The Bank for International Settlements published a BIS Quarterly Review feature outlining how its international banking statistics and global liquidity indicators can be used to disentangle the international dimensions of credit to borrower economies and to gauge related financial stability risks. The article links rapid growth in international credit to domestic credit booms and argues that, since the global financial crisis, foreign currency borrowing has increasingly shifted from internationally active banks to international bond markets. The paper frames international credit along three dimensions: the funding source (direct cross-border credit versus domestic lending funded via net cross-border borrowing), the currency of denomination, and the identity and structure of creditors (banks versus non-banks, and foreign banks lending locally versus across borders). It highlights that indirect cross-border credit can be a material but often overlooked driver of credit expansions, and that foreign banks’ cross-border lending tends to retrench first during periods of financial volatility, while locally funded and locally denominated credit is typically more resilient. Illustrative indicators show that, as of end-Q3 2024, 90% of direct cross-border bank credit was denominated in USD, EUR, JPY, GBP or CHF; foreign banks extended an estimated 75% of international bank credit; and the foreign bank participation rate for emerging market economies fell from over 20% in 2008 to 7% in 2024. For emerging market borrowers, the bond share of foreign currency credit rose from almost a third at end-2008 to almost a half by mid-2024, alongside a warning that “non-bank to non-bank” cross-border credit remains opaque because consolidated data on bond holders are not available.
Bank for International Settlements 2025-03-11
Bank for International Settlements research explains how BIS statistics capture direct and indirect cross-border credit risks and the post-crisis shift to bond markets
The Bank for International Settlements’ BIS Quarterly Review explains how its international banking statistics and global liquidity indicators help disentangle the international dimensions of credit and assess financial stability risks, highlighting the growing role of international bond markets in foreign currency borrowing since the global financial crisis. It finds that indirect cross-border credit is a material but often overlooked driver of credit booms and that foreign banks’ cross-border lending retrenches first in periods of volatility.