By CentralBankNews.info
Global bank lending shrank for the seventh consecutive quarter in the final three months of 2013 as euro-denominated credit continued to fall, boosting the total decline in international credit to $2.3 trillion, or 7.7 percent, since the end of March 2012, according to the Bank for International Settlements (BIS).
But while total cross-border lending fell by $93 billion, Swiss-based BIS said the 0.3 percent contraction from end-September to end-December was considerably smaller than in the previous two quarters when the decline averaged $519 billion, or 1.8 percent.
The worldwide lending pattern in the fourth quarter showed a further decline in euro-denominated while loans extended in U.S. dollars and yen rose, said BIS, known as the central banks’ bank.
Euro lending fell by $325 billion, or 3.3 percent, while dollar-lending grew by $49 billion, or 0.4 percent, and yen-lending rose by $62 billion, or 5.3 percent.
The sharp fall in euro-denominated lending is part of the broader global trend that has been seen since the global financial crises.
The outstanding stock of euro-denominated claims, including intra-euro lending, has shrunk by $1.8 trillion, or 21 percent, since peaking at $8.8 trillion at the end of 2008. This fall accounts for nearly two-thirds of the overall fall in the stock of global cross-border in the same period.
This decline since March 2008 and December 2013 has been widely distributed across euro zone countries and sectors, with claims on banking offices down by $1.2 trillion, or 32 percent, and those on non-bank borrowers down by $180 trillion, or 8.3 percent.
Euro area banks accounted for the overwhelming majority of the decline in lending during the same period while loans by Swiss banks shank by 36 percent. In contrast, euro-denominated lending by U.S. and Japanese banks rose by 49 percent and 21 percent, respectively.
Lending by UK banks, which had expanded from end-March 2008 to end-June 2012, then fell sharply, or by 36 percent, from mid-2012 to the end of 2013, BIS said.
Despite the outflow of capital from many emerging markets since the U.S. Federal Reserve last May said it was preparing to reduce its asset purchases, cross-border lending to emerging markets grew by $95 billion, or 2.7 percent in the fourth quarter, boosted by strong growth in lending to China.
Lending to China, primarily short-term lending, rose by $85 billion, or 11 percent, raising the share of international claims on Chinese borrowers with a remaining maturity of less than one year to 79 percent end-December from 56 percent end-2007 and 76 percent end-2010.
Claims on the rest of emerging Asia rose by $36 billion, or 4.0 percent in the fourth quarter, including a $4.4 billion, or 5.6 percent, rise in loans to Indonesia. Lending to Korea shrank by $3.0 billion, or 1.6 percent, while claims on Indian borrowers was stable in the fourth quarter in contrast to a decline in the previous two quarters.
In contrast to higher lending to borrowers in Latin America and the Caribbean, lending to emerging Europe, Africa and the Middle East fell by $12 billion, and $20 billion, respectively from end-September to the end of December last year, with loans to Russia contracting by $11 billion, or 6.1 percent.
By the end of 2013, on the eve of the unrest in Ukraine, foreign banks’ claims on Russia stood at $219 billion on an an ultimate risk basis – which reflects guarantees and collateral and thus reduces risk – with French banks accounting for the largest stock of outstanding claims at $49 billion and Italian banks with claims of $29 billion.
But BIS said most of the claims by French and Italian banks were based on loans extended by the Russian affiliates of those banks and typically funded locally. In contrast, most of the loans extended by U.S. banks were cross-border claims.
In addition to the foreign claims on Russian residents, BIS said banks had other potential exposures, such as derivatives, guarantees and credit commitments, totaling $151 billion.
The foreign exposure of major international banks to Ukraine amounted to $24 billion on an ultimate risk basis at the end of last year, with European banks accounting for more than 90 percent of of those claims. The majority of those claims, or $15 billion, comprised local claims of foreign bank’s Ukrainian affiliates and other potential exposures to Ukraine by major banks totaled a further $19 billion.
International lending to Latin American and Caribbean borrowers rose in the fourth quarter, but only by $5.5 billion, or 0.9 percent, partly reversing sizable declines in lending in the second and third quarters of last year, BIS said.
Lending to Mexico grew by $8.6 billion, or 7.5 percent, while claims on Brazil fell by $5.0 billion, or 1.6 percent, from end-September to end-December.
