Risks Related to EME Corporate Balance Sheets: The Role of Leverage and Currency Mismatch

13 Pages Posted: 1 Oct 2014

See all articles by Michael K.F. Chui

Michael K.F. Chui

Bank for International Settlements (BIS)

Ingo Fender

Bank for International Settlements (BIS)

Vladyslav Sushko

Bank for International Settlements (BIS) - Monetary and Economic Department

Date Written: September 2014

Abstract

Corporates in many EMEs have taken advantage of unusually easy global financial conditions to ramp up their overseas borrowing and leverage. This could expose them to increased interest rate and currency risks unless these positions are adequately hedged. The key question is whether EME corporate balance sheets have become more susceptible to shocks. Greater corporate exposures could, in turn, spill over into vulnerabilities for both local banks and the financial system more broadly. Shocks to interest or exchange rates could generate damaging feedback loops if credit risk concerns were to prevent existing bank or bond market funding from being rolled over.

JEL Classification: D21, F31, G32

Suggested Citation

Chui, Michael K.F. and Fender, Ingo and Sushko, Vladyslav, Risks Related to EME Corporate Balance Sheets: The Role of Leverage and Currency Mismatch (September 2014). BIS Quarterly Review September 2014. Available at SSRN: https://ssrn.com/abstract=2498630

Michael K.F. Chui (Contact Author)

Bank for International Settlements (BIS) ( email )

CH-4002 Basel, Basel-Stadt
Switzerland

Ingo Fender

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

HOME PAGE: http://www.bis.org

Vladyslav Sushko

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

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