Key Points
- Dollar credit grew by 8.5% year-on-year, reaching $14.3 trillion by December 2025.
- Euro-denominated credit expanded at 11%, totaling €4.9 trillion by year-end.
- Japanese yen credit contracted by 4.9%, marking a decline in its global share.
- Emerging markets saw dollar credit rise from $3.2 trillion in 2015 to $4.3 trillion in 2025.
Analysis
The latest BIS global liquidity indicators reveal a robust expansion in foreign currency credit, particularly in US dollars and euros, as of the end of December 2025. Dollar credit outside the United States grew by 8.5% year-on-year, marking the fastest growth rate since Q3 2014, and bringing the total outstanding stock to $14.3 trillion. This growth is indicative of a broader trend in global liquidity, driven by a combination of bank loans and international bond market activities.
Meanwhile, euro-denominated credit also saw impressive growth, expanding at an annual rate of 11%, which elevated its total to €4.9 trillion by the end of the year. In contrast, foreign currency credit in Japanese yen experienced a contraction of 4.9%, reflecting a decline in its attractiveness as a reserve currency. This shift highlights the ongoing challenges faced by the yen in maintaining its global standing amidst a strengthening dollar and euro.
The BIS data underscores the significant role that emerging markets and developing economies (EMDEs) play in this liquidity landscape. Dollar credit to EMDEs has surged by 35% over the past decade, increasing from $3.2 trillion at the end of 2015 to $4.3 trillion by the end of 2025. The growth trajectory of euro credit to EMDEs has been even more pronounced, nearly doubling from €437 billion to €858 billion during the same period.
This trend reflects a broader shift in credit dynamics, with euro credit growth outpacing dollar credit growth in recent years. The BIS report indicates that the growth in dollar credit to EMDEs can be divided into three distinct phases since the onset of the COVID-19 pandemic. The first phase, from Q1 2020 to Q2 2022, saw an average annual growth rate of 5.6%.
This was followed by a contraction phase starting in Q3 2022, coinciding with US monetary tightening measures. However, by Q1 2024, dollar credit growth to EMDEs returned to positive territory, with regional variations observed across different areas. Notably, dollar credit growth to Africa and the Middle East has consistently outpaced other regions, while emerging Europe has seen a significant acceleration in dollar credit growth during the latest phase.
The report also highlights that euro credit to EMDEs has followed a similar growth trajectory, with an annual growth rate reaching 12% by the end of 2025, significantly outpacing the 6.2% growth rate for dollar credit during the same period. This divergence in growth rates between the two currencies suggests a shifting preference among borrowers and investors, influenced by the evolving economic landscape and monetary policies across major economies.
Market Impact
The robust growth in foreign currency credit, particularly in US dollars and euros, is likely to have significant implications for global financial markets. As emerging markets continue to attract increased credit, this could lead to enhanced investment opportunities and economic growth in these regions. However, the contraction in yen credit may signal a diminishing role for the Japanese currency in international finance, potentially affecting Japan’s economic strategies.
Investors will need to closely monitor these trends as they could influence currency valuations and global liquidity conditions moving forward.
Sources
Bank for International Settlements / Credit and Liquidity Statistics