Major international banks continued to reduce their lending to European borrowers in favor of increased business with emerging economies, especially China, leaving the total stock of international claims steady at $28.6 trillion at the end of the first quarter of 2013, according to the Bank for International Settlements (BIS).
Preliminary data for international bank lending showed that claims on banks and related offices in advanced economies fell by an annual 9 percent, or by $329 billion, from end-2012 to end-March, the sixth consecutive quarterly decline.
Since the end of September 2011, the total drop in interbank lending to advanced economies amounts to $1.9 trillion, with most of the decline in the first quarter of this year to banks in the United Kingdom, Germany and the Netherlands, BIS said. Interbank lending with the United States and Japan also shrank, but only marginally.
Meanwhile, internationally-active banks are finding plenty of borrowers in emerging markets, with claims up 9 percent, or by $265 billion, from the first quarter of 2012 to the end of March.
Total outstanding cross-border claims on borrowers from emerging markets now amount to $3.4 trillion, of which Asia accounts for 45 percent, or $1.52 trillion, and Latin America for 20 percent. But that still pales in comparison to outstanding claims on all developed countries of $21.3 trillion.
The expansion in lending in the first quarter was especially strong to borrowers from China, with loans up by $160 billion, a jump of 30 percent year-on-year, with loans concentrated in short-term maturities and to the bank sector, BIS said.
“BIS reporting banks’ exposure to Asian credit risk has increased even more rapidly than their lending to Asian borrowers,” said BIS, which compiles statistics on international banking activity based on data from at least 31 different countries.
Apart from showing the diverging trend in the pattern of global credit, the BIS data also reveal how banks transfer credit risk from one borrowing country to another.
Historically, banks have sought to transfer the risk from a loan to a borrower in an emerging country onto a guarantor in another country, limiting their exposure to countries that in some cases were characterized by social and political risks.
But reflecting the rapid political and economic transformation in many emerging countries, BIS found a decline in credit risk transfers out of Asia in recent years. By the end of March the transfer of risk into the region for the first time exceeded the transfer of risk away from the region.
The development was driven by credit to the large economies in emerging Asia, such as India, China and Korea.
“A similar, if less pronounced, development is visible in the Latin American region, driven by credit to Brazil in particular,” BIS said.
In contrast, major global banks continued to shift credit risk out of emerging Europe, Africa and the Middle East, though the trend had started to reverse for emerging Europe, particularly in the first quarter, BIS said.
(Click to read "Preliminary international banking statistics at end-March 2013"