Global debt surging to ‘unmanageable’ levels, IMF warns

The IMF also sounded a warning against the unintended effects of the trillions deployed by policymakers to ease the impact of the virus creating exuberance in financial markets – and gave a veiled hint that central banks should be ready to pull the plug.

It added: “Policymakers need to be attentive to possible unintended consequences, such as a continued buildup of financial vulnerabilities in an environment of easy financial conditions. The expectation of continued support from central banks could turn already stretched asset valuations into vulnerabilities.”

The Bank of England has encouraged lending by banks, cutting the counter cyclical capital buffer banks hold against loans and excluding the Chancellor’s Bounce Back Loans from the cap limiting banks total lending. It comes on top of slashing the base rate to 0.1pc and ramping up quantitative easing.

Officials argue that extra lending will help support businesses, jobs and the wider economy, and so boost banks’ stability, whereas slashing the supply of credit might initially help protect banks from losses, but risks ultimately undermining the economy and so harming the banking sector.

However the minutes of the latest meeting of the Financial Policy Committee, headed by Andrew Bailey, the Governor, show there are concerns over the level of debt taken on by some businesses.