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How much stress could Covid put on corporate credit? Evidence using sectoral data

Author

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  • Benoit Mojon
  • Daniel Rees
  • Christian Schmieder

Abstract

The economic downturn prompted by the Covid pandemic was historically deep and highly divergent at a sectoral level. We project corporate credit losses for the G7 economies, China and Australia until 2022 and find that they could be substantial for the sectors most affected by the pandemic. Yet, because those sectors account for a relatively small share of total corporate borrowing, aggregate corporate credit loss rates (ie losses in relation to the stock of corporate debt) could fall short of those sustained during the Great Financial Crisis of 2007–09.

Suggested Citation

  • Benoit Mojon & Daniel Rees & Christian Schmieder, 2021. "How much stress could Covid put on corporate credit? Evidence using sectoral data," BIS Quarterly Review, Bank for International Settlements, March.
    • Handle: RePEc:bis:bisqtr:2103e
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    References listed on IDEAS

    as
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    7. Christian Dembiermont & Mathias Drehmann & Siriporn Muksakunratana, 2013. "How much does the private sector really borrow - a new database for total credit to the private non-financial sector," BIS Quarterly Review, Bank for International Settlements, March.
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    Cited by:

    1. Mikael Juselius & Nikola Tarashev, 2021. "Could corporate credit losses turn out higher than expected?," BIS Bulletins 46, Bank for International Settlements.
    2. Alexandra Horobet & Stefania Cristina Curea & Alexandra Smedoiu Popoviciu & Cosmin-Alin Botoroga & Lucian Belascu & Dan Gabriel Dumitrescu, 2021. "Solvency Risk and Corporate Performance: A Case Study on European Retailers," JRFM, MDPI, vol. 14(11), pages 1-34, November.
    3. Sanchez Serrano, Antonio, 2022. "From Lost Turnover to Nonperforming Loans: The Impact of the COVID-19 Pandemic on the Economy and on the Financial System," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 4(3), pages 99-164, April.
    4. Salha Ben Salem & Moez Labidi, 2024. "Financial friction and optimal monetary policy: analysis of DSGE model with financial friction and price sticky," SN Business & Economics, Springer, vol. 4(7), pages 1-24, July.

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    More about this item

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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