Location: Basel
Author: BIS Staff
Date: Monday, February 2, 2009
In the third quarter of 2008, cross-border activity decreased significantly on a consolidated basis when measured at current exchange rates and taking into account off-balance sheet exposures.
However, on a locational basis and at constant exchange rates, overall cross-border credit turned slightly positive, mainly as a result of substantial inter-office lending by banks.
In the third quarter of 2008, due to the strong recovery of the US dollar against the euro (close to 10% during the quarter), which caused balance sheet positions denominated in euros to shrink in dollar terms, banks' reported external claims declined by $1.5 trillion at current exchange rates. After excluding these exchange rate effects, the volume of banks' cross-border assets actually increased by $167 billion (0.5%), compared with a contraction of $821 billion in the second quarter.
The consolidated international claims of BIS reporting banks on an immediate borrower basis decreased by $1.6 trillion (7%). Though no currency breakdown is available for these statistics, a large part of the downturn is also due to the decline in the euro/dollar exchange rate during the quarter.
Once the exchange rate effect is accounted for, and noting that there was growth mainly in banks' inter-office claims, which are excluded by definition from consolidated reporting, underlying international consolidated claims can be estimated to have contracted by only $180 billion (-0.8%) during the third quarter. Banks' other outstanding exposures declined in US dollar terms.
Guarantees, which include credit protection sold via credit derivatives, dropped by 9% while reported credit commitments declined by 5%.
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