Banks Raise Cross-Border Lending by Least in 13 Years, BIS Says

Global banks’ cross-border lending increased at the slowest rate in 13 years in the third quarter, restrained by a contraction in loans to financial firms in the euro-area, the Bank for International Settlements said.

Lenders reporting to BIS, the record keeper of the world’s central banks, increased cross-border assets by $33 billion, or 0.1 percent, in the three months through September, according to data released by the BIS yesterday. Cross-border claims on non- banks increased by $153 billion, or 1.4 percent, in the period. Lending to banks fell by $120 billion, or 0.7 percent.

“An expansion of cross-border credit to non-banks, especially those located in the U.S., was largely offset by a decline in claims on banks in the euro area,” the BIS said.

Foreign banks are reducing their lending to European banks on concern that the region’s sovereign debt crisis could be exacerbated by political uncertainty in Italy, the area’s third- largest economy. Banks are also reducing lending as they try to meet the stricter capital requirements set by the Basel Committee on Banking Supervision.

The increase in cross-border claims was concentrated in those denominated in U.S. dollars, pounds and peripheral currencies, the Basel, Switzerland-based BIS said. Claims in euros fell by the most in the period.

To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net