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The international banking market - Essay Example

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Total cross-border claims continued to expand in the third quarter of 2005, although at a somewhat slower pace than in the previous two quarters. Interbank activity accounted for over half the total rise in cross-border claims, with greater claims on non-banks in offshore centers also contributing…
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The international banking market
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Download file to see previous pages International banking activity continued to expand , propelled by banks' substantial purchases of securities and the return of Japanese banks to the international banking market. The cross-border claims of banks in the reporting area increased by $110 billion .select few, most notably Mexico and Turkey. Another notable development in the first half of the year was a sharp increase in deposit flows from developing countries to international banks, arising from an improvement in the external position of oil-exporting countries..
Interbank activity slowed , as was to be expected following the extraordinary surge in lending to banks in the developed countries in the first quarter. To some extent, banks in the reporting area unwound the large interbank positions that they had built up during the first quarter, with funds moving from banking centres in the euro area to London and then being passed on
to Tokyo, Zurich, the Bahamas and the Cayman Islands. Despite flows from banks in the United Kingdom to their branches in the Caribbean, reporting banks' claims vis--vis banks in offshore centres continued to decline in the second quarter. ...
According to the consolidated banking statistics, Japanese and UK banks were responsible for most of the increase in reporting banks' claims on US banks
Deposits by developing countries soar
The ongoing contraction of bank credit to developing countries reflects in part weak demand for external financing. Despite strong growth in many countries, this year developing countries are expected to post their largest current account surplus in two decades. The strengthening external position of oil-exporting countries is responsible for most of the improvement. As well as limiting external financing needs, this improvement contributed to a large increase in developing countries' deposits with foreign banks.
Flows to US non-banks surpass those to euro area borrowers
Purchases of securities also accounted for most of the $57 billion rise in claims on non-bank borrowers in the second quarter. More recent data on syndicated credits show a surge in lending to telecom firms, suggesting that direct lending to non-banks in Europe may have also recovered. Banks in the reporting area continued to purchase substantial amounts of securities issued by non-bank borrowers in Europe. Nevertheless, international bank flows to non-banks in the euro area more than halved to $20 billion, Banks resident in the United Kingdom and the euro area, which had provided massive sums to non-bank borrowers in Banks' cross-border claims on non-banks in the United States have increased since late 1999.
Renewed lending by Japanese banks was funded in part through the international interbank market. Taking into account changes in both assets and liabilities, reporting banks moved upwards of $59 billion into banks in Japan in the second quarter, the largest increase in years. Further ...Download file to see next pagesRead More
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