The International Monetary Fund (IMF) issued a new warning about the corporate debt market as it started its autumn meetings with the World Bank in Washington this week.

The IMF said a downturn half as bad as the last financial crisis would result in $19 trillion of corporate debt being considered “at risk” — which the IMF defines as the debt of firms whose earnings would not cover the cost of their interest expenses.

The IMF warned that 40% of all corporate debt in major economies could be considered “at risk” in another global downturn, exceeding levels seen during the 2008-2009 financial crisis.

A major event like the UK leaving the European Union without an agreement could trigger a sharp tightening of financial conditions, the IMF said in its bi-annual Global Financial Stability Report. 

The IMF said attempts by central banks worldwide to lower interest rates have led to “worrisome” levels of debt with poor credit quality.

“With rates staying lower for longer, financial conditions have eased, helping to address downside risks and support global growth for now,” said IMF capital markets director Tobias Adrian.

“But loose financial conditions have encouraged investors to take on more risk.” 

The IMF warned investors may be “overly complacent” about downside risks this late in the economic cycle.

On Tuesday, the IMF cut its 2019 global growth projection to its lowest level since the financial crisis.

The US Federal Reserve has cut rates twice this year amid concerns that slowing global growth.

The European Central Bank and Bank of Japan have kept interest rates in negative territory in a bid to boost lending. 

“The search for yield in a prolonged low interest rate environment has led to stretched valuations in risky asset markets around the globe, raising the possibility of sharp, sudden adjustments in financial conditions,” the IMF report said.