Guard against sovereign credit risk, India warned

Though emerging countries like India are not yet affected adversely by increases in sovereign credit risk in developed countries, they cannot remain complacent about the threats arising from the explosion in the public finances of the US, the UK, Spain, Greece, Portugal, and Italy, among others, a report by BIS said.

The report issued by the Committee on the Global Financial System (CGFS) of the BIS  warned that “that increases in sovereign credit risk push up the cost and weaken the composition of banks’ funding through several channels, reflecting the extensive role of government securities in the financial system.”