The international banking market expanded in the fourth quarter of last year, as new credit to Asian, African and Middle Eastern emerging markets offset impact of the financial turmoil in mature markets, the Bank for International Settlements (BIS) said on Sunday.
“Activity in the international banking market continued to expand in the fourth quarter of 2007, despite the ongoing tensions in the interbank market,” a new report by the bank said. “A significant portion of this increase was accounted for by new credit to emerging markets.”
Inter-bank borrowing in mature markets, particularly the US, hit a snag in the same period as banks were wary of lending to each other due to the subprime crisis.
The US Federal Reserve and key European central banks have had on several occasions to pump billions of dollars of liquidity into the system to ease gridlocked lending.
However, the BIS report indicates that credit to borrowers in emerging economies “surged in the fourth quarter.”
In fact, record claims were posted for the period on borrowers in the Asia-Pacific region, Africa and the Middle East. This powered total claims on these borrowers to US$2.6 trillion.
Credit to borrowers in Africa and the Middle East grew by US$70 billion, the largest quarterly expansion for this region on record, with much of the money lent by banks in the euro area and Britain.
Meanwhile, credit to borrowers in the Asia-Pacific region grewUS$82 billion, also a quarterly record.
But in Asia and the Pacific, the borrowing was also met by a massive increase in deposits by residents in the region.
In particular, Chinese residents’ deposits grew by US$72 billion, with much of these placements denominated in US dollars.
As a result, the US dollar share of BIS reporting banks’ liabilities to China reached 77 percent by the end of last year, compared to 64 percent at the end of last June.
The BIS gathers some 55 central banks worldwide. It is scheduled to hold its annual general meeting at the end of the month.
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