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June 19, 2024

Basel Committee on Banking Supervision (BCBS) underscores heightened credit risk concerns

The BCBS, drawing from a series of supervisory workshops with private sector participants and bank supervisors on real estate and leveraged loan markets, emphasized the risks and vulnerabilities related to credit.

In the global banking sphere, the BCBS said in a recent report that: (i) the COVID-19 pandemic has exacerbated credit risk with an evident increase in house prices as well as household and corporate indebtedness; (ii) both real estate and leveraged loans are exposed to risks related to higher inflation and interest rates;
(iii) banks’ risk management practices in financing real estate and leveraged loans are generally considered adequate, however, banks should be alert to evolving risks; and (iv) supervisory authorities have responded to heightened risks through stricter supervision.