Cross-border claims of BIS reporting banks contracted by 2% in the second quarter of 2012, the second largest decline since early 2009. Reporting banks' cross-border claims on non-banks remained relatively stable, but credit to banks in advanced economies and in offshore financial centres contracted sharply (-3%). The fall in interbank claims was driven by reductions in inter-office positions (-5%). The outstanding stock of cross-border claims on borrowers in emerging markets changed little.
The gap left by euro area and Swiss banks pulling back from lending to emerging market economies in Asia-Pacific has been largely filled by banks in the region. The estimated intraregional lending accounted for 36% of total international claims on emerging Asia-Pacific in the most recent quarter available, up from an estimated 22% a few years ago.
OTC derivatives markets continued to shrink. Notional amounts outstanding of all contracts declined for the second half-year in a row, to $639 trillion at end-June 2012. This was mainly driven by lower volumes of interest rate derivatives and credit default swaps, which more than offset an increase in positions in foreign exchange, equity-linked and commodity contracts.
Reference rates such as Libor and Euribor play a key role in financial markets. At least 14% of outstanding debt securities are linked to an identifiable reference rate. For US dollar- and sterling-denominated securities, this tends to be Libor, with Euribor serving as the main benchmark for euro-denominated debt. The role of reference rates is even larger in the syndicated loan market, where well over half of the loans originated in the 12 months to October 2012 are linked to these rates.