International bank lending rose marginally in the third quarter of 2012 but the trend toward shrinking interbank business and the global retrenchment of euro area banks continued while credit to non-bank borrowers continued to grow, the Bank for International Settlements (BIS) said.
Cross-border loans by euro area banks have been declining since 2008 with their share of total foreign claims on the U.S. non-bank private sector dropping to 26 percent at the end of September compared with a peak of 43 percent end-2007.
The retreat of euro area banks has made room for the advance of Japanese banks, which raised their share of U.S. non-bank lending to 22 percent from 12 percent during the same period, and Canadian banks, which boosted their share to 14 percent from only six percent, BIS said.
Preliminary data for international lending by banks in 31 countries showed that third quarter cross-border claims rose by only $26 billion, or 0.1 percent, to $29.4 trillion from the second quarter, the BIS said. Final data, together with detailed analysis, will be released in BIS’ quarterly review on March 18.
“Cross-border credit to non-bank borrowers expanded noticeably, particularly to those in the United States, whereas cross-border interbank claims contracted for the fourth consecutive quarter,” the BIS said.
Global lending to non-bank borrowers rose for the third consecutive quarter with claims on U.S. borrowers expanding the most: by $96 billion, or by 4 percent.
Total lending to borrowers in advanced economies expanded by a modest $100 billion, or 0.5 percent, in the third quarter, with interbank claims down while non-bank borrowers increased their lending by $106 billion, or 1.3 percent.
While loans to banks in the U.K. rose by $117 billion, or 3.3 percent, claims on borrowers in the euro area contracted by $165 billion, or 3 percent, BIS said.
For the first time, BIS included data from Korean banks, which showed that foreign loans by Korean headquartered banks amounted to $121 billion at the end of September, similar to the lending by Portuguese banks of $124 billion and slightly higher than Brazilian banks’ claims of $98 billion.
Roughly half of Korean banks’ claims were to borrowers in the Asia-Pacific region, lead by borrowers in China, but among BIS' reporting banks, Korean banks were the largest creditors to Cambodia and Uzbekistan and the second largest to Vietnam.
International lending to borrowers in emerging economies shrank by $30 billion, or 1 percent, in the third quarter, driven by lower interbank lending, especially to banks in Asia-Pacific and Latin America. Non-bank lending, however, rose.
Cross-border claims on banks in Latin America, including inter-office positions, fell by $12 billion, or 5 percent in the third quarter, the largest quarterly contraction seen by the BIS since 2009.
However, figures based on an ultimate risk basis – which reflect risk transfers and thus reveals the nationality of the ultimate borrower – shows that the total exposure of BIS reporting banks to Latin American borrowers in fact rose in the third quarter by $16 billion to $156 billion.
In Asia-Pacific, global lending to banks fell by $48 billion, or 6 percent, only the second quarterly decline since 2009. The drop was driven by lower lending to banks in China and Korea while lending to many other Asian countries rose, BIS said.