International bank lending contracts sharply in Q2 – BIS

    International bank lending fell sharply in the second quarter of 2012 as major banks continued to reduce their exposure to financial institutions in advanced economies, especially in the euro area, the United States and the UK, the Bank for International Settlements (BIS) said.

     Meanwhile, globally-active banks continued to extend credit to borrowers in the Asia-Pacific region and Latin America. Second quarter lending to Asia-Pacific rose by $25 billion and by $5 billion to Latin America. However, loans to Africa and emerging Europe declined by a total of $26 billion from the first quarter.

    Preliminary data for international bank lending showed that total cross-border claims of major banks reporting to the Basel-based BIS fell by $596 billion, or 1.9 percent, to $29.4 trillion, a sharp contrast to the first quarter when international lending rebounded after a plunge in the fourth quarter of 2011.

    But while credit to financial institutions, including those in offshore centers, dropped by $609 billion in the second quarter – the fifth largest quarterly fall ever recorded by the BIS - banks continued to extend credit to non-banks with claims up by $27 billion in advanced economies and up by $2 billion to emerging economies.

    Figures that exclude inter-office lending and risk transfers also show a continued decline in the exposure of banks to other banks, especially in the euro area, BIS said.

    The total exposure of major banks worldwide to euro area banks fell by $76 billion in the second quarter to $1.6 trillion while the exposure to non-banks was relatively stable.

    The large public sector debt in some southern European countries is leading to a two-way split in lending, with euro-area banks continuing to cut their exposure to Greece, Ireland, Italy, Portugal and Spain, while increasing  their exposure to Germany and France, BIS said.

    The exposure of euro area banks to the five debt-plagued countries fell by $16 billion, or 7 percent, to $201 billion, while the exposure to Germany and France rose, pushing the exposure to euro area sovereigns of all banks reporting to the BIS to some $1.7 trillion, above the $1.45 trillion exposure to the U.S. government.

    Final data for second quarter lending will be published by the BIS in its December quarterly review.

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