Wednesday, July 23, 2014

Contraction in global banking activity ends in Q1 - BIS

    The contraction in global banking activity since late 2011 ended in the first quarter of this year as cross-border claims of major banks on borrowers rose by $580 billion from the end of 2013 to the end of March, according to the Bank for International Settlements (BIS).
    The upturn in overall lending activity was seen across many countries and sectors, with the largest increase in credit to borrowers in China while claims on the rest of Asia, Latin America, Africa and the Middle East also rose, but at a more modest pace.
    BIS, which only last month in its annual report warned of the dangers from the growing reliance on debt, said loans to China rose by $133 billion in the first quarter for an annual rise of 49 percent, pushing the outstanding stock of claims to just over $1 trillion.
    Even Europe, which is recovering after two years of recession, saw a $158 billion rise in claims in the first quarter for the first increase since early 2012.
    Cross-border lending to non-banks in the United States was also strong, said Swiss-based BIS, which collects data on international lending by globally-active banks.
     The amount of credit extended by banks to other banks rose for the first time since late 2011, with total interbank claims up by $306 billion, including a $111 billion rise in intra-euro activity.

    Although global bank lending expanded, BIS added that it was not enough to offset the declines in the preceding quarters so the annual rate of contraction in the first quarter was still down by 2.0 percent though this was slower than the 3.7 percent decline seen at the end of 2013.
    The conflict between Ukraine and Russia has hit the currencies of both countries hard, resulting in a fall in the U.S. dollar value of the outstanding stock of foreign claims on both countries.
    In U.S. dollar terms, the claims of major international banks on Russia dropped to $209 billion at the end of March from $225 billion end-December 2013 while claims on Ukraine fell to $22 billion from $25 billion. But adjusted for exchange rates, claims on Russian residents was virtually unchanged while those on Ukraine only fell by an annual 15 percent, or $1.5 billion, BIS said.
    Lending by major international banks to emerging Europe - such as Turkey and Poland - fell for a fourth consecutive quarter, with a contraction of $14 billion causing a 1.9 percent decline in claims in the first quarter of this year compared with the same 2013 quarter, said BIS.
    Claims on Turkey and Poland shrank the most in the first quarter, by $5.3 billion and $4.8 billion, respectively, while loans to Hungary rose by $1.3 billion.
    Overall lending to non-banks, such as governments and non-financial corporates, rose by $274 billion in the first quarter, the largest rise since late 2010. Lending to non-banks in the U.S. expanded by $73 billion, pushing up the share of international claims on U.S. to 53 percent from 52 percent.
    As a trend, cross-border lending to non-banks has been growing in the last few years while loans extended between banks has been declining, BIS said.
    The global share of cross-border loans to non-banks reached 24 percent by the end of the first quarter after being around 20 percent in the decade from end-1995 to end-2005, while the share of cross-border interbank loans have declined to 46 percent from over 60 percent in the late 1990s.
    To read International banking statistics at send-March 2014, please click on


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