Risk warning over bank-sovereign debt loop
A steep rise in purchases of sovereign debt by banks in emerging and developing economies (EMDEs) has earned them higher profits but also leaves them more vulnerable to economic shocks, according to research by the International Monetary Fund (IMF).
In recent years, holdings of public debt by domestic banking sectors have significantly increased in EMDEs from an average of 8.2% of banks’ total assets in 2008 to 11.8% in 2016.In oil exporting EMDEs, the rise has been even sharper, with banks’ holdings of domestic sovereign debt ...
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