Risks are building in Canadian credit markets, says a key international finance group that is raising early warning signs about the potential for stress in the country’s banking system.
A new report from The Bank for International Settlements, which is owned by 60 central banks, looks at four measures that are designed to raise early alarms before financial vulnerabilities may emerge. In the latest review, two of those measures – Canada’s credit-to-GDP gap and its total debt-service ratio – are coded red, meaning they exceed a threshold that points to a higher risk of a banking crisis in the coming years.
On two other measures – the debt service ratio for households and crossborder claims to GDP – Canada surpassed a lesser threshold, triggering amber alerts.
