Tuesday, June 6, 2017

Global banking activity weak in Q4 but up in 2016 - BIS

     Global banking activity weakened in the fourth quarter of 2016 as lending fell to advanced economies, especially the United Kingdom, but strong growth in the first half of the year and major debt offerings by Saudi Arabia and Qatar helped boost total cross-border lending in 2016 by $504 billion, or 1.9 percent, according to the Bank for International Settlements (BIS).
      Credit extended by major global banks declined by a total of $281 billion in the fourth quarter of last year for the second consecutive quarterly decline, primarily due to a $120 billion contraction in lending to non-bank financial institutions, such as hedge funds, insurance companies and pension funds, BIS said in its latest quarterly review of international banking and financial markets.
      A $287 billion fall in lending to borrowers in advanced economies largely reflected a $143 billion fall in credit to the U.K., with loans to banks shrinking by $72 billion and those to non-banks by $24 billion.
      Cross-border lending to the U.S. also fell in the fourth quarter, down by $82 billion, along with lending to several euro area countries while credit to Japanese borrowers grew by $60 billion.
      After stalling in the third quarter of last year, cross-border lending to China rose by a moderate $16 billion in the fourth quarter, bringing the outstanding stock of claims to $755 billion.
      In contrast, cross-border lending to emerging Asia, excluding China, shrank by $9 billion, with a $7 billion fall in lending to Korea and a $3 billion fall in claims on Indonesia while lending to Taiwan grew by $4 billion.
      Despite the fall crude oil prices in recent years, international lending to oil-producers in the Middle East rose on the back of two of the three largest debt offerings in the history of emerging market sovereign debt.
     In October 2016 Saudi Arabia issued $17.5 billion in debt while Qatar raised $9 billion in May 2016. Saudi Arabia, along with several other countries, this week cut diplomatic ties with Qatar, accusing it of supporting terrorism in the Gulf region.
      BIS said its database suggested that general government net issuance last year reached $30.6 billion for Saudi Arabia, $10 billion for the United Arab Emirates and $9 billion for Qatar despite the pressure on the fiscal position of many oil exporters from the fall in oil prices from more than $100 a barrel in 2014 to almost $30 at the start of 2016.
     By end-2016 prices had recovered to $54 a barrel but are currently trading below $50.
     U.K. banks are the most important single group of lenders to oil exporters, accounting for $67 billion, or 23 percent of total outstanding international claims, while euro area lenders accounted for 22 percent, followed by U.S. banks with 16 percent and Japanese banks with 14 percent.
     However, banks from Asian emerging markets are now also playing an increasingly important role in international banking activity, said BIS, which monitors global banking flows.
     Low oil prices also affected capital flows from the Middle East into the international banking system with cross-border deposits from residents in those countries down by $11 billion in 2016, taking the stock to $499 billion, with deposits denominated in U.S. dollars in particular dropping, BIS said.
     But outstanding stock of deposits in U.S. dollars still account for more than two-thirds of the total, with more than half of the deposits placed in banks in advanced economies, such as $156 billion in the U.K., $48 billion in the U.S. and $26 billion in Switzerland.

    Click to read the full quarterly review by the BIS.




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