The BIS, in cooperation with central banks and monetary authorities worldwide, compiles and disseminates data on activity in international financial markets. This chapter summarises the latest data for the international banking and over-the-counter derivatives markets, available up to end-2015. A box looks at the international business of banks in China, and another at global residential property price developments in 2015.1
Takeaways
The slowdown in international banking activity that began in early 2015 broadened in the final quarter of the year. The $651 billion contraction in cross-border bank lending affected most major currencies, sectors and regions.
A $276 billion drop in cross-border claims on euro area countries accounted for the largest share of the $361 billion fall in lending to advanced economies.
Cross-border bank credit to emerging market economies (EMEs) was down by $159 billion during Q4 2015, or 8% in the year to end-December 2015 - the sharpest year-on-year contraction since 2009.
The $114 billion decline in cross-border lending to China was the second quarterly drop in a row, and it pushed the annual growth rate down to -25%.
New data published by China confirm that banks on the mainland are becoming an increasingly important source of international bank credit. They are an especially important source of US dollar credit: their cross-border dollar assets totalled $529 billion at end-December 2015.
Global over-the-counter derivatives markets saw a broad-based decline in activity in the second half of 2015, largely thanks to ongoing trade compression. The notional amount of outstanding contracts fell by 11%. Gross market values decreased by 6%.
Residential property prices increased significantly in many of the large advanced and emerging economies in 2015, but fell sharply in Brazil and Russia.
Recent developments in the international banking market
The fourth quarter of 2015 saw another sizeable contraction in international banking activity. Between end-September and end-December 2015, the cross-border claims of BIS reporting banks dropped by $651 billion after adjustment for exchange rate movements and methodological breaks (Graph 1, top panels).2 It was the third consecutive quarterly drop, which reduced the outstanding stock to $26.4 trillion. The annual growth rate in the year to end-December 2015 sank to -3%, far below the average of 6% seen over the past 20 years. The weakening in international banking activity during Q4 2015 coincided with a relatively tranquil period in global financial markets, during which markets stabilised following a bout of volatility in the third quarter. However, a deterioration in global growth prospects, particularly in EMEs, started to feed into renewed market turbulence at the turn of the year.3
The decline in cross-border lending4 was more evenly spread across sectors, major currencies and regions in Q4 2015 than in previous quarters.
As regards sectors, interbank activity again accounted for the largest share and mainly drove the overall decline. But claims on non-bank borrowers, which had previously held up better, also fell substantially (by $177 billion): their annual growth rate slowed to 2% at end-December 2015, down from a peak of 11% at end-March 2015.
As regards currencies, cross-border claims denominated in euros fell the most ($325 billion), followed by those in US dollars ($175 billion). By contrast, cross-border claims denominated in Japanese yen rose slightly, by $32 billion during the last three months of 2015 (Graph 1, bottom panels), reflecting an increase in Japanese banks' cross-border lending.
Across borrowing regions, the decline in international banking activity affected advanced economies (-$361 billion), EMEs (-$159 billion) and offshore centres alike (-$120 billion). Activity channelled via offshore centres continued its steady post-financial crisis decline. Deposits placed with banks there, including intragroup transactions and interbank deposits, totalled $3.2 trillion at end-December 2015, down by 8% compared with a year earlier.
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