New Telegraph

February 25, 2024

BIS: Cross-border claims contract by $1.1trn in Q2’20

Cross-border claims contracted by $1.1 trillion from end-March to end-June, partly reversing the $2.7 trillion surge observed the quarter before. Consequently, the year-on-year (yoy) growth rate dropped from 10 per cent to five per cent, the Bank for International Settlements (BIS) has said. The BIS stated this in its international banking statistics at end-June 2020 report obtained by New Telegraph.

The report stated that the Q2 contraction, like the Q1 surge, was driven by interbank positions, adding that: “Almost half of the quarterly change was the result of reduced inter-office positions, as banks redistributed liquidity across their global operations amidst the pandemic. In particular, claims on counterparties located in the United States, which accounted for much of the expansion in the first quarter, fell the most in the second.”

Noting that the global contraction was uneven across regions, the report said that while cross-border claims on advanced economies contracted during the quarter, their annual growth rate remained strong at +7 per cent yoy.

“The growth in claims on the United States in particular stayed high, at +11 per cent yoy. In contrast, claims on offshore centres almost stalled (+1 per cent yoy) and those on Emerging Market and Developing Economies (EMDEs) fell (-1 per cent yoy) for the first time since end-2016,” it stated. According to the report, “the contraction observed for EMDEs was relatively widespread.

While claims on EMDE non-banks increased slightly (+3% yoy), this was more than offset by a big drop in interbank claims (-$93 billion or -5% yoy). “Cross-border claims on all four EMDE regions dropped from Q1 to Q2 2020, with those on Latin America falling the most (-$43 billion; Graph 2, centre panel). Claims declined yoy for three of the four regions, resulting in negative yoy growth for EMDEs as a whole for the first time since end-2016.

“One exception to this general picture is the Africa and Middle East region: the annual growth in cross-border claims on its residents has remained positive (+4% yoy), extending the trend observed since 2014.

As a result, claims on that reregion now surpass those on both emerging Europe and Latin America.” The report further shows that banks reported fewer cross-border liabilities to official monetary authorities in Q2 2020, reversing the rise reported in the first quarter. It explained that these cross-border liabilities typically reflect deposits of foreign exchange reserves with commercial banks.

“US dollar-denominated deposits had surged in the course of Q1’20 (+$97 billion) but then reverted in the second quarter by $84 billion. Commercial banks located in Europe and, to a lesser extent, the United States reported the largest fluctuations over the two quarters. Ranked by bank nationality, it was affiliates of European and US banks that saw the largest moves,” it said.

Meanwhile, the BIS Consolidated Banking Statistics (CBS), which track the globally consolidated positions of banks headquartered in a given country, also show a decrease in banks’ claims in the second quarter. According to the data, “overall, banks’ foreign claims – i.e cross-border claims and local claims booked by affiliates located abroad (excluding inter-office positions) – fell by $1.1 trillion from end-Q1 to end-Q2’20.” BIS is an international financial institution owned by central banks that “fosters international monetary and financial cooperation and serves as a bank for central banks.”

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