BIS global liquidity indicators at end-September 2022

Global liquidity indicators at end-September 2022

The BIS global liquidity indicators (GLIs) track credit to non-bank borrowers, covering both loans extended by banks and funding from global bond markets through the issuance of international debt securities (IDS). The main focus is on foreign currency credit denominated in three major reserve currencies (US dollars, euros and Japanese yen) to non-residents, ie borrowers outside the respective currency areas. The GLIs monitor growth in this credit relative to that denominated in those same currencies to residents within these currency areas (as reported in national financial accounts).¹⁰

In Q3 2022, global foreign currency credit denominated in US dollars contracted further while that in euros and yen expanded. As a result, annual growth rates diverged (Graph 5.A). Dollar credit to non-banks outside the United States stood at $13.1 trillion at quarter-end, 2% lower than a year earlier (Annex Graph C.1). Growth in euro credit to non-banks outside the euro area remained robust at 9% yoy, pushing the amount outstanding to €4 trillion ($3.8 trillion). Similarly, yen credit to non-banks outside Japan grew at 10% yoy, reflecting brisk growth in bank lending (19% yoy) (Graph 5.B). This pushed the stock of yen credit to ¥50.7 trillion ($0.35 trillion). In all three currencies, the issuance of IDS slowed (Graph 5.C).

Borrowers in EMDEs also saw dollar and euro credit diverge. Credit to non-banks in EMDEs fell in dollars but expanded in euros, leaving the respective stocks at $5.3 trillion and €0.9 trillion (Graph 6.A). In one of the largest contractions on record, dollar credit to EMDEs fell by $135 billion during Q3 2022 (Graph 6.B), mainly vis-à-vis borrowers in Asia-Pacific (–$110 billion) in particular those in China (–$41 billion) and Hong Kong SAR (–$49 billion). Dollar credit to emerging Europe (–$18 billion), Africa and the Middle East (–$7 billion) and Latin America (–$1 billion) also contracted.

In contrast to dollar credit, growth in euro credit to non-banks in EMDEs remained resilient (Graph 6.C). Loans grew by €13 billion in Q3, while net issuance (gross issuance less redemptions) of IDS added €4 billion. Most of the new credit went to borrowers in Asia-Pacific (+€11 billion), followed by those in Africa and the Middle East (+€4 billion), Latin America (+€2 billion) and emerging Europe (+€1 billion).

The tightening in dollar credit to EMDEs was driven by a contraction in bank loans that left the stock of loans 3% lower than the year before (Graph 7.A, dashed line). The third quarter also saw the first decline in the stock of dollar-denominated IDS since the Great Financial Crisis: EMDEs' net issuance of dollar bonds dropped by $11 billion, reducing the growth rate to 1.5% yoy (dotted line).

The expanding stock of euro credit to EMDEs reflected the rapid pace of bank lending, which grew at a rate of 12% yoy (Graph 7.B, dashed line). Meanwhile, net issuance of IDS slowed to 2% yoy (dotted line). Yen credit also expanded in Q3 thanks to bank lending (Graph 7.C, solid line). Yen-denominated bank loans to EMDEs reached ¥10.2 trillion ($71 billion), 8% higher than a year before (dashed line). Net issuance of yen-denominated IDS, however, continued to decline at 9% yoy (dotted line). The bulk of this decline was due to reduced issuance by the non-financial sector (–6% yoy).

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⁹   www.euroclear.com/newsandinsights/en/press/2022/2022-mr-17-euroclear-continues-to-outperform.html.

¹⁰   For more details, see the GLI methodology:    www.bis.org/statistics/gli/gli_methodology.pdf.