FLASH: BIS Warns on China, Canada, and Hong Kong Economies

Yuan2, cc Flickr David Dennis, modified, https://creativecommons.org/licenses/by-sa/2.0/


China, Canada, and Hong Kong are the major economies most at risk of a banking crisis according to a new report from the Bank of International Settlements (BIS).

This is not the first time the BIS – a financial organization co-owned by 60 of the largest central banks around the globe – has sounded the alarm on China’s financial system.

The BIS early-warning indicator (EWI) system narrows in on debt, both household and international, and weighs the numbers against 20-year rolling averages. The rationale is that aberrations in the normal boom-bust cycle like inflated asset prices can be identified before they are allowed to trigger a wider economic crisis. Thus the red flags don’t necessarily indicate an imminent crisis, but rather a potentially destabilizing aberration in a country’s long-term trend.

Here’s what the latest BIS quarterly report found:

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