BIS report shows euro zone impact on Australia
(13 March 2012 – Europe) Figures released by the Bank for International Settlements (BIS) in Switzerland showed how Europe’s troubled banks accelerated efforts to pull loans from countries throughout the world towards the end of last year.
As the euro zone debt crisis intensified, Europe’s banks cut more than US$8 billion (A$7.56 billion) worth of loans from the Australian economy as the funding squeeze began.
During the second half of last year, most European banks began selling down their international loan portfolio or simply turning off the lending tap, the BIS said.
This coincided with a period in which many large Australian companies were attempting to refinance loans they had locked in during the global financial crisis.
''Pressures on European banks to deleverage increased towards the end of 2011 as funding strains intensified and regulators imposed new [capital] targets,'' the BIS said in its March quarterly review, released on Monday.
The report found it was largely an orderly exit by European banks and other global banks and bond markets were able to step in to replace financing. This helped Australian businesses avoid a credit squeeze.
Towards the end of last year, European banks were unable to raise funds on wholesale markets. And for those banks rolling over short-term loans, costs surged to levels last seen at the peak of the financial crisis.
A massive injection of funds by the European Central Bank into the region's banking system has helped ease strains on financial markets and economic activity. The offer of more than €1 trillion (A$1.24 trillion) worth of cheap loans to Europe's banks since December has helped improve funding conditions, the BIS said.
The BIS figures, which cover June to the end of September, show French banks pulled more than A$4.5 billion worth of loans from the Australian economy. Italian, Irish and Spanish banks each cut their exposure by hundreds of millions of dollars. At the same time, Australian banks pulled billions of dollars in funds from Belgium, France and Spain.
During the second half of last year, most European banks began selling down their international loan portfolio or simply turning off the lending tap, the BIS said.
This coincided with a period in which many large Australian companies were attempting to refinance loans they had locked in during the global financial crisis.
''Pressures on European banks to deleverage increased towards the end of 2011 as funding strains intensified and regulators imposed new [capital] targets,'' the BIS said in its March quarterly review, released on Monday.
The report found it was largely an orderly exit by European banks and other global banks and bond markets were able to step in to replace financing. This helped Australian businesses avoid a credit squeeze.
Towards the end of last year, European banks were unable to raise funds on wholesale markets. And for those banks rolling over short-term loans, costs surged to levels last seen at the peak of the financial crisis.
A massive injection of funds by the European Central Bank into the region's banking system has helped ease strains on financial markets and economic activity. The offer of more than €1 trillion (A$1.24 trillion) worth of cheap loans to Europe's banks since December has helped improve funding conditions, the BIS said.
The BIS figures, which cover June to the end of September, show French banks pulled more than A$4.5 billion worth of loans from the Australian economy. Italian, Irish and Spanish banks each cut their exposure by hundreds of millions of dollars. At the same time, Australian banks pulled billions of dollars in funds from Belgium, France and Spain.
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