BIS Damps $2 Trillion Emerging Market Company Debt Spree

More than $2 trillion of foreign borrowing by emerging-market companies since 2008 is leaving them vulnerable to a sudden drop in funding at the first sign of trouble, according to the Bank for International Settlements.

Bond investors willing to lend generously when conditions are good can pull out in a crisis or when central banks tighten monetary policy, analysts led by Claudio Borio, head of the monetary and economic department, wrote in the BIS annual report. Emerging-market companies that lose access to external debt markets may then be forced to withdraw bank deposits, depriving domestic lenders of funding as well, they said.