The rapid growth of credit to non-bank financial institutions (NBFIs) since the global financial crises continued in the fourth quarter of 2018 when total worldwide cross-border bank claims grew only 1.0 percent, according to the Bank for International Settlements (BIS).
After growing in 2016, global cross-border lending was largely steady in the last 2 years as higher lending to borrowers from advanced economies in 2018 was offset by a decline in lending to borrowers from emerging and developing economies, and offshore centers, BIS said in its latest release of international banking statistics for the end of 2018.
Total global cross-border claims grew by $134 billion, or 1.0 percent year-on-year in, during the fourth quarter of last year to an outstanding amount of $29 trillion, propelled by an 8 percent rise in claims on NBFIs, short-hand for an vast number of firms that provide financial services but do not have a full banking license and does not accept customer deposits.
One of the effects of the global financial crises was that banking regulators tightened their supervision of major banks, forcing them to retreat from some riskier financing operations.
Into this breach, stepped non-bank financial firms, such as insurance companies, specialized lenders, or institutional investors such as pension funds and brokerage firms.
Between end-2015 and end-2018 cross-border claims on NBFIs grew by an annual pace of 8 percent in stark contrast to 0 percent growth in lending to banks and only 2 percent growth in lending to non-financial borrowers.
Another illustration of the shrinking role of banks is that cross-border claims on banks fell by an annual 1 percent by end-2018 while claims on non-banks was up by nearly 5 percent, data from BIS, know as the central banks’ bank, showed.
The bulk of credit to NBFIs, nearly 80 percent, is focused on a small number of jurisdictions, with nearly half of the total global stock of $6 trillion in claims against borrowers in the US (24 percent), the euro area (23 percent), the Cayman Islands (18 percent) and the UK (14 percent).
After rising sharply in 2016 and 2017, lending to emerging and developing economies slowed last year, especially to borrowers in developing Europe, while lending to Latin American revived.
Overall claims on emerging market and developing economies slowed from 9 percent growth at the end of 2017 to 3 percent by the end of 2018, with roughly half of the $30 billion in claims in the fourth quarter going to borrowers in developing Asia and Pacific.
Claims on Asia and Pacific rose $15 billion in the fourth quarter, bringing annual growth to 5 percent, with claims on China up $9 billion, the Philippines by $4 billion, Indonesia by $3 billion and Thailand by $2 billion.
In contrast, cross-border lending to Taiwan fell by $11 billion, Swiss-based BIS said.
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