BIS international banking statistics and global liquidity indicators at end-March 2022

Global cross-border claims surged in Q1 2022

The resurgence of inflation, the war in Ukraine and the lockdown in China raised further challenges to the world economy in the first quarter of 2022. Amidst this complex global landscape, banks' global cross-border claims, as tracked in the BIS locational banking statistics (LBS), surged by $1.4 trillion during the quarter (Graph 1).¹ The expansion was the third largest on record, pushing the stock of cross-border claims to $35.9 trillion at end-March 2022 (up 4% from a year earlier).

The Q1 expansion was uneven across regions and currencies. Most of the $1.4 trillion surge went to borrowers in advanced economies (AEs) ($1.3 trillion) (Graph 1.1), with interbank claims ($903 billion) driving this expansion, followed by credit to non-bank financial institutions (NBFIs) (Graph 1.2). Claims denominated in several major currencies went up in Q1 2022, with those denominated in euros growing the most (Graph 1.3). Five countries – the United Kingdom, Germany, Japan, the United States and France – together attracted 70% of the increase in cross-border claims (Annex Graph A.3). Claims on offshore financial centres (OFCs) also rose by $74 billion, while those on all EMDEs combined fell slightly, by $3 billion.

The surge in global cross-border claims in Q1 was partly the result of seasonal factors that affect several large banking systems (Graph 1.4), with positions contracting at year-end only to expand again the following quarter in most cases (Graph 2.1, blue bars).² Removing these seasonal effects tends to moderate the Q1 changes in cross-border claims (Graph 2.1, red dots). In the aggregate, seasonal effects accounted for 50% of the Q1 expansion, leaving a still remarkable expansion of roughly $700 billion. This expansion in cross-border claims was mainly driven by claims on AEs, which increased by $630 billion on a seasonally adjusted basis (Graph 2.2). By contrast, claims on EMDEs overall fell by $17 billion on a seasonally adjusted basis (Graph 2.3).

Falling claims on China dampen flows to EMDEs

Banks' cross-border claims on EMDEs changed little overall during the first quarter of 2022, with a drop in claims on China offsetting an increase vis-à-vis other EMDEs (Graph 3.1). Claims on Africa and the Middle East rose by a mere $3 billion, significantly less than the $27 billion rise in the previous quarter.³ Similarly, the rises in claims on Latin America and the Caribbean (+$7 billion) and on emerging Europe (+$15 billion) during the quarter were both noticeably smaller than those in the previous quarter.⁴

In emerging Asia-Pacific, cross-border claims on most major economies in the region expanded (Graph 3.1), with Korea and Chinese Taipei attracting sizeable inflows ($14 billion each) (Graph 3.2). Offsetting these increases, however, was a $66 billion drop in claims on China (Graph 3.1), booked mainly by banks operating in Hong Kong SAR, the United Kingdom and Chinese Taipei (Graph 4.1).⁵ About 60% of the drop in claims on China was attributable to Chinese banks located abroad (Graph 4.2).

The BIS consolidated banking statistics (CBS), which track the worldwide consolidated claims (excluding inter-office positions) of national banking systems, show a similar decline in claims on China. Of the $1.3 trillion in global bank claims on China in Q1 2022, those held by foreign (ie non-Chinese) banks accounted for $877 billion (Graph 4.3). These claims, which include banks' cross-border claims as well as the local positions booked by their affiliates located in China, fell in the course of Q1 2022 by roughly $36 billion.

The CBS figures for Q1 have also begun to capture the effects of the war in Ukraine that began in February. Foreign claims on Ukraine fell by $2.6 billion (–19%) during the quarter, to stand at $11.2 billion at end-March (Graph 5.1). This decline in foreign claims can include actual reductions in lending or securities holdings as well as the impact of lower valuations and writedowns of the existing assets. French banks' foreign claims fell sharply (–43%), from $3.5 billion to $2 billion (Graph 5.1, blue line). The 27% and 35% declines for US banks (yellow line) and other reporting banks (purple line), respectively, were also remarkable. By contrast, Austrian banks – which had the highest exposure to Ukraine among CBS reporting banks – reported claims only marginally lower (–$70 million, –2%) than in Q4 2021.

Banks' foreign claims on Russia also declined during the quarter, possibly the result of international sanctions. By end-March 2022, they had contracted by $14 billion (–11%) to $107 billion.⁶ More than half of this overall drop was reported by US banks, whose claims fell from $16 billion to $9 billion, or by 45%. Several other major banking systems (eg Austrian and French banks) also reduced their foreign claims by more than 10% (Graph 5.2). Italian banks, by contrast, reported a 3% increase in foreign claims. In addition to revaluations and writedowns, divestures of local affiliates operating in Russia are reported to have played a role.

While Chinese authorities do not report the CBS, other data sources suggest that Chinese banks may have maintained or stepped up their credit to borrowers in Russia. Outstanding syndicated loans derived from Dealogic data up to June 2022 show that loans extended by Chinese banks reached $51 billion, accounting for over 40% of the global total of syndicated loans to Russia. The most recent uptick echoes developments seen in the earlier phase of the war: Chinese banks expanded their syndicated loans to Russia in 2016 following a retreat by banks from other countries after the imposition of sanctions on Russia in 2014 (Graph 5.4).

A notable development regarding counterparts in Russia was on the liability side of global banks' balance sheets. BIS reporting banks' cross-border liabilities to Russia have exceeded their claims on the country since Q1 2015. During the first quarter of 2022, these net cross-border liabilities (liabilities minus claims) to Russia almost tripled, reaching $68 billion (Graph 5.3, black line). The biggest increase was reported by banks located in Belgium and the United States, which saw their liabilities jump mainly vis-à-vis banks and the NBFI sector in Russia, respectively. This suggests that, in a process resembling capital flight, Russian residents may have shifted dollar and euro deposits from banks located in Russia to banks abroad.

Syndicated lending to EMDEs slowed in second quarter

Looking beyond Q1, the war in Ukraine and the resurgence in inflation in many countries may have an outsize impact on cross-border bank credit to EMDEs. However, the Q2 2022 BIS international banking statistics (IBS) data will be available only in October 2022. Meanwhile, syndicated loan data, which are partial but timelier, can foreshadow trends in cross-border bank credit in the second quarter of 2022.⁷ In addition, they are available on a monthly basis, and thus shed light on changing patterns within quarterly periods.

While not as strong as in Q4 2021, the net issuance of syndicated loans was positive in Q1 2022 (Graph 6). Monthly data show brisk net issuance (new loans minus repayments) in January of loans to non-financial corporates (NFCs) in both AEs and EMDEs. Net issuance slowed in February and March but remained positive.

While NFCs in AEs continued to attract syndicated loans through end-June 2022 (Graph 6.1), net issuance of loans to those in EMDEs turned negative, with new issuance falling short of repayments. The drop was larger on a nationality basis (not shown), pointing to weaker growth in loans to EMDE companies that raise funding offshore. Syndicated loan data thus suggest that bank credit to EMDEs more generally may have weakened, possibly foreshadowing a Q2 contraction in cross-border claims on these borrowers as captured in the LBS.

Global liquidity indicators at end-March 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).⁸

In Q1 2022, foreign currency credit stagnated in dollars but expanded in euros. As a result, the year-on-year (yoy) growth rates diverged (Graph 7.1). Dollar credit to non-bank borrowers outside the United States stood at $13.4 trillion at quarter end, some 3% higher than a year earlier (Annex Graph C.4). Growth in euro credit to non-bank borrowers outside the euro area accelerated to 11% yoy, pushing the stock to €3.8 trillion ($4.2 trillion). Yen credit to non-bank borrowers outside Japan grew for the first time since end-2020, at 1% yoy, to stand at ¥47 trillion ($0.4 trillion). In all three currencies, issuance of IDS continued to outpace bank loans (Graph 7.2 vs 7.3).

Foreign currency credit to non-banks in EMDEs remained resilient through end-March, having expanded at roughly 5% per annum in both dollars and euros in recent years. This left the stocks at $4.2 trillion and €0.8 trillion respectively (Table E2-USD and E2-EUR). In all regions, yoy growth rates remained positive, except for euro credit to Latin America (Graphs 8.1 and 8.2). During Q1 2022, total foreign currency credit to EMDEs increased by $44 billion after adjusting for exchange rate effects (Graph 8.3). Borrowers in Asia-Pacific accounted for $35 billion of this expansion, mainly through dollar credit.

Looking ahead, higher-frequency but partial data from Dealogic, which cover both issuance of syndicated loans and bonds, can help to assess global liquidity conditions in the second quarter (Graphs 9 and 10). The data suggest that the deterioration in market sentiment following the start of the war in Ukraine and the broad-based surge in inflation coupled with expectations of faster-than-anticipated policy tightening by the major central banks weighed on foreign currency credit to EMDE corporates. During Q1, net monthly issuance (gross issuance minus redemptions) of foreign currency-denominated syndicated term loans to NFCs in EMDEs turned negative, by $8 billion (Graph 9.1). The downward trend continued in Q2, with a cumulative decline of $13 billion by end-June 2022 (black dots). This is in contrast with AEs, where net issuance of foreign currency syndicated loans remained positive in both Q1 and Q2 2022 (Graph 9.2).

Monthly data on global bond issuance also show signs of weakness, particularly for EMDEs (Graph 10.1 and 10.2).⁹ Net issuance (in dollars, euros, and yen) by NFCs in EMDEs (residency basis) turned negative in February 2022 (–$10 billion). This downward trend continued into the second quarter, when net issuance declined by a further $8 billion (Graph 10.2, blue bars). Aggregating net EMDE issuance on a nationality basis¹⁰ shows an even sharper cumulative decline of $21 billion by March, and even $58 billion by end-June (Graph 10.2, red line). The $37 billion contraction in the stock of outstanding foreign currency bonds between April and June 2022 was the largest quarterly decline recorded to date. Bonds issued by Chinese NFCs accounted for nearly $24 billion (65%) of this.

A prolonged tightening of financial conditions makes it more expensive for EMDE corporates to refinance their foreign currency debt. For EMDE NFCs as a group, $158 billion in debt securities denominated in dollars, euros and yen will mature between June and December 2022 (Graph 10.3). Asian NFCs have the largest refinancing needs ($110 billion), with Chinese firms accounting for 67% of all upcoming redemptions in the region ($74 billion). This is followed by borrowers headquartered in Latin America ($19 billion), Africa and the Middle East ($17 billion), and emerging Europe ($12 billion).

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¹  In the LBS, claims comprise loans, holdings of debt securities, derivatives with a positive market value and other residual instruments. Data on banks resident in Russia are no longer reported, since the BIS ceased receiving data from public authorities in this country. Their positions are excluded from end-Q1 2022 stocks, representing a break in series in terms of levels (but not affecting value-adjusted Q1 changes). Data for end-March 2022 have been rolled forward from previous quarters for the following reporting countries: Brazil, Curaçao (end-June 2017), Germany, Netherlands, Philippines and Singapore (end-June 2021). See the    explanatory notes on the BIS website.

²  Most reporting banks' fiscal year closes at the end of the calendar year. Some, however, have their fiscal year-end at end-March (eg Japanese banks).

³  Within the region, claims on South Africa rose for the first time since Q1 2019 (+$7 billion), whereas those on Egypt, the United Arab Emirates and Israel declined.

⁴  Relatively large increases in claims on Czechia (+$15 billion), Hungary, Poland and Croatia (+$7 billion combined) more than offset a drop in claims on Russia, Turkey, Romania and Ukraine (–$8 billion in total), resulting in an overall increase on Emerging Europe (Graph 3.2).

⁵  As emerging Asia's largest economy, China accounted for 45% of the stock of cross-border claims on the region, as of Q1 2022.

⁶  This is more than the $90 billion in foreign claims on a guarantor basis, ie adjusted for collateral, guarantees and other credit risk mitigants.

⁷  One reason is that the issuance of term loans to NFCs, when retained by banks that make up the syndicate, will contribute to the international positions those banks report later in the IBS. As a result, syndicated loan issuance tends to move together with changes in positions banks report in the IBS. See B Gadanecz and K von Kleist, "Do syndicated credits anticipate BIS consolidated banking data?", BIS Quarterly Review, March 2002.

⁸  For more details, see the    GLI methodology.

⁹  The stock of outstanding bonds issued by EMDE borrowers is lower than that of AE borrowers. The drop is thus sharper for EMDEs as a percentage of the outstanding stock.

¹⁰ Data compiled on a nationality basis associate the issuance of EMDE-headquartered NFCs with the corresponding EMDE when the firm issues in AEs or offshore financial centres.