BIS records startling collapse of eurozone interbank loans…(Brace For Impact!!)
Cross-border lending is falling drastically across the western world as banks slash exposure to Europe and bend to tougher capital rules, according to data from the Bank for International Settlements.
By Ambrose Evans-Pritchard
02 Jun 2013
Foreign bank loans fell by $472bn (£311bn) in rich countries in the fourth quarter of last year, contracting at an 8pc annual rate. The retrenchment was led by a collapse of interbank loans in the eurozone, where lenders in the creditor states continue to pull back from periphery countries.
Volumes fell by $284bn across the eurozone, a 20pc rate of contraction. Belt-tightening by banks is a key reason why the region remains stuck in recession for the seventh quarter in a row.
The BIS said in its quarterly report that the markets are “under the spell of monetary easing”, convinced that central banks will keep the asset boom going despite signs of “broad deceleration” in the US economy and fatigue in China.
Jaime Caruana, the BIS’s managing director, said last month that the authorities should refrain from further stimulus to keep growth alive, warning that excessive liquidity is distorting the financial system without achieving much. “If a medicine does not work as expected, it’s not necessarily because the dosage was too low,” he said.
The BIS was the only major watchdog to warn of a bubble before the Lehman crisis, and it has once again begun to fret over junk bonds and frothy asset prices.