Pandemic-induced credit losses could hit $1 trillion, BIS says

Waves of bankruptcies triggered by the coronavirus pandemic will wipe as much as $1 trillion (around R15 trillion) from the value of global corporate debt markets, the Bank for International Settlements (BIS) warned.

Company insolvencies "are expected to rise as measures to support credit are wound back, new consumption habits and business practices accelerate the downsizing of specific sectors," the BIS wrote in a quarterly report published on Monday. "The looming increase in corporate bankruptcies will generate credit losses that will need to be absorbed, either by the financial system or by taxpayers."

The sombre outlook comes a year after the pandemic threw credit markets into a tailspin and constrained access to funding for essential expenses like payrolls and inventory. And while market valuations have broadly recovered, more pain lies ahead for weaker companies, according to the BIS, which is known as the central bank for central banks.