BIS Quarterly Review, December 2012

About this issue

• Forecasts for global economic growth fell in the three months to early December, yet most risky asset prices increased. These prices benefited from further loosening of monetary policies and perceptions that some major near-term risks to the world economy had diminished.
• Cross-border claims of BIS reporting banks dropped sharply between April and June, for the second time in three quarters. Interbank claims - especially inter-office positions - fell significantly, whereas claims on non-banks remained relatively stable.
• Banks from emerging market economies in Asia-Pacific largely filled the gap left by euro area and Swiss banks pulling back from lending to the region.
  The OTC derivatives market continued to shrink. Notional amounts outstanding declined for the second half-year in a row, to $639 trillion at end-June 2012.
• Reinsurers transfer only part of the risk arising from natural catastrophes to other financial institutions and the broader financial market. Sebastian von Dahlen (International Association of Insurance Supervisors) and Goetz von Peter (BIS) argue that these transfers, though small, warrant attention because little is known about who exactly has taken over the risk.
• Research by Stefan Avdjiev (BIS), Zsolt Kuti (Magyar Nemzeti Bank) and Előd Takáts (BIS) indicates that the deteriorating health of euro area banks explains most of the sharp fall in cross-border lending to emerging market economies in the second half of 2011.
• Morten Bech of the BIS and Todd Keister of Rutgers University argue that central banks may have to adjust their operating framework to deal with the changed demand for liquidity once the liquidity coverage ratio of Basel III comes into effect.
• The BIS has revised its debt securities statistics to enhance their comparability across different markets. The article by Branimir Gruić and Philip Wooldridge (BIS) explains the reasoning behind these changes.