Provisional international banking statistics, second quarter 2008

Statistical commentary on provisional locational and consolidated banking statistics at end-June 2008 (PDF, 12 pages, 82 kb)

In the second quarter of 2008, international banking activity, which had been sustained mainly by banks' inter-office loans in the first quarter, decreased by 3%. The reduction in assets was centred on short-term interbank credits in US dollars. In contrast, loans to banks and non-banks in emerging markets continued to grow. Banks' other exposures, such as credit derivatives and guarantees, also rose.

In the second quarter of 2008, BIS reporting banks' total international claims declined by $1.1 trillion at constant exchange rates (or 3%) to $39.1 trillion. The largest previous contractions occurred in the second quarter of 2001 in the aftermath of the bursting of the dotcom bubble ($125 billion or 1% of the total at the time) and in the fourth quarter of 1998 following the demise of LTCM (1.2%). Cross-border claims fell by $862 billion (2%) and foreign currency positions with local residents dropped by $231 billion (5%).

While banks provided additional credit to residents of emerging markets, particularly developing Europe, and within the euro area, credits to the United States, the United Kingdom and Caribbean and European offshore centres contracted by 7%, mainly due to declines of $564 billion in cross-border US dollar claims and $189 billion in pound sterling claims. Foreign currency positions with residents decreased mainly in euros ($149 billion), US dollars ($67 billion) and Japanese yen ($43 billion).

Banks' cross-border liabilities shrank by $1 trillion, including drawdowns of $633 billion US dollar and $184 billion pound sterling, mostly by residents of the United States, the United Kingdom and Switzerland. Foreign currency liabilities vis-à-vis residents decreased by $185 billion, mainly in euros ($139 billion). Banks' issues in international markets rose by $148 billion.

In the second quarter of 2008, the consolidated international claims of BIS reporting banks on an immediate borrower basis declined by $781 billion (3%). This decline mirrored developments in claims on a locational basis.

Given that there was very little movement in major exchange rates during the quarter, changes in the currency composition of consolidated assets can be estimated to be broadly similar to those in the locational statistics. However, the currencies of some emerging markets (such as Brazil, Mexico and eastern Europe) appreciated during the quarter. Hence, the increase in outstanding local claims in local currency of $62 billion was mainly due to exchange rate appreciation against the US dollar, and underlying local claims in local currencies increased by only $3 billion.

In terms of maturity, there was no change in overall long-term claims, while short-term claims dropped by $663 billion. Short-term claims on mature economies fell even more (by $727 billion), while short-term claims on offshore centres remained unchanged and those on emerging economies increased by 5%.

Consolidated claims on an ultimate risk basis, which takes account of net risk transfers related to guarantees and collateral, declined by 2% to $30.1 trillion. Banks' other exposures increased, mainly those related to derivatives (3% or $128 billion) and guarantees, which include credit protection sold via credit derivatives (5% or $444 billion). Credit commitments declined by 2%, however ($116 billion).

Revised data, together with a detailed commentary, will be made available in the next BIS Quarterly Review to be published on 8 December 2008.