Banks around the globe expanded lending outside their home base by US$700 billion, or 2.1%, to $33.4 trillion in the first quarter of this year, according a report by the Bank for International Settlements.
The international claims of BIS reporting banks rose for the first time since the third quarter of 2008. The expansion was driven by solid increases in both interbank claims ($383 billion or 1.8%) and claims on non-bank entities ($317 billion or 2.5%).
The overall expansion in claims was broadly spread across currencies. The largest increases were recorded in claims denominated in US dollars ($253 billion or 1.9%) and in euros ($238 billion or 1.9%). Claims denominated in sterling and yen also moved up, rising by $30 billion (1.6%) and $15 billion (1.3%), respectively. The only major currency showing a decline was the Swiss franc. Claims denominated in that currency fell by $14 billion (2.1%).
There was a sharp increase in lending to emerging countries. The $113 billion (4.6%) expansion in the first quarter of 2010 was about 40% larger than the combined increases of the previous three quarters.
In line with the strong economic growth in Asia-Pacific, BIS reporting banks expanded their cross-border claims on residents of the region for the fourth quarter in a row. Almost half of the $89 billion (11.4%) overall increase was due to an unprecedented $42.1 billion (23.8%) surge in claims on residents of China. Meanwhile, claims on residents of India went up by $18.1 billion (13.5%), the second largest increase on record. In addition, banks significantly expanded their cross-border lending to Korea (by $11.0 billion or 5.5%), Chinese Taipei (by $6.3 billion or 11.7%), Indonesia (by $4.7 billion or 10.2%) and Malaysia (by $2.9 billion or 7.6%). Some of those increases could be linked to carry trades that took place during the period as a result of the considerable interest rate differentials between some of the above-mentioned countries and the major developed economies.
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