Canadian Credit Market at Risk due to Rising Debt Levels

The credit markets in Canada have increasing risks according to a major global finance group that assesses initial outlook towards the potential stress in Canadian banking system. The report of The Bank for International Settlements probes four measures intended to stir up early signs prior the emergence of financial vulnerabilities. The latest review of  Canada's credit-to-GDP gap and overall debt-service ratio were coded red, which indicates higher risks of banking crisis for the next few years. On the other hand, measures for Household Debt Service Ratio and cross-border claims to GDP have appeared to be amber.

The BIS warning signal was published while the household-debt levels in the country continued to be at record highs and housing prices continued to surge within the cities of Toronto and Vancouver since the current regulations restrained the growth rate.

Credit became a primary concern for regulators and policymakers, however, executives at major banks guaranteed shareholders about having a favorable environment and records for lending books are free from any crisis. The released BIS indicators cannot be regarded as precise and need to be interpreted carefully. Aside from Canada, both Hong Kong and China received red flags in the same categories.