Systemic bank risk is likely to emerge with global credit growth slowing, says a new report from Fitch Ratings.

Fitch reports that median real global credit growth peaked at 14% last year — its highest since the eve of the 1997 Asian crisis. Growth has already slowed this year, a trend that will gather pace due to the liquidity squeeze triggered by the U.S. subprime crisis, it notes. Fitch forecasts real credit growth to slow to around 9% this year.

This growth rate is still high enough to increase vulnerability to potential bank systemic stress, Fitch says. However, as credit growth slows, the growing risk of systemic stress is increasingly likely to materialise, it adds.

“Fragilities that have built up but been masked by rapid credit growth are likely to be exposed as credit growth slows from now on,” says Richard Fox, senior director in Fitch’s sovereign team.

Three-quarters of developed countries and half of emerging markets now give ‘moderate’ or ‘high’ cause for concern due to developments in credit growth, asset prices and real exchange rates, proportions which are likely to rise in the next six months, Fitch says.

Just three developed countries, Australia, Canada and Iceland, remain in the highest macro-prudential risk category, Fitch reports. However, it adds that they all have either ‘strong’ or ‘very strong’ banking systems, like the majority (90%) of developed country systems.

The report extends Fitch’s analysis of property price trends to 30 countries and concludes that, although these are substantially above trend in a number of developed countries, nowhere is the divergence so great as compared with past experience to suggest a high risk of a full-blown system-wide banking crisis.

Emerging market banking systems are typically weaker than developed country systems, but in general do not show as much sign of lending excess as developed markets, it adds.