BIS consolidated international banking statistics for end-June 1999
11 November 1999
The BIS is releasing today its consolidated statistics on the maturity, sectoral and nationality distribution of international bank lending for end-June 1999, together with summary tables. The statistics are available on the BIS website (www.bis.org). They will be reproduced in the statistical annex of the BIS Quarterly Review of International Banking and Financial Market Developments, to be released on 22 November 19991 The BIS international banking data are also included in the joint BIS-IMF-OECD-World Bank quarterly statistical release on external debt, which was introduced at the beginning of this year The coverage of the most recent consolidated data has been expanded to include positions vis-à-vis the reporting countries themselves and information on net risk transfers.2
The latest set of statistics reveals a widespread retreat of commercial banks from the developing world in the first half of 1999. The cutback from December 1998 was most severe in the case of eastern Europe (-11%), with the further trimming of claims on Russia (-14%) being accompanied by a reduction in outstanding bank credit to most other eastern European countries. In contrast, the impact of the Russian and Brazilian crises on banks' relations with Latin American countries appears to have been limited. Thus, the decline in exposure to the region (-3%) was more than fully due to Brazil (-16%). Meanwhile, banks continued to pull back from Asia, albeit at a reduced pace (-4%, against -21% year over year in 1998). Nevertheless, this general retrenchment of bank credit from transition and emerging market economies in the first half of 1999 should be qualified. First, many countries have retained or regained access to the international capital markets, albeit at higher costs. Second, there has been no apparent let-up in the strategy of major banks to acquire stakes in local banks, even though the net impact of consolidation on reported positions is unclear. Third, current account surpluses in emerging Asia and the reflow of direct and portfolio investments have alleviated the need for the majority of countries in this region to import capital.
At the same time, the maturity composition of bank claims shows important divergences among recipient countries, both across and within regions. In eastern Europe, there was a further lengthening of the maturity profile. Thus, the share of the short-term (up to one year) category lost two and a half percentage points (to a six and a half-year low of 33%). However, this movement was strongly influenced by exposure to Russia and concealed some shortening in the maturity profile for Poland, the only major borrower in the area to receive fresh funds (mostly in the form of interbank credit). Similarly, the decline in the share of the less than one year maturity band (to 51%) in Asia masked an opposite trend in Korea, which was faced with a large volume of maturing loans in the period under review. In Latin America, the overall stability in the proportion of short-term debt (at 52%) also concealed major divergences. In particular, there was a significant reduction in the share of short-term debt for Mexico, reflecting the country's success in extending the maturity profile of its debt. In contrast, the shortening of the Argentine debt profile reflected both a preference of lending banks for short-term credit and a growing volume of longer-term debt falling due within the next 12 months. This may have added to pressure for the country to issue long-term bonds in the international market.
Looking at the sectoral composition of claims, there was in the first half of 1999 a fairly widespread tendency to bypass local banking systems. However, several major borrowers departed from the overall trend. In eastern Europe, there was an increase in the share of Russia's banking sector debt, possibly reflecting a greater accumulation of arrears than for other sectors, while Polish banks continued to be the main recipient of banking funds. Meanwhile, other central European countries tended to rely exclusively on their public sector to attract funds. In Asia, the decline in the share of local banking systems was part of a broader trend for the public sector to take over foreign debt, with Korea again the major exception to this rule. In the case of Latin America, the slight decline in the proportion of the banking sector mainly reflected developments in Brazil. In contrast, large-scale repayments of Mexican public debt and continued borrowing by the Argentine banking sector resulted in a slight strengthening in the relative importance of the two countries' local banking systems.
Data on net risk transfers provided for the first time by 13 out of 18 reporting countries for end-June 1999 point not surprisingly to a lower banking exposure to transition and emerging market countries after allowing for outward (negative) and inward (positive) risk transfers. This reallocation of claims from immediate to ultimate counterparties amounted to a net outward risk transfer of $58 billion and represented 16% and 10% of total outstanding exposures for eastern Europe and Latin America respectively, while accounting for around 5% for the other developing regions.3 This shows the importance of guarantees in the granting of credit to developing country borrowers. However, there were some major exceptions to the general pattern. These included the Czech Republic in eastern Europe, and Korea and Taiwan in Asia, to which banks reported a higher exposure on an ultimate than on an immediate counterparty basis.
With respect to the nationality composition of claims, the consolidated data show that Japanese banks continued to take the lead in banks' retreat from transition and emerging economies in the first half of 1999. Japanese banks now account for about a quarter of claims vis-à-vis Asia, down from a peak of 48% at end-1988. Another salient feature of the period under review has been the withdrawal of Japanese and UK banks from Latin America.
1For related conceptual and statistical issues, see the August 1998 issue of the BIS Quarterly Review of International Banking and Financial Market Developments.
2Based on outward and inward risk transfers to the countries of residence of ultimate borrowers as reported by 13 out of 18 participating countries. A more detailed explanation of the ultimate risk concept is provided in the explanatory notes to Tables 1 and 2.
3Percentages are based on the total claims reported by the same 13 countries also providing information on net risk transfers.