BIS international consolidated banking statistics - second quarter of 2001
29 October 2001
The BIS is today releasing international consolidated banking statistics for the end of June 2001.1 These data indicate that banks maintained their international corporate credit exposures during the second quarter of 2001 despite the worsening global economic outlook. Nevertheless, there were some signs of increased risk aversion: for example, the share of claims guaranteed by a third party or backed by collateral rose in several countries. Consolidated international claims on emerging economies continued to decline, especially claims on Asia and countries facing specific problems such as Argentina and Turkey. Whereas in Argentina banks in the reporting area cut back their longer-term claims and maintained their short-term claims, in Turkey the opposite was the case.
Banks maintain their international exposure to US and European corporates
After an exceptionally large increase in claims on US corporations and other non-bank borrowers in the first quarter, banks in the reporting area took on modest amounts of additional exposure to US credits in the second. US borrowers' share of banks' outstanding international claims continued to trend upwards, to 16% on an ultimate risk basis. Especially noteworthy, considering the deterioration in corporate earnings prospects in the second quarter, were the stable share of the non-bank private sector in outstanding claims on the United States, at 57% (Graph 1), and the 1 percentage point decline in the public sector's share, to 13%.
Cross-border mergers, notably the Royal Bank of Canada's acquisition of US-based Centura Banks, were partly responsible for the continued rise in claims on the United States. A more important factor was banks' willingness to continue to extend credit to private sector entities in the United States, albeit at a slower pace than in the first quarter. Notwithstanding this new lending, banks in the reporting area did take some steps to limit their risk exposure. Short-term claims, which are considered less risky than longer-term claims, neared 44% of outstanding claims on the United States (Graph 1). Furthermore, the use of credit risk mitigants such as guarantees and collateral resulted in a further decline in banks' ultimate risk exposure to 92% of contractual claims on the United States (Graph 1).
In Europe too, banks in the reporting area showed no signs of reducing their international exposure to the corporate sector. The non-bank private sector's share of outstanding international claims on European borrowers remained stable at 31%. German, Japanese and Swiss banks all increased their share of the international banking market in Europe, while Dutch and French banks pulled back. German banks' market share - which rose to 27% in the second quarter from 25% in the first - received a one-off boost of nearly 1 percentage point from HypoVereinsbank's purchase of Bank Austria, the largest bank in Austria.2 Japanese banks continued to shift their international claims from offshore centres and emerging economies towards Europe. Indeed, Japanese banks' claims on Europe increased to a record high of 37% of their outstanding international claims.
International claims on Japan resumed their long decline in the second quarter. As in previous quarters, this decline largely reflected the unwinding of loans to Japanese residents booked through Japanese banks' offices in banking centres abroad. The maturity distribution of such loans is not available. Consequently, the fall in the stock of these loans shows up as a decline in the unallocated maturity portion of total claims; it does not affect reported short-term claims. The sharp rise in the share of reported short-term claims in total international claims on Japan is thus misleading (Graph 1). Taking only the consolidated claims of foreign banks, ie excluding claims on Japan booked by Japanese banks' overseas offices, the short-term share has remained stable since mid-2000, at 55%.
Banks reduce their net risk exposure to emerging economies
While banks in the reporting area maintained their overall claims on private sector borrowers in the developed countries, outstanding claims on emerging economies fell again in the second quarter, by approximately 3%. Furthermore, the ratio of net risk exposures to contractual claims on emerging economies declined by 2 percentage points, to 88%. This suggests that banks in the reporting area are increasingly not rolling over maturing unsecured credits but seeking guarantees and other credit risk mitigants for their claims.
As in previous quarters, repayments by Asian borrowers were responsible for much of the decline in claims on emerging economies in the second quarter. Claims on Asia, which had accounted for over 40% of claims on all emerging economies at the onset of the Asian financial crisis in 1997, are now exceeded by claims on Latin America: 31% versus 34% (Graph 2). Most Asian borrowers experienced a decline in the second quarter. The most notable changes were in Korea, where banks paid back substantial amounts, and China, where a rise in claims on the non-bank private sector was more than offset by a fall in claims on banks. In several Asian countries, there was also a noticeable shift in the composition of claims away from the private sector towards the public sector. Taiwan, China saw the largest shift, with claims on the public sector doubling in the second quarter to 12% of total contractual claims, followed by Malaysia and the Philippines.
Claims on Argentina and Turkey fell again in the second quarter, by approximately 3% and 12%, respectively, on a contractual basis. The way in which banks in the reporting area reduced their exposure to each country differed in certain important respects. In Argentina, banks shortened the maturity of their claims. The proportion of claims maturing within one year rose to 58% from 56%, mainly because of a drop in the stock of longer-term debt (Graph 2). This drop appears to reflect a reduction in banks' holdings of Argentine government bonds; claims on the public sector fell by 3 percentage points in the second quarter, to 20% of total claims on Argentina. Furthermore, claims on Argentina on an ultimate risk basis fell by much more than contractual claims, to 91% of contractual claims in the second quarter from 94% in the first. Banks apparently sought to limit their exposure to Argentina through the use of collateral, guarantees and other credit risk mitigants. By contrast, in Turkey, the maturity distribution of claims lengthened, and the ratio of net exposure to contractual claims remained stable. Banks in the reporting area did not renew maturing short-term credits extended to Turkish banks and public sector borrowers. However, the stock of longer-term claims was more or less unchanged. Consequently, short-term claims on Turkey fell sharply to 58% of total claims from 63%.
The Czech Republic also saw a large decline in international claims in the second quarter, but this arose from a reclassification of claims rather than an outflow of funds. A Belgian bank merged its subsidiaries in the Czech Republic, and this affected cross-border positions on the Czech Republic and Slovakia.
1 A second set of BIS international banking statistics - the locational statistics - will be released on 10 December 2001 in the BIS Quarterly Review: International banking and financial market developments. The consolidated banking statistics provide a measure of the international exposure of national banking systems, while the locational statistics provide a better approximation of cross-border capital flows. A currency breakdown is not available for the consolidated statistics, and so exchange rate movements can result in changes in outstanding consolidated positions reported in US dollars even when positions remain unchanged. The explanatory notes at the end of this press release describe the consolidated statistics in more detail, and the statistical annex of the BIS Quarterly Review outlines the main differences between the two sets of international banking statistics. The consolidated and locational banking statistics are available on the BIS website (www.bis.org) and in the statistical annex of the BIS Quarterly Review. They are also included in the joint BIS-IMF-OECD-World Bank quarterly statistical release on external debt (www.bis.org/publ/r_debt.htm).