BIS consolidated international banking statistics for end-March 2000
4 August 2000
Two changes to the consolidated international banking data are introduced with this issue. Firstly, the data are now reported and published on a quarterly basis to reduce the effective time lag to users between updates on reporting banks’ country exposure. Secondly, two countries have joined the group of reporters. Worldwide consolidated data for banks with head offices in Hong Kong have been added as from end-1997 and data for those in Portugal are included as from end-1999.
Developments in contractual claims(2)
Total worldwide consolidated claims of BIS reporting banks rose by 5% in the first quarter of 2000, due to a 6% increase in claims on developed countries and a 3% increase in those on offshore centres. Claims on developing countries continued to decline slightly, but this was mainly an exchange rate effect, as explained below.
The increase in claims on developed countries was evenly distributed among banks, private sector non-banks and the public sector and there was only a small increase in the share of short-term claims.(3) The increase in positions on offshore centres was due to a revival of transactions in the banking sector, which increased its share to 41% of total positions. Previously, from end-1997 onwards, a continuous shift of funds from the banking sector (in the Cayman Islands and Singapore) to the non-bank private sector (especially in the Caymans) had resulted in the share of the latter sector increasing from 49% to 60% of total borrowing by the end of 1999. This shift had been accompanied by a decline in short-term positions from a high of 74% of total claims in the fourth quarter of 1997 to 51%.
The small reduction in claims on developing countries needs to be interpreted carefully. Firstly, both the euro and the yen depreciated against the US dollar, by 5% and 3% respectively, in the first quarter of 2000. This led to concomitant decreases in the euro and yen components of outstanding claims when reported in US dollar terms. Secondly, since in this quarter underlying transactions with developing countries were limited, the impact of the exchange rate effect is particularly visible. Although the consolidated statistics do not contain information on the currency composition of banks’ consolidated claims, the currency breakdown of the BIS locational banking statistics can be applied to arrive at an estimate of exchange rate effects. This leads to the conclusion that the small decline in reported consolidated claims in the first quarter was fully due to exchange rate movements and that in aggregate there was no repayment of bank lending by developing countries.
The move to longer maturities also appears to have come to a halt in the context of heightened market volatility, with short-term positions increasing slightly to 47% in the first quarter of 2000, as some longer maturities were nearing their due date. Short-term positions had reached a maximum of 57% in the first half-year of 1997 and had declined quite rapidly thereafter as the Asian crisis unfolded.
Outstanding positions on Asia declined by 2%. However, one can estimate that only $1.6 billion of the reported $6.6 billion decline in positions outstanding on Asia was due to repayments.(4) In particular, the reported declines in positions on China and Indonesia were probably almost entirely due to valuation effects, leaving actual outflows of only $0.2 and $0.3 billion. Thailand, however, repaid an adjusted $1.1 billion of private sector loans, reflecting continuing overcapacity in industry despite a pickup in economic activity, so that there was a further small decrease in the share of its short-term borrowing, to 43%.
In contrast, claims on South Korea increased by an adjusted $4.3 billion, all short-term, reflecting strong imports. Short-term claims also increased due to about $1 billion of maturing long-term debt. Korea’s short-term debt to international banks had declined to $30 billion after the Asian crisis, but it has recently edged back up to almost $40 billion, or 58% of total borrowing, although it is still nowhere near the $71 billion seen in the second quarter of 1997. Additional borrowing by Taiwan’s banking and non-bank private sectors, reflecting heavy investment in the export-driven electronics sector, was to some extent offset by almost full repayment of short-term borrowing by the public sector. Taiwan’s short-term borrowing has remained almost constant at about $15 billion (compared with a maximum of $22 billion in the second quarter of 1997).
There was a small $1.6 billion increase in positions on Latin America, with higher claims on some countries being largely offset by reductions elsewhere. On an exchange rate adjusted basis, actual flows to the region are estimated to have been about twice as large.
Claims on Brazil, in particular the non-bank private sector, increased by an adjusted $1.8 billion, reflecting economic recovery driven by growth in industrial output and exports, following the 34% effective depreciation of the real in 1999. Chile’s borrowing rose by $1.8 billion, with a strong shift from long- to short-term positions due to maturing debt. The 1998 easing of the "encaje" regulation, which reduced to zero the percentage of any foreign investment that had to be deposited at the central bank for one year, at 0% interest, may have contributed to the current expansion of total foreign lending to Chile. The private sector in Peru increased short-term borrowing by $2 billion, bringing the stock of outstanding short-term loans to $8.4 billion, up 55% from the second quarter of 1997. With economic output improving only slowly, the adjusted $1.2 billion reduction in claims on Argentina was concentrated in the private sector. Claims on Mexico, mainly the public sector, declined by an adjusted $1.3 billion. Public sector borrowers in both countries preferred to issue international bonds instead of borrowing from banks.
There was little apparent change in positions on developing countries in Europe, which have the highest euro component (40%). Adjusted for the euro depreciation, there was in fact estimated new lending of $3.2 billion to the region. Turkey received $2.3 billion, all short-term, in a generally improved economic context and supported by high privatisation receipts, substantial international bond issues and an IMF-sponsored economic stabilisation package. The adjusted $1.6 billion decrease in claims on Russia may have been related to the $10.6 billion relief granted to Russia in February on its Soviet-era debt by the London Club of commercial creditors.
In Africa and the Middle East, overall positions fell by $2.8 billion, but this was mostly due to exchange rate movements. An adjusted $1 billion decline in lending to the non-bank private sector in South Africa was largely balanced by increased positions on banks in Iran, Saudi Arabia and Egypt.
Developments in the distribution by nationality of reporting banks
In the first quarter of 2000, banks incorporated in Europe reversed the previous decline in their share of lending to offshore centres and also continued to increase their share of total bank lending to developing countries. Japanese banks, on the other hand, retrenched from all regions, in particular from offshore centres, where their share had been increasing previously. Japanese banks’ share of worldwide claims on developing countries fell below 10% of the total for the first time.
Developments in net country risk exposure
The memorandum item in the last column of the attached Tables 1-5 provides data on banks’ net country risk exposure. These data are derived from contractual claims shown in the first column by subtracting claims which have been guaranteed by residents of other countries (outward risk reallocation) and by adding guarantees provided by residents of the specified country for reporting banks’ claims outstanding elsewhere (inward risk reallocation).(5)
As can be seen from a comparison of the two columns, banks’ net risk exposure to offshore centres is an overall 74% of contractual exposure, a figure that has declined from about 80% in 1998. However, there is considerable variation between reporting countries. Banks in the United States and the United Kingdom, for example, report net exposures vis-à-vis the offshore centres that are only 60% of contractual claims for the current quarter. UK banks’ net exposure vis-à-vis the Cayman Islands has been as low as 43% of contractual claims (in the second quarter of 1998). Banks incorporated in some other major countries report much smaller differences between contractual claims and exposure to offshore centres, but this may be due at least in part to different methodological approaches to risk reallocation.(6)
In Asia as a whole, net risk exposure has been almost identical (98%) to contractual claims since 1998, when these data were first collected. However, in India, Pakistan, the Philippines, Uzbekistan and Vietnam, net risk exposure is substantially less (88% to 72%) than that reported on a contractual basis. This is largely balanced by Thailand, on which banks now report net exposure of 124% of contractual claims (equivalent to a net $7.3 billion of guarantees provided by residents of Thailand for claims on other countries). This development has occurred in the last two quarters, whereas a more typical ratio of around 90% had been reported for Thailand since 1998. Exposures to Taiwan account for most of the remaining difference ($2 billion), developing from 115% of contractual claims in 1998 to 109% in the current quarter.
In Latin America net risk exposure is typically about 90% of contractual claims, largely unchanged since 1998. Risk exposure is somewhat higher (around 95%) in Chile, Bolivia and Cuba but lower in Venezuela, Uruguay, Ecuador and Guatemala, at 85% to 64% of contractual claims.
For developing countries in Europe and Africa, a net risk exposure of about 90% of contractual claims is also fairly typical. Exceptions are Kuwait, Poland, Kenya and Iran, where exposures amount to 78% to 73%. On the other hand, banks have more risk exposure than contractual claims on Israel (109%) and especially Jordan (171%).
1The statistics are available on the BIS website (www.bis.org/publ/index.htm) and they will be reproduced in the statistical annex of the BIS Quarterly Review: International Banking and Financial Market Developments, to be released on 28 August 2000. The BIS international banking data are also included in the quarterly release of the joint BIS-IMF-OECD- World Bank statistics on external debt (www.bis.org/publ/r_debt.htm).
2 On-balance sheet financial claims, also known as lending to the "immediate borrower".
3 Claims of banks with a remaining maturity of up to and including one year.
4 About 25% of outstanding claims are denominated in yen and 10% in euros.
5 For details on current reporting country practices of risk reallocation, see the table on page 28. Since risk transfers do not create or eliminate country risk, the differences between total claims on a contractual basis and total net risk exposures should in principle sum to zero. However, the accounting identity is not satisfied because balancing entries for risk transfers to or from the reporting country itself are not reported.
6 One should note that German and French banks, among others, do not yet report risk reallocations due to guarantees.