Hong Kong amongst economies most vulnerable to banking crisis

The Asian financial centre has one of the worst credit-to-GDP gaps globally.

Hong Kong, along with China and Canada, are the economies that are at the highest risk to a banking crisis, according to the Bank for International Settlements.

The BIS is an international organisation which aims to foster monetary and financial stability and acts as a bank for central banks.

Hong Kong has one of the worst credit-to-GDP gaps globally which is in the red at 30.7 and long beyond the acceptable threshold at 9 whilst debt service ratio falls at 6.9 which is similarly way beyond the acceptable range of 1.8.

Credit to GDP serves as a useful early warning indicator for a banking crisis as it measures the risk associated with credit given to households and businesses.

The city’s rising debt levels is reinforced by overheated housing market with runaway prices in residential and commercial properties putting the city in bubble risk territory.

The Swiss-based BIS routinely collects and analyses data including credit, home prices and borrowers' ability to service debts in an effort to track vulnerabilities in the global financial system.