BIS global liquidity indicators at end-June 2022

Key takeaway

  • Against the backdrop of rising interest rates, dollar borrowing by non-banks outside the United States via syndicated loans and bonds contracted in both Q2 and Q3, foreshadowing weaker growth in credit overall.

Global liquidity indicators at end-June 2022

The BIS global liquidity indicators (GLIs) track credit to non-bank borrowers, covering both loans extended by banks and funding from global bond markets through the issuance of international debt securities (IDS). The main focus is on foreign currency credit denominated in three major reserve currencies (US dollars, euros and Japanese yen) to non-residents, ie borrowers outside the respective currency areas. The GLIs monitor growth in this credit relative to that denominated in those same currencies to residents within these currency areas (as reported in national financial accounts).10

In Q2 2022, foreign currency credit denominated in US dollars contracted while that in euros expanded. As a result, yoy growth rates diverged further (Graph 7.A). Dollar credit to non-bank borrowers outside the United States stood at $13.3 trillion at quarter-end, only 1% higher than a year earlier (Annex Graph C.4). Growth in euro credit to non-bank borrowers outside the euro area remained strong at 10% yoy, pushing the amount outstanding to €3.9 trillion ($4.1 trillion). Yen credit to non-bank borrowers outside Japan accelerated to 10% yoy through a jump in bank loans (16% yoy) (Graph 7.B). Increased yen lending, by both Japanese and other banks, pushed the stock of credit to ¥49.8 trillion ($0.37 trillion). In all three currencies, the issuance of IDS slowed down (Graph 7.C).

Foreign currency credit to non-banks in emerging market and developing economies (EMDEs) also weakened in dollars but accelerated in euros (Graph 8.A). This left the respective stocks at $4.2 trillion (Table E2-USD) and €0.8 trillion (Table E2-EUR). Dollar credit to EMDEs declined by $7 billion during Q2 2022 after six consecutive quarterly expansions (Graph 8.B). Dollar credit to non-banks in Asia-Pacific fell the most (-$13 billion), mainly reflecting lower credit to borrowers in China (-$21 billion), followed by those in emerging Europe (-$3 billion). By contrast, credit to borrowers in Africa and the Middle East (+$7 billion) and in Latin America (+$2 billion) grew. In contrast to dollar credit, growth in euro credit to EMDEs gained momentum (Graph 8.C). Euro-denominated loans grew by €23 billion in Q2, whereas net issuance of IDS (gross issuance minus redemptions) added little. Borrowers residing in emerging Europe received most of the new euro credit (+€16 billion), followed by Asia-Pacific (+€8 billion). The only region that saw a contraction was Latin America (-€2 billion), mainly on account of Mexico (-€2 billion).

Looking ahead, high inflation and rising interest rates in many jurisdictions may have a significant impact on foreign currency credit to EMDEs and advanced economies (AEs). Persistent dollar strength can pose balance sheet challenges to dollar borrowers whose assets or revenues are in local currencies. While the GLI data for Q3 2022 will be available only in January 2023, data from Dealogic can provide timelier (if partial) insights in the meantime.

Overall, these data foreshadow a further slowdown of dollar financing in Q3, for bonds as well as for term loans (Graph 9). Weakness in dollar credit in Q2 continued into the third quarter, especially for debt issuance by non-financial corporates (NFCs) in AEs (Graph 9, purple bars). Issuance by these firms dropped markedly in Q2 (-$18 billion), and the downward trend in issuance continued into Q3, with July (-$4 billion), August (-$6 billion) and September (-$12 billion) data pointing to further slowdown. As regards NFCs in EMDEs (green bars), Q3 data suggest a cumulative decline (-$9 billion) in the outstanding stock of dollar debt between July and September.

10 For more details, see the     GLI methodology.

The BIS ceased receiving data from public authorities in Russia after 28 February 2022. Where possible, data publication will be continued if the BIS is able to use data from public or commercial sources.