Publication - International banking and financial market developments - BIS Quarterly Review June 2016
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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 postfinancial 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.
Central bahnplatz 2 4051 Basel Switzerland
BISBCHBB Website:www.bis.org
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