The Bank for International Settlements (BIS) said in a report released Thursday (25) that last year’s Epidemic global government provided a lot of credit support to enable companies to postpone the risk of bankruptcy, but if the economic recovery continues to be slow, it is possible that more companies in the epidemic-affected industries will become zombie enterprises.
BIS said that companies in the travel and tourism industry are carrying heavy debts during the epidemic, and if the economy does not rebound significantly, they will not be able to repay their debts from the current profits.
However, if the economy recovers optimistically, the risk of a significant increase in corporate zombification will be low once the revenue of the affected industries concerned returns to the level before the epidemic, while vaccinations are given on a large scale and the economy warms up.
BIS said that certain industries operating leverage increased significantly, profit forecasts remain weak, showing that for some companies, the Federal Reserve and the government to expand the scale of credit will only delay bankruptcy, can not retreat from the risk of bankruptcy in the whole body.
Significant Credit Expansion Next Year’s Corporate Bankruptcies, GDP, Unemployment Standard Deviation
During the outbreak, even in the face of rising unemployment and economic contraction, corporate bankruptcies remained at very low levels, in large part related to the large amount of credit support provided by the government and capital markets.
With the credit expansion, a future tightening of monetary policy threatens to exacerbate risks in the banking system. In Europe, for example, the bank credit situation, the transport industry is the largest exposure to industry, all banks, HSBC exposure to the epidemic affected industry is the largest, up to 53.1 billion euros, followed by BNP Paribas also has 47.7 billion euros exposure.
The EU executive committee said that without government support, nearly a quarter of EU companies would have had difficulty keeping up with financing last year. Paradoxically, even in the face of the epidemic’s impact last year, the number of insolvent companies in the EU was lower than in 2019.
The BIS also warned that the low insolvency situation could change as long as economic activity continues to slow, putting pressure on debt-ridden companies, the EU’s executive committee said.
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