as the bank for central banks.

Hong Kong has one of the worst credit-to-GDP gaps globally which is in the red at 30.7 and long beyond the acceptable threshold at 9 whilst debt service ratio falls at 6.9 which is similarly way beyond the acceptable range of 1.8. Its overheated housing market with runaway prices putting the city in bubble risk territory is also reinforcing its vulnerability to a market shock. China's credit-to-GDP gap is also in the red at 16.7 whilst DSR is at 5.1. 

Credit to GDP serves as a useful early warning indicator for a banking crisis as it measures the risk associated with credit given to households and businesses.

BIS routinely collects and analyses data to track vulnerabilities in the global financial system. These data typically include the amount of credit in an economy, house prices and borrowers’ ability to service their debts.

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