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BBVA Research, other economists see nonfinancial business debt as potential source of financial instability

- Business debt continues to trend upward: Unlike household debt, which has declined since the Great Recession, business leverage continues to trend upward

- Corporate debt: The main driver behind the steep increase in nonfinancial business debt has been corporate debt

HOUSTON, Feb. 7, 2020 /PRNewswire/ -- Nonfinancial debt, specifically the relatively high ratio of business leverage, is drawing attention from economists working in policy and finance spheres, according to a recent publication by BBVA Senior Economist Filip Blazheski.

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This high ratio comes on the heels of over a decade of accommodative monetary policy worldwide and is now recognized as a potential source of financial instability. Unlike household debt, which has declined in relative terms since the Great Recession, business leverage has continued to trend upwards.

According to the report, BBVA Research's recent analysis of recession triggers suggests that unlike the last recession, which was a result of household overextension, the next recession could very likely be caused or exacerbated by unsustainable business indebtedness.

Corporate debt can take several forms, including both bank and non-bank loans.The volume of outstanding loans to nonfinancial corporations has increased by close to $1 trillion in the last three years, a significant portion through foreign entities and non-banks. The increase in funding of corporate loans by non-banks has gone hand in hand with the evolution of collateralized loan obligations (CLOs), instruments through which corporate loans are securitized.

The brief provides a detailed look at CLO composition, the CLO market size and its importance to corporate finance, as well as the potential risks of CLOs precipitating market dislocations going forward.

Read the full report here.

See the complete library of BBVA Research publications here.

For more BBVA news visit, www.bbva.com and the U.S. Newsroom.

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For more financial information about BBVA in the U.S., visit bbvausa.investorroom.com.

About BBVA

BBVA Group
BBVA (NYSE: BBVA) is a customer-centric global financial services group founded in 1857. The Group has a strong leadership position in the Spanish market, is the largest financial institution in Mexico, it has leading franchises in South America and the Sunbelt Region of the United States. It is also the leading shareholder in Turkey's Garanti BBVA. Its purpose is to bring the age of opportunities to everyone, based on our customers' real needs: provide the best solutions, helping them make the best financial decisions, through an easy and convenient experience. The institution rests in solid values: Customer comes first, we think big and we are one team. Its responsible banking model aspires to achieve a more inclusive and sustainable society.

BBVA USA
In the U.S., BBVA is a Sunbelt-based financial institution that operates 641 branches, including 330 in Texas, 89 in Alabama, 63 in Arizona, 61 in California, 44 in Florida, 37 in Colorado and 17 in New Mexico. The bank ranks among the top 25 largest U.S. commercial banks based on deposit market share and ranks among the largest banks in Alabama (2nd), Texas (4th) and Arizona (6th). In the U.S., BBVA has been recognized as one of the leading small business lenders by the Small Business Administration (SBA) and ranked 8th nationally in terms of dollar volume of SBA loans originated in fiscal year 2018.

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SOURCE BBVA USA