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The credit-to-GDP gap data set aims at quantifying the notion of “excessive credit” in a simple way. It serves as an early warning indicator for potential banking crises or severe distress.

The data set covers 44 economies, starting at earliest in 1961 and captures total borrowing from all domestic and foreign sources. The credit-to-GDP gap is defined as the difference between the credit-to-GDP ratio and its long-run trend. The trend is derived using a one-sided (ie backward-looking) Hodrick-Prescott filter.

To facilitate comparability across countries, the credit-to-GDP ratio, as published in the BIS database of total credit to the private non-financial sector, is used as input data. However, it also means that the credit-to-GDP gaps published by the BIS may differ from those used by national authorities as part of their countercyclical capital buffer decisions.

The gap indicator was adopted as a common reference point under Basel III to guide the build-up of countercyclical capital buffers. Authorities are expected, however, to apply judgment in the setting of the buffer in their jurisdiction after using the best information available to gauge the build-up of system-wide risk rather than relying mechanistically on the credit-to-GDP guide. For instance, national authorities may form their policy decisions using credit-to-GDP ratios that are based on data series that differ from the BIS series, leading to credit-to-GDP gaps that differ from those published by the BIS.

For the technical features of the data set, see "Recent enhancements to the BIS statistics", BIS Quarterly Review, September 2016. Please also refer to the Basel Committee on Banking Supervision page on the countercyclical capital buffer.

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Research and publications

Emerging markets' reliance on foreign bank credit

This article examines the importance of foreign banks in the provision of credit to emerging market borrowers. It documents this along two dimensions: the share of total credit provided and the concentration of claims from different foreign banking systems. The share of credit from foreign banks in total credit to emerging market economies has fallen since the Great Financial Crisis, but still stands at 15-20% on average, with the remainder provided by domestic banks or non-bank creditors. ...

How much income is used for debt payments? A new database for debt service ratios

Debt service ratios (DSRs) provide important information about the interactions between debt and the real economy, as they measure the amount of income used for interest payments and amortisations. Given this pivotal role, the BIS has started to produce and release aggregate DSRs for the total private non-financial sector for 32 countries from ...

How much does the private sector really borrow - a new database for total credit to the private non-financial sector

Despite their importance, data capturing total credit to the private non-financial sector are scarce. This article introduces a new BIS database that provides this information for 40 economies with, on average, more than 45 years of quarterly data, reaching back to the 1940s and 1950s in some cases. It explains the key concepts underlying the compilation of the new series, including a description of the high-level statistical criteria applied, the characteristics of the underlying series used and the statistical techniques employed. For illustration purposes, some facets of the historical evolution of total credit are explored, revealing interesting similarities and differences across countries.

Do debt service costs affect macroeconomic and financial stability?

Excessive private sector debt can undermine economic stability. In this special feature, we propose the debt service ratio (DSR) as a measure of the financial constraints imposed by private sector indebtedness, and investigate its association with recessions and financial crises. We find that the DSR prior to conomic slumps is related to the size of the subsequent output losses. Moreover, the DSR provides a very accurate early warning signal of impending systemic banking crises at horizons of up to one to two years in advance. We conclude that the DSR can serve as a useful supplementary indicator for the build-up of vulnerabilities in the real economy and financial sector.

Anchoring countercyclical capital buffers: the role of credit aggregates

We investigate the performance of different variables as anchors for setting the level of the countercyclical regulatory capital buffer requirements for banks. The gap between the ratio of credit-to-GDP and its long-term backward-looking trend performs best as an indicator for the accumulation of capital as this variable captures the build-up of system-wide vulnerabilities that typically lead to banking crises. Other indicators, such as credit spreads, are better in indicating the release phase as they are contemporaneous signals of banking sector distress that can precede a credit crunch.

FAQs

Data are released every quarter. The publication date and the latest reference period are shown in the Statistics release calendar.

The series underlying the credit-to-GDP gaps is the total credit to the private non-financial sector, as published in the "credit to the non-financial sector data set". Credit-to-GDP is calculated as the outstanding amount of debt at the end of the quarter compared with the sum of the last four quarters of nominal GDP.

The credit-to-GDP gap is defined as the difference between the credit-to-GDP ratio and its long-run trend. It captures the build-up of excessive credit in a reduced form fashion. The gap indicator was adopted as a common reference point under Basel III to guide the build-up of countercyclical capital buffers. For the characteristics of the data set, "Recent enhancements to the BIS statistics", BIS Quarterly Review, September 2016.

The trend to generate the credit-to-GDP gap is derived using a Hodrick-Prescott filter. For the technical features of the calculation, see "Recent enhancements to the BIS statistics", BIS Quarterly Review, September 2016.

The BIS uses the total credit to the private non-financial sector series as input data, which facilitates comparability across countries. This means that the credit-to-GDP gaps published by the BIS may differ from those considered by national authorities as part of their countercyclical capital buffer decisions. The gap indicator was adopted as a common reference point under Basel III to guide the build-up of countercyclical capital buffers. Authorities are expected, however, to apply judgment in the setting of the buffer in their jurisdiction after using the best information available to gauge the build-up of system-wide risk rather than relying mechanistically on the credit-to-GDP guide. For instance, national authorities may form their policy decisions using credit-to-GDP ratios that are based on different data series from the BIS as input data, leading to credit-to-GDP gaps that differ from those published by the BIS. See also the Basel Committee on Banking Supervision.