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Fitch: Global Credit Growth to Stabilise in 2017; Low Macro-Prudential Risk in Most Markets
August 25, 2017 / 9:45 AM / a month ago

Fitch: Global Credit Growth to Stabilise in 2017; Low Macro-Prudential Risk in Most Markets

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Macro-Prudential Risk Monitor - August 2017 here LONDON, August 25 (Fitch) Global credit growth in 2017 is likely to stabilise following a slowdown in 2016, but remains at a record low since the global financial crisis of 2008, says Fitch Ratings in its latest Macro-Prudential Risk Monitor. Consequently, macro-prudential risk indicators (MPI scores) continue to point towards reduced vulnerability to systemic stress in the majority of markets. Fitch estimates that global median real credit growth will be 2.5% in 2017, broadly in line with 2.8% growth in 2016. The stabilisation is driven by credit performance in emerging markets (EMs), particularly Middle East and Africa (MEA) and Latin America, which accounted for the sharp deceleration in global credit growth from 5.6% in 2015. This reflects the recovery in EM demand, underpinned by the progress commodity producers have made following the 2014-2015 terms of trade shock. Subdued credit growth is becoming more widespread. Fitch does not expect any markets to have real credit growth over 15% in 2017, with 42% of EMs and 64% of developed markets (DMs) forecast to have low but positive credit growth of up to 5% - the highest concentration since Fitch began this report series in 2005. The 2016 slowdown was driven by a marked deceleration to median credit growth of 2.9% in EMs, well below average post-global financial crisis growth of 8.4% during 2010-2015. For MEA and Latin America, median credit growth slowed to 2.8% and 2.9% respectively, while EM Europe's weak credit performance continued at 1.3%. EM Asia saw the highest credit growth at 9.9%, but this was moderate relative to 2010-2012 performance in the immediate aftermath of the global financial crisis and below double-digits for half the markets in the region. Modest credit growth continued in DMs at just above 2% for the third consecutive year, in line with the economic recovery. MPI scores are updated to reflect outturns for 2016 and coverage has been expanded to include the Maldives (MPI 1), the sovereign rating of which has been newly assigned this year. As Fitch's estimates from January 2017 were broadly in line with credit growth outturns, there are few changes. The number of EMs scoring MPI 3, indicating high vulnerability to systemic risk is unchanged at 3. These are Ethiopia, Turkey and Venezuela. Including these, there are 18 EMs for whom real credit growth exceeded 15% in two successive years in 2013-2016 (the trigger for an MPI 2 or above for EMs), up from 17 in the previous report. This is 24% of all EMs included in the report. In the developed world, Hong Kong and Macao remain on MPI 3, also unchanged from the previous report. These are two of the 10 DMs for which credit/GDP is more than 5pp above trend in a single year between 2014 and 2016 (the trigger for an MPI 2 or above for DMs), up from eight in the previous report; this is 26% of all DMs included in the report. The proportion of markets scoring MPI 1, indicating low vulnerability to systemic risk, is 76%; this is slightly down from the record high of 78% in January 2017 as Cyprus, Egypt and Switzerland move to MPI 2. However, the placid outlook for credit growth suggests this ratio will increase again in the next report, due in early 2018. At that time, the reference period for calculating MPI scores will move forward to include updated estimates for 2017. Bank Viability Rating (VR) changes have led to four Banking System Indicator (BSI) changes: El Salvador (to 'ccc' from 'b'), South Africa (to 'bb' from 'bbb') and Turkey (to 'bb' from 'bbb') have weakened; and Greece has improved (to 'ccc' from 'f'). Fitch has withdrawn the BSI indicator for Finland on insufficient coverage. This report updates the systemic risk indicators Fitch has published since 2005. It aims to identify the build-up of potential stress in banking systems due to a specific set of circumstances: rapid credit growth accompanied by bubbles in housing or equity markets, or an appreciated real exchange rate, the latter sometimes associated with asset market bubbles. The focus is therefore on only one potential source of banking system stress. The latest 'Macro-Prudential Risk Monitor' is available at 'www.fitchratings.com' or at the link above. Contact: Robert Shearman Director, Model and Operational Risk Officer, Sovereigns +44 20 3530 1759 Fitch Ratings Limited 30 North Colonnade London E14 5GN Bosco Dias Director, Financial Institutions +44 20 3530 1084 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com; Benjamin Rippey, New York, Tel: +1 646 582 4588, Email: benjamin.rippey@fitchratings.com; Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Sovereign Rating Criteria (pub. 21 Jul 2017) here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. 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Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

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