Europe banks continue to boost cross-border loans - BIS

     International lending by European banks, especially French banks, continued to rise in the third quarter, suggesting the contraction seen following the 2007-2009 global financial crises has now been reversed, according to the Bank for International Settlements (BIS).
     The expansion of European banks' cross-border lending comes amid an overall 9 percent rise global cross-border claims in the third quarter to $31 trillion at the end of September, the highest growth rate since end-March 2008, according to the latest International banking statistics by BIS, the Swiss-based forum for central bank cooperation.
     The global expansion in lending was mainly driven by activity in advanced economies, which rose 10 percent year-on-year in the third quarter, while claims on emerging and developing economies contracted by 3 percent, with the biggest falls seen in claims on China, Turkey and Mexico.
     As in recent quarters, lending to non-bank financial institutions continued to expand rapidly, rising by an annual 17 percent in the third quarter, outpacing the growth in claims on all other sectors.
     One of the effects of the global financial crises was that banking regulators worldwide tightened their supervision of major banks, forcing them to retreat from riskier financing operations.
     Non-bank financial firms, such as insurance companies, specialized lenders, leasing firms or institutional investors, such as pension funds and brokerage firms, took advantage of this hole in the market place.
     Following the global financial crises, European banks retreated from international lending whereas U.S. and Japanese banks continued to expand their presence, BIS said.
     For example, between mid-2008 and end-2017 German banks' cross-border claims on non-banks fell an average annual rate of 5 percent while those of Japanese and U.S. banks' claims rose an average 7.0 percent and 4.0 percent, respectively.
     But since 2018 European banks' cross-border lending has been expanding again, with an average annual growth rate of cross-border claims 9 percent by euro area banks and 11 percent by UK banks.
     French banks have been particularly active, with their claims expanding at an average annual rate of 21 percent while the claims of German banks has remained virtually unchanged, BIS said.

     To read the full BIS report, please click here.

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