Global banks’ lending falls 1.8%

VIENNA: Lending by global banks fell by 1.8 per cent in the third quarter of 2013, as loans to other banks shrank at the fastest rate in more than a year, the Bank for International Settlements (BIS) said.

Cross-border claims of banks reporting to the BIS declined by $500 billion to $28.5 trillion in the three months through September 2013, the Basel, Switzerland-based institution said in a report released yesterday. The reduction was driven by a 2.7 per cent fall in lending to other banks, extending a five-year slump that has taken out $5.7 trillion of bank funding since 2008, the BIS said.

“The 2007–09 global financial crisis and the subsequent euro area financial strains have left a profound imprint on internation- al interbank funding,” the BIS, record-keeper of the world’s central banks, said in its quarterly report. “While this contraction affected most countries worldwide, it was largest for borrowers in Europe, especially the euro area.”

The decline in interbank lending comes as regulators discourage wholesale borrowing and move to rules that will require creditors to take losses when banks are rescued. Lenders also still harbor doubts about their peers’ asset quality and central banks continue to step in with unprecedented liquidity as they did when strains in global banking first appeared in 2007.

The biggest reason for the drop in bank lending in the third quarter of 2013 was a reduction of “inter-office positions,” or lending between parent and subsidiaries of the same banking group, the BIS said. That extended a “steady decline” that started in late 2011, it said. Regionally, the retreat was most pronounced for claims on banks in the euro area, which declined by 4.2 per cent, and in the UK, which fell 7.8 per cent, it said.

Lending to borrowers in emerging-market economies rose 1.7 per cent, or $60 billion in total, as significant increases in a few Asian countries more than outweighed declines elsewhere.