Monday, June 04, 2012

BIS Quarterly Review: Global Banks Cut Lending

From the Bank for International Settlements (BIS): Quarterly Review(ht mp)

And from Mark Scott at the NY Times DealBook: Global Banks Cut Lending in Response to Economic Slowdown
International lending by global banks in the fourth quarter last year fell by the largest amount since the collapse of Lehman Brothers in 2008, according to the Bank for International Settlements, an association of the world’s central banks.

In total, financial firms cut overseas lending by $799 billion in the last three months of 2011, the latest figures available. Around 80 percent of the reduction came from the so-called interbank market where institutions lend money to one another.
...
As the ripple effects of the European debt crisis have been felt across the United States and emerging economies in Asia and Latin America, banks in both developed and emerging economies have been looking to pullback on credit to risky borrowers.

Attention has focused on Europe and its beleaguered banking system. In its quarterly review published on Monday, the Bank for International Settlements, based in Basel, Switzerland, said international banks had cut lending to financial firms in the so-called euro zone region by $364 billion in the fourth quarter last year. The reduction represents almost half of the global pullback in lending over the period.
This pullback in lending is global, but it is concentrated in Europe. However there appears to be some tightening in the U.S. too. In a research note on Friday, Goldman Sachs noted this:
US financial conditions have tightened by about 40bp since April, according to our GSFCI. If the current stress were sustained, the tightening would mechanically imply a 0.6% hit to real GDP. Our analysis suggests that perhaps half of this can be explained by the European crisis.

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