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The top risks to global credit quality are tightening financial conditions, the outlook for U.S. commercial real estate, and the latest political fight over the U.S. government debt limit, according to a new report from Fitch Ratings.

The rating agency said its list of key risks have evolved since the first quarter, with the rising cost of capital, financial stability, inflation and geopolitics continuing to represent significant risks to the credit landscape.

Fitch said it “expects broader risks to investment and consumption to persist as financial conditions continue to tighten and inflation remains above central bank targets.”

Already those tighter conditions have helped lead to the failure of several large U.S. banks and the emergency takeover of Credit Suisse by UBS AG.

“While further systemic contagion risk has been mitigated through prompt government and regulator support measures, the longer-term effects on financing costs, especially for smaller and regional banks, and credit conditions in the wider economy remain highly uncertain,” it said.

Moreover, the financial pressures on U.S. banks have sparked concerns about their exposure to commercial real estate, particularly offices, “which are facing a combination of secular challenges from changing work patterns, cyclical pressures from a lacklustre economic outlook and tightening financing conditions,” Fitch said.

Additionally, geopolitical risks, including the ongoing war in Ukraine, tensions over the Taiwan Strait, and the U.S. debt limit wrangling, remain undiminished, the report noted.

One risk that has receded since last quarter is China.

“Uncertainty over the Chinese economy’s recovery in 2023 has been reduced significantly with the end of zero-Covid and a rapid consumption-led jump in growth in the first quarter,” Fitch said.