Download Patterns in international banking: Key take

Patterns in international banking:
Key take-aways and implications
(Verhaltensmuster im Internationalen Banking: Erkenntnisse und
Implikationen); Swiss Bankers Association Journalistenseminar 2017
June 08, 2017; Zurich
Ingo Fender, Bank for International Settlements (BIS)*
*The views expressed here are those of the presenter and do not necessarily reflect those of the BIS.
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Starting point
The BIS is known (among other things) for:
 Banking regulation
 BCBS as standard setter in the area of international banking
 Most recently: Basel III package of regulatory reforms
 International Banking Statistics (IBS)
 Key dataset covering international banking activity
 Aggregate information at the banking system level
Plan: Use IBS to establish “patterns” in international banking;
derive broad (prudential) implications on that basis
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Outline
6 international banking patterns… :
 International banking is a USD business
 International banking centered on “hubs”
 Degree of international activity differs
 Bank structure differs too
 USD funding/hedging as a key issue
 New players/new targets (regionalisation)
…and their (prudential) implications.
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#1: International banking is a USD business
Bank claims scaled by world GDP (%)
Cross-border claims, by currency1
European banks (all currencies)2
20
6
15
4
10
2
5
0
00
02
USD
EUR
04
06
JPY
OTH
08
10
12
14
16
0
2002
2004
German banks
British banks
2006
2008
2010
French banks
Swiss banks
2012
2014
2016
Belgian banks
Dutch banks
1 Banks in BIS locational reporting countries; including intragroup claims and claims of foreign affiliates
on home countries. 2 Foreign claims excluding claims on residents of the home country booked by banks’
foreign offices.
Sources: IMF; BIS consolidated statistics; BIS locational statistics by nationality; BIS calculations.
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#2: …and is centered on “hubs”
Geographic linkages in the international banking system
USD stock linkages (residency perspective)1
CH
EUR stock linkages (residency perspective)1
Euro
Other
CH
Em Euro
Euro
Other
Em Euro
UK
UK
US
JP
Carib FC
Carib FC
Asia-Pac
$3.8 tn
$2.5 tn
$1.3 tn
JP
Asia FC
Lat Am
US - Carib FC:
US - UK:
US - Euro:
US
Oil
Asia FC
Lat Am
Euro - UK:
Euro - US:
Euro - CH:
Asia-Pac
$3.5 tn
$0.3 tn
$0.3 tn
Oil
1 The size of each circle is proportional to the stock of cross-border claims and liabilities booked by
reporting banks located in the particular geographical region. Some regions include non-reporting countries.
.
2010-Q1 data; line thickness proportional to the sum of claims (all residents)/liabilities (non-banks) across nodes
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#1/2: US dollar-based and hub-centred
 International banking is a USD business
 About half of cross-border activity
 US bank share is only about 25-30%
 Peak in 2008; tentative recovery
 Bond market activity is up over same period
 Shift to non-banks/”disintermediation”
 Cross-border banking is very concentrated
 UK and a few other major banking centers
 Foreign banks have large presence
 New York; London; Caymans; HK SAR/Singapore
 UK banks < 30% of UK total positions
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#3: Degree of international activity differs…
International banking business by nationality (2014/2016; ratios)
Foreign claims / total claims, end-20161
Foreign claims / total claims, end-20141,2
0.5
0.5
0.4
0.4
0.3
0.3
0.2
0.2
0.1
0.1
0.0
SG CH GB SE BE FR ES CA DE US IT
JP KR TR
0.0
SG CH GB SE BE FR ES CA DE US IT
JP KR TR
BE = Belgium; CA = Canada; CH = Switzerland; DE = Germany; ES = Spain; FR = France; GB = United Kingdom;
IT = Italy; JP = Japan; KR = Korea; SE = Sweden; SG = Singapore; TR = Turkey; US = United States.
1
2
Consolidated claims of CBS reporting banks on an immediate counterparty basis. Foreign claims refer to claims
on borrowers outside of banks’ home country. Total claims comprise foreign claims plus domestic claims..
Data for Singapore relate to end-March 2015.
Sources: BIS Consolidated Banking Statistics; BIS Locational Banking Statistics; ECB; IMF IFS; national data.
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#4: …and bank structure too
Foreign assets and liabilities (2016; %), by booking location1
Foreign assets
Foreign liabilities
100
100
80
80
60
60
40
40
20
20
0
JP
DE US
BE
FR
IT
NL CH AU GB CA ES
From home office
From a third country
0
JP
DE US
BE
FR
IT
NL CH AU GB CA ES
Local
Banks domiciled in: AU = Australia; BE = Belgium; CA = Canada; CH = Switzerland; DE = Germany; ES = Spain;
FR = France; GB = United Kingdom; IT = Italy; JP = Japan; NL = Netherlands; US = United States.
1 Cross border, from home office = cross-border positions booked by the lending bank’s home office plus estimated
cross-border funding of positive net positions vis-à-vis residents of the home country; Cross border, from a third
country = cross-border positions booked outside the lending bank’s home country; Local = positions booked where
the borrower resides.
Sources: BIS consolidated banking statistics; BIS locational banking statistics by nationality.
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#3/4: International activity and bank structure
 International activity: consolidated foreign claims/total claims
 Banks from SG, SE, CH and GB stand out as having
internationally oriented balance sheets (~50% share)
 IT, JP and US banks are more domestically oriented (<25%)
 Banks with large domestic operations: may be less
vulnerable to foreign shocks; but less diversified?
 Notable differences in bank structure:
 GE, JP: centralised pattern of international activities
 SP, CN: more locally managed and funded
 Different approaches/decision making: shock transmission?
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#5: Currency hedging…
Banks’ gross/net US dollar-denominated foreign positions
German banks, by counterparty sector
Japanese banks, by counterparty sector
200
2,500
1,000
2,500
100
1,250
500
1,250
0
0
0
0
–100
–1,250
–1,250
–200
–2,500
–2,500
–300
–3,750
00
Lhs:
Net
02
04
06
08
10
12
Gross (rhs):
1
Monetary authorities
14
16
Non-banks
–3,750
00
02
Gross (rhs):
Interbank
04
06
08
10
12
14
16
Inter-office
Amounts in USD bn; gross and net USD-denominated positions on German/Japanese banks’ balance sheets.
The vertical lines indicate the 2007 beginning of the global financial crisis and the 2008 collapse of Lehman Brothers.
Sources: BIS consolidated statistics; BIS locational statistics by nationality; BIS calculations
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#6: …and new players (regionalisation)?
Bank credit to emerging Asia-Pacific
International claims on the region (USD bn)1
Share in international claims on the region (%)
1,600
40
1,200
30
800
20
400
10
0
2002 2004 2006 2008 2010 2012 2014 2016
Intraregional banks
AU & JP banks
US banks
British banks
2
Swiss banks
Euro area banks
Other reporting banks
0
2002 2004 2006 2008 2010
Intraregional banks
AU & JP banks
US banks
British banks
2012 2014 2016
Swiss banks
Euro area banks
Other reporting banks
Sum of all cross-border claims and locally extended claims in foreign currency. 2 Intraregional share is the sum of
international claims on the emerging Asia-Pacific region of banks headquartered in Chinese Taipei, Hong Kong SAR, India,
Singapore and the offices of banks located in the region that have a parent institution from a non-BIS reporting country
(assuming these are headquartered in Asia).
1
Source: BIS consolidated banking statistics (immediate borrower basis).
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#5/6: Old issues and new players
 Long USD positions were big prior to the crisis
 GER (and CH, UK) banks funding LT claims on US non-banks
(read: conduits) from non-USD/domestic sources
 Currency mismatch; typically hedged via FX swaps;
translates into roll-over needs
 Net claims have come down substantially since; but not
everywhere: USD funding markets remain key
 Intraregional share of banking activity is up
 Most obviously in Asia, but also elsewhere
 Integration of frontier markets
 Changing regional interlinkages: risk-sharing/concentration
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(Prudential) Implications
 International nature of banking
 Underscores value of international standards and…
 …of consistent implementation (level playing fields)
 Differences across national banking systems
 No one-size-fits-all in supervision (& risk management)
 Premium on supervisory activity in key host jurisdictions…
 …and on supervisory cooperation
 Home-host issues taken to new country pairs
 Stress tests at the local (not only consolidated) entity level;
different supervisory focus across countries
 USD funding as one focal point
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-Thank you/Danke-
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