April 25th, 2013
by Peter Nielsen, Central Bank News
Lending between banks, especially to those in the euro area and the United States, shrank further in the fourth quarter of 2012 while credit to non-banks rose, accelerating the recent trend toward a retreat in interbank activity, the Bank for International Settlements (BIS) said.
Cross-border claims on banks and related offices contracted by $405 billion in the fourth quarter of 2012 while credit extended to non-bank borrowers, which includes governments and non-bank financial intermediaries, rose by $132 billion, according to preliminary global banking data.
BIS, known as the central bank to the world’s central banks, said,
“Owing to this divergence, the share of outstanding international claims on a consolidated basis accounted for by interbank claims declined to a historical low of 38% at end-December, 2012.”
Total cross-border lending to borrowers in all countries fell by $274 billion in the fourth quarter to total outstanding claims of $29.31 trillion at the end of 2012.
The decline was fueled by a $407 billion fall in lending to borrowers in developed countries while lending to emerging countries rose by $49 billion, driven by a $40 billion rise in lending to Asian countries, BIS data showed.
The share of interbank lending as a proportion of total international lending has now fallen from 40 percent at the end of 2011 and 46 percent end-2007, illustrating the shrinking role of banking since the global financial crises.
The BIS, noting that during 2012 lending to banks and non-banks moved in the opposite direction, said -
“In most periods, interbank activity and credit to non-bank counterparties tend to rise and fall in tandem.”
The retreat in global interbank credit is especially significant in Europe and the United States. After moderating in 2010 and 2011, the pace of decline accelerated in 2012 with cross-border claims on banks in Europe down by 8.0 percent in 2012 after a 4.0 percent drop in 2011.
In the United States and the U.K., cross-border interbank activity shrank by 16.0 percent and 5.0 percent, respectively, in 2012.
Most of the rise in lending to emerging markets was to banks and while the pace of expansion accelerated in the fourth quarter from earlier in 2012, BIS said it remained well below the trend of 2010 and 2011.
Claims on emerging markets grew by only 3.0 percent in 2012 compared with an 8.0 percent rise in 2011 and 17 percent rise in 2010.
Lending to Latin American borrowers rose by $16 billion in the fourth quarter, the bulk of which was lent to Mexican residents followed by those in Brazil and Colombia.
While non-Latin American banks still dominate international banking activity, BIS said banks headquartered in the region were expanding.
Brazilian, Chilean, Mexican and Panamanian banks together accounted for only 3.0 percent of outstanding foreign claims on Latin America at the end of 2012, but this was up from 2.3 percent at the end of 2011 and 1.8 percent end-2010.
Cross-border lending to the emerging economies of Europe rose by $5 billion in the fourth quarter, reversing a decline seen in the last five quarters, led by higher claims to borrowers in Poland and the Czech Republic while the upward trend in lending continued to borrowers in Russia and Turkey.
Hungary, however, suffered a fall of 21 percent in international lending in 2012, second only to the 31 percent plunge in lending to Greek borrowers.