Credit to the private sector as a share of GDP, minus its long-run trend
How far private credit has run ahead of its trend relative to the economy; the Basel early-warning gauge for banking crises.
The BIS computes the ratio of credit to the private non-financial sector to GDP, fits a slow-moving trend through it with a one-sided filter, and reports the difference in percentage points. A gap above 10 points is the level at which the Basel III framework calls for the maximum countercyclical capital buffer; historically, gaps of that size have preceded most banking crises.
After a crisis the gap turns deeply negative for years as the economy deleverages, which says little about current risk; the level matters when it is high, not when it is low.
On this site
- Credit-to-GDP gap China −5.1 pp Normal
- Credit-to-GDP gap Eurozone −17.1 pp Normal
- Credit-to-GDP gap India +4.3 pp Normal
- Credit-to-GDP gap Japan +5.7 pp Normal
- Credit-to-GDP gap United Kingdom −20.1 pp Normal
- Credit-to-GDP gap United States −11.3 pp Normal
Related terms
BIS · GDP · countercyclical capital buffer · pp
Sources
- Basel Committee on Banking Supervision (2010), Guidance for national authorities operating the countercyclical capital buffer
- Borio, C. and Lowe, P. (2002), Asset prices, financial and monetary stability: exploring the nexus, BIS Working Paper 114
- Bank for International Settlements, Credit-to-GDP gaps statistics