BIS

BIS Quarterly Review International banking and financial market developments June 2020

BIS Quarterly Review Monetary and Economic Department

Editorial Committee:

Claudio Borio Stijn Claessens Benoît Mojon Hyun Song Shin Philip Wooldridge

General queries concerning this commentary should be addressed to Philip Wooldridge (tel +41 61 280 8006, e-mail: [email protected]), queries concerning specific parts to the authors, whose details appear at the head of each section, and queries concerning the statistics to Patrick McGuire (tel +41 61 280 8921, e-mail: [email protected]).

This publication is available on the BIS website (http://www.bis.org/publ/qtrpdf/r_qt2006.htm).

© Bank for International Settlements 2020. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated.

ISSN 1683-0121 (print) ISSN 1683-013X (online)

BIS Quarterly Review

June 2020

International banking and financial market developments

International dimensions of EME corporate debt ...... 1 Stefan Avdjiev, Patrick McGuire and Goetz von Peter Key takeaways ...... 2 NFCs’ debt in context ...... 3 Box: Estimating externally funded and foreign currency debt with BIS statistics ...... 4 Externally funded debt ...... 5 Foreign currency debt ...... 7 Dollar debt in early 2020 ...... 9 Conclusion ...... 11

EME government debt: cause for concern? ...... 15 Carlos Cantú, Tirupam Goel and Jochen Schanz

BIS statistics: charts ...... A1

Notations used in this Review billion thousand million e estimated lhs, rhs left-hand scale, right-hand scale $ US dollar unless specified otherwise … not available . not applicable – nil or negligible

Differences in totals are due to rounding. The term “country” as used in this publication also covers territorial entities that are not states as understood by international law and practice but for which data are separately and independently maintained.

BIS Quarterly Review, June 2020 iii

Abbreviations

Currencies

ALL Albanian lek MXN Mexican peso ARS Argentine peso MXV Mexican unidad de inversión (UDI) AUD Australian dollar MYR Malaysian ringgit BGN Bulgarian lev NAD Namibian dollar BHD Bahraini dinar NGN Nigerian naira BRL Brazilian real NOK Norwegian krone CAD Canadian dollar NZD New Zealand dollar CHF Swiss franc OTH All other currencies CLP Chilean peso PEN Peruvian sol CNY (RMB) Chinese yuan (renminbi) PHP Philippine peso COP Colombian peso PLN Polish zloty CZK Czech koruna RON Romanian leu DKK Danish krone RUB Russian rouble EUR euro SAR Saudi riyal GBP pound sterling SEK Swedish krona HKD Hong Kong dollar SGD Singapore dollar HUF Hungarian forint THB Thai baht IDR Indonesian rupiah TRY Turkish lira ILS Israeli new shekel TWD New Taiwan dollar INR Indian rupee USD US dollar ISK Icelandic króna VES bolívar soberano JPY Japanese yen VND Vietnamese dong KRW Korean won XOF CFA franc (BCEAO) MAD Moroccan dirham ZAR South African rand

iv BIS Quarterly Review, June 2020

Countries

AE United Arab Emirates CY Cyprus AF Afghanistan CZ Czech Republic AL Albania DE Germany AM Armenia DJ Djibouti AO Angola DK Denmark AR Argentina DM Dominica AT Austria DO Dominican Republic AU Australia DZ Algeria AZ Azerbaijan EA euro area BA Bosnia and Herzegovina EC Ecuador BD Bangladesh EE Estonia BE Belgium EG Egypt BF Burkina Faso ER Eritrea BG Bulgaria ES Spain BH Bahrain ET Ethiopia BI Burundi FI Finland BJ Benin FJ Fiji BM Bermuda FO Faeroe Islands BN Brunei FR France BO Bolivia GA Gabon BR Brazil GB United Kingdom BS The Bahamas GD Grenada BT Bhutan GE Georgia BY Belarus GH Ghana BZ Belize GN Guinea CA Canada GQ Equatorial Guinea CD Democratic Republic of the Congo GR Greece CF Central African Republic GT Guatemala CG Republic of Congo GW Guinea-Bissau CH Switzerland GY Guyana CI Côte d’Ivoire HN Honduras CL Chile HK Hong Kong SAR CM Cameroon HR Croatia CN China HT Haiti CO Colombia HU Hungary CR Costa Rica ID Indonesia CV Cabo Verde IE Ireland

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Countries (cont)

IL Israel MX Mexico IN India MY Malaysia IQ Iraq MZ Mozambique IR Iran NA Namibia IS Iceland NC New Caledonia IT Italy NG Nigeria JE Jersey NL Netherlands JM Jamaica NO Norway JO Jordan NR Nauru JP Japan NZ New Zealand KE Kenya OM Oman KG Kyrgyz Republic PA Panama KH Cambodia PE Peru KR Korea PG Papua New Guinea KW Kuwait PH Philippines KY Cayman Islands PK Pakistan KZ Kazakhstan PL Poland LA Laos PT Portugal LB Lebanon PY Paraguay LC St Lucia QA Qatar LK Sri Lanka RO Romania LR Liberia RS Serbia LS Lesotho RU Russia LT Lithuania RW Rwanda LU Luxembourg SA Saudi Arabia LV Latvia SC Seychelles LY Libya SD Sudan MA Morocco SE Sweden MD Moldova SG Singapore ME Montenegro SK Slovakia MH Marshall Islands SI Slovenia MK North Macedonia SR Suriname ML Mali SS South Sudan MM Myanmar ST São Tomé and Príncipe MN Mongolia SV El Salvador MO Macao SAR SZ Eswatini MR Mauritania TD Chad MT Malta TG Togo MU Mauritius TH Thailand MV Maldives TJ Tajikistan MW Malawi TL East Timor

vi BIS Quarterly Review, June 2020

Countries (cont)

TM Turkmenistan VC St Vincent and the Grenadines TO Tonga VE Venezuela TR Turkey VG British Virgin Islands TT Trinidad and Tobago VN Vietnam TW Chinese Taipei XM euro area TZ Tanzania ZA South Africa UA Ukraine ZM Zambia US United States 1C International organisations UY Uruguay 1Z British West Indies UZ Uzbekistan

BIS Quarterly Review, June 2020 vii

Stefan Avdjiev Patrick McGuire Goetz von Peter

[email protected] [email protected] [email protected]

International dimensions of EME corporate debt1

International credit can be fickle and subject to sudden stops during periods of global economic stress. Non-financial corporate borrowers that rely on credit from abroad are vulnerable to reversals in capital flows. Similarly, corporates that borrow in foreign currency may face problems rolling over their debt when the local currency depreciates or global dollar funding conditions tighten. This feature draws on several BIS data sets to examine corporates’ external and foreign currency debt for key emerging market economies on the eve of the Covid-19 outbreak.

JEL classification: F34, F65.

Since the Great Financial Crisis (GFC) of 2007–09, corporate borrowers in many emerging market economies (EMEs) have increasingly turned to external sources of funding, much of it denominated in foreign currencies. Such debt can be susceptible to sudden stops (Calvo (1998), Forbes and Warnock (2012)), which often lead to sharp contractions in economic activity.2 This feature uses several BIS data sets to examine two dimensions of EME corporates’ debt at end-2019, on the eve of the Covid-19 outbreak. We first estimate externally funded debt, comprising cross-border credit in the form of bonds held by non-residents and loans from banks abroad, denominated in any currency. Then, drawing on the currency dimension in BIS statistics (one of their key strengths), we estimate foreign currency debt owed by corporates to all creditors, domestic and foreign. The two dimensions overlap, but also differ in ways that can have important implications for borrowers’ susceptibility to sudden stops. We focus on EME non-financial corporates (NFCs) because they stand out in terms of borrowing externally and in foreign currencies.3 In particular, they

1 The authors thank Iñaki Aldasoro, Claudio Borio, Michael Chui, Stijn Claessens, Mathias Drehmann, Bryan Hardy, Catherine Koch, Dubravko Mihaljek, Swapan-Kumar Pradhan, Hyun Song Shin and Philip Wooldridge for valuable comments, and Bat-el Berger, Jakub Demski, Kristina Micic and Marjorie Santos for excellent research assistance. The views expressed in this article are those of the authors and not necessarily those of the Bank for International Settlements.

2 In the run-up to the GFC, cross-border credit to EMEs, provided mainly by global banks, fuelled domestic credit booms, and the reversal in credit flows during the crisis exacerbated the economic downturns that followed (Borio, McCauley and McGuire (2011), Ehlers and McGuire (2017)).

3 Previous crises in EMEs tended to be associated with international borrowing by sovereigns (eg in the 1980s) or banks and other financial institutions (eg in the 1990s). Sovereigns have moved from

BIS Quarterly Review, June 2020 1

Key takeaways

• Corporates in many emerging market economies borrowed increasingly from external sources in foreign currencies during the decade prior to the Covid-19 crisis. • Such debt is susceptible to sudden stops, although foreign currency revenues and other hedges reduce corporates’ vulnerability. • BIS statistics can help track the evolution of externally funded debt and foreign currency debt in a granular way.

accounted for much of the post-GFC increase in total dollar credit to all EME non- bank borrowers, which rose from $1.6 trillion in 2009 to $3.8 trillion at end-2019. The economic shutdown in 2020 and associated disruptions in supply chains, falls in sales and drops in commodity prices squeezed many corporates, casting doubt on their ability to service their debts (Eichengreen (2020)). While reliance on external and foreign currency debt has in the past heightened vulnerabilities (eg to capital flow reversals or exchange rate depreciations), our measures by themselves paint an incomplete picture. A full assessment of vulnerabilities would incorporate factors such as revenues, assets and intragroup linkages. For example, commodity exporters and other corporates with foreign currency revenues have a natural hedge for dollar debt. Many own substantial foreign currency assets too, as do the countries in which they operate. These factors should be kept in mind when interpreting our measures for specific countries. For most of the EMEs examined here, the ratio of NFCs’ estimated foreign currency debt to GDP was less than 15% at end-2019. Of the few with higher ratios, some are commodity exporters. Across most EMEs, the bulk of NFCs’ foreign currency debt is denominated in US dollars. While much of NFCs’ debt remains in the form of bank loans, the issuance of international debt securities has gained ground since the GFC, especially if offshore issuance by NFCs’ foreign affiliates is taken into account. In the next section, we present measures of the total debt of NFCs in 16 major EMEs at end-2019, the latest quarter for which comprehensive data are available. The following two sections then present our estimates of externally funded and foreign currency debt, and discuss their limitations. The box explains how we construct these estimates. In the final section, we employ commercial data sources on dollar- denominated international bonds and syndicated loans to gauge how debt stocks have evolved since the global spread of Covid-19.

borrowing in foreign currency towards doing so in domestic currency (Cantú, Goel and Schanz (2020, in this issue)), and banks manage their currency mismatches more carefully now.

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NFCs’ debt in context

The characteristics of NFCs’ debt often differ from those of other non-financial borrowers. In many EMEs, government debt increasingly consists of bonds in domestic currency (Cantú, Goel and Schanz (2020, in this issue)), while household debt is mainly domestic loans in domestic currency. In contrast, NFC debt is a combination of bonds and loans, and both in domestic and in foreign currencies. Since the GFC, the total debt of NFCs in EMEs has grown substantially in absolute terms, and slightly faster than that of other non-financial borrowers (ie governments and households). At end-2019, NFCs resident in the 16 EMEs in Graph 1 combined had outstanding debt of $28.6 trillion, up from $10.5 trillion at end-2009.4 This amounted to 51% of the total debt of non-financial borrowers in these countries at end-2019, slightly higher than the share at end-2009. NFCs’ debt made up more than half of non-financials’ total debt in Chile, China, Russia, Saudi Arabia and Turkey, and it exceeded 40% in the Czech Republic, Hungary and Korea (left-hand panel). With debt growing faster than nominal GDP, the ratio of resident NFCs’ debt to GDP was considerably higher than before the GFC for several EMEs (Graph 1, centre and right-hand panels). This ratio surpassed 100% for China, Korea and Chile at end- 2019, and was above 60% for Hungary, Malaysia and Turkey. While the ratios for Brazil, the Czech Republic and Poland have trended downwards in recent years, they remained higher at end-2019 than their pre-GFC levels.

Total debt of non-financial borrowers in selected EMEs1 Graph 1

By borrower sector, at end-2019 Outstanding debt of non-financial corporates (NFCs) Per cent % of GDP % of GDP % of GDP

75 250 150 100

60 200 120 80

45 150 90 60

30 100 60 40

15 50 30 20

0 0 0 0 CN MY BR TH PL CZ SA MX 01 04 07 10 13 16 19 01 04 07 10 13 16 19 KR CL HU ZA IN TR RU ID Brazil Poland Czech Republic Korea Share of total Debt (rhs): Chile Russia Hungary Mexico (lhs): NFCs China Saudi Arabia India South Africa NFCs Households Malaysia Turkey Indonesia Thailand Government 1 The data used in the BIS total credit statistics are based on national financial balance sheet accounts for those countries that compile these data. For others (ID, IN, MY, SA, TH and ZA), the BIS’s estimates sum cross-border and domestic bank credit, and do not capture non-bank creditors’ holdings of debt securities; for CN and RU, credit from non-banks is also included. See Dembiermont et al (2013).

Sources: National data; BIS total credit statistics.

4 Total credit to NFCs in China stood at $21.2 trillion at end-2019, up by $15.3 trillion (more than 250%) since end-2009. Total credit to NFCs in all other countries in Graph 1 rose by a combined $2.8 trillion, or 61%, over this period.

BIS Quarterly Review, June 2020 3

Estimating externally funded and foreign currency debt with BIS statistics

This box details the construction of the debt measures presented in the main text, and follows closely the methodology in Borio, McCauley and McGuire (2011) and McCauley, McGuire and Sushko (2015a,b). Externally funded debt (EFD) Our measure of NFCs’ externally funded debt is that sector’s external debt liabilities in the form of bonds and loans (measured as for a country), plus the part which that sector receives indirectly via banks that borrow (net) from abroad. We proxy this as the sum of (1) international debt securities issued by resident NFCs and (2a) direct and (2b) indirect cross-border bank credit to resident NFCs, in any currency. Constructing this proxy relies on a few assumptions. For the non-resident bond holdings (part 1), we take outstanding issues of international debt securities (IDS) as a proxy. These securities could, in principle, be held by residents of the country. However, for most EMEs discussed in this feature, NFCs’ outstanding IDS match their cross-border debt security liabilities as recorded in International Investment Position (IIP) data (grey dots in Graph 2), with Korea and Russia being exceptions. For direct cross-border bank credit (part 2a), we use the BIS locational banking statistics (LBS), which historically have tracked cross-border bank loans to all non-banks. A breakdown of non-banks into non-bank financials (NBFs) and the subsectors of non-financials (ie NFCs, households and governments) was introduced in 2013. Most reporting countries do separately report positions with NBFs and non-financials, but many do not report the non-financial subsectors (Garcia Luna and Hardy (2019)). We thus proxy cross-border bank loans to NFCs as cross-border loans to all non-banks less the observed loans to NBFs, governments and households (red bars in Graph 2). While this could overstate cross-border loans to NFCs, cross-border loans to the other non-financial subsectors are generally small. Indirect cross-border bank credit (part 2b) is net cross-border borrowing (if positive) by banks located in the country; this is the part of domestic bank credit that is funded abroad. For those EMEs that report the LBS, we use cross-border liabilities minus cross-border claims of banks located in the country. For those EMEs that do not report the LBS, we take these figures from their international investment position (PL and TH), or use net claims (claims minus liabilities) on banks in the country, as reported by banks in all BIS reporting countries (CZ and HU). All measures include intragroup positions. These measures may overstate indirect credit to NFCs since it could be used to fund domestic bank credit to other non-bank borrowers (governments, households or non-bank financial institutions). Foreign currency debt (FCD) NFCs’ foreign currency debt is debt denominated in a currency other than that of the borrower country, regardless of whether it is held by investors locally or abroad. It is the sum of all foreign currency cross-border and local loans to, and international debt securities issued by, NFCs. The IDS are constructed from securities-level data complete with currency information, and thus yield a clean measure of NFCs’ foreign currency debt security liabilities. However, an estimate of cross-border and local bank loans in foreign currencies requires a few assumptions. In the LBS, cross-border loans are reported separately for (a) each of five major currencies (USD, EUR, JPY, GBP and CHF), (b) the domestic currency of the reporting bank, and (c) residual foreign currencies from the perspective of the reporting bank. Parts (a) and (b) are foreign currencies from the perspective of EME borrowers. For part (c), the currency is not known, but we assume this piece is also denominated in foreign currencies even though it could include loans denominated in the currency of the borrower country. The measure for local loans in foreign currencies depends on the EME in question. The figures for BR, CL, ID, IN, KR, MX, MY, TR and ZA are local foreign currency loans to non-banks in their reported LBS data. The breakdown of these foreign currency loans in the five major currencies is estimated for ID and MY, using the currency breakdown of cross-border loans to the banking sector. For RU and TR, US dollar- and euro-denominated local loans are calculated following the global liquidity indicator estimates. Estimates for CN, CZ, HU and PL are based on national data on domestic credit in foreign currencies, which, for some of these EMEs, includes credit to all non-banks. The estimate for SA is outstanding amounts of foreign currency syndicated term loans, derived from loan-level data from Dealogic. For TH, we proxy foreign currency loans to NFCs by the difference between international claims on the non-bank private sector from the BIS consolidated banking statistics (CBS) and cross-border claims on NFCs from the LBS.

 For example, Canadian dollar cross-border loans to Brazil reported by banks in Canada would be reported under part (b), and their Singapore dollar and Brazilian real cross-border loans would be reported together under part (c), as residual foreign currencies.  In the CBS, international claims on borrowers in a particular country comprise all cross-border claims and any locally extended claims in foreign currencies. Claims include loans, holdings of securities and other financial assets.

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Externally funded debt

External debt is the stock of debt liabilities held by creditors residing outside the borrower country. It includes all cross-border credit in the form of bonds held by non- residents and loans from banks abroad, denominated in any currency. For a country as a whole, these external debt liabilities are measured on a residency basis as part of the country’s international investment position. Here, we focus on the external debt of the NFC sector and go one step further than the standard measure: we add indirect external bank credit to NFCs, ie the part of domestic credit that resident banks fund through net borrowing abroad (see box).5 We call this aggregate NFCs’ externally funded debt (EFD).6 EMEs differ in their reliance on loan versus bond funding (Graph 2, left-hand panel). International debt securities (yellow bars) make up more than half of NFCs’ externally funded debt in Chile, Korea and Mexico, but less than a tenth in Hungary, Poland and Turkey.7 Those NFCs relying more on loans often obtain them through the indirect channel (blue bars), notably those in emerging Europe and East Asia. Hardy (2019) notes that, in emerging Europe, the local affiliates of foreign banks often borrow within their banking group to fund domestic lending. Also, a large share of trade finance is channelled through local banks. Across EMEs, the reliance of NFCs on EFD reflects the size and openness of the economies they operate in. In absolute terms, EFD at end-2019 was highest for NFCs in China, followed by India, Mexico and Brazil, all among the largest EMEs (Graph 2, left-hand panel). Scaling by GDP puts these amounts into perspective (right-hand panel). The half-trillion EFD of NFCs resident in China amounted to only 3.3% of Chinese GDP – the lowest ratio in the sample. At the other end of the spectrum are smaller financially open economies, where NFCs’ EFD surpassed 20% of GDP. Some NFCs resident in EMEs have foreign parents that may guarantee portions of the debt incurred, although BIS data do not reveal this. One source of stability is the fact that many NFCs issue bonds with long maturities, and thus face limited rollover risk. At end-2019, only a small fraction was due for repayment within a year (Graph 3, left-hand panel). The share was below 10% for most EMEs shown. All this, however, does not preclude a tightening of financial conditions if foreign investors sell their holdings (see last section).

5 Adding indirect cross-border bank credit may overstate credit to NFCs in a country because this credit may be passed on to sectors other than NFCs.

6 The estimates in this section are on a residency basis, following international reporting standards (Tissot (2016)). Offshore debt (ie bonds issued by affiliates abroad) is incorporated in the next section.

7 The outstanding stock of international debt securities (IDS) may overstate externally funded debt if these securities are held by residents. For most countries in Graph 2, the stock roughly matches cross- border debt security liabilities as tracked in international investment position (IIP) data, with Korea and Russia being exceptions (grey dots, left-hand panel). We nevertheless use the IDS series, since it provides the currency breakdown needed in the following two sections.

BIS Quarterly Review, June 2020 5

Externally funded debt of non-financial corporates1 At end-2019 Graph 2

By type Relative to total debt of NFCs and to GDP6 USD bn USD bn Per cent Per cent Lhs Rhs 500 160 40 80

375 120 30 60

250 80 20 40

125 40 10 20

0 0 0 0

CN IN MXBR ID TR KR CL MYRU CZ PL SA TH ZA HU CZ CL MYMX TR ID PL HU IN BR SA TH ZA KR RU CN Direct XB loans2 Int'l debt securities4 Relative to: GDP (lhs) Total debt of NFCs (rhs) 3 5 Indirect XB credit IIP debt sec liabilities 1 Estimates of externally funded debt of non-financial corporates (NFCs), comprising the sector’s external debt liabilities (bonds and loans) plus indirect bank credit that banks fund through net borrowing abroad (see box). 2 Cross-border loans to non-banks minus loans to non- bank financial institutions, households and government, from the BIS locational banking statistics. 3 Net cross-border borrowing by banks located in the country (see box). 4 NFCs’ outstanding international debt securities from the BIS international debt securities. 5 NFCs’ cross-border debt security liabilities as reported in the international investment position (IIP), for the latest data available. 6 Externally funded debt of NFCs, as a share of total debt of NFCs (blue dots) and as a ratio to GDP (red dots). Blue dots are shown for countries that compile financial balance sheet accounts and/or have comprehensive total debt measures (Graph 1).

Sources: IMF; Dealogic; Euroclear; Thomson Reuters; TRAX; BIS locational banking statistics; national data.

Cross-border bank credit, which tends to have shorter maturities, can contract more quickly during stress periods such as the GFC. While BIS data do not track the maturity profile of lending to NFCs specifically, they do provide a maturity breakdown of banks’ international claims on borrowers in all sectors taken together (Graph 3, right-hand panel).8 On average, short-term claims – defined as those with a remaining maturity of up to one year – accounted for over 40% of total claims, with higher shares for China (64%) and Korea (57%) and lower shares for Russia (26%) and Poland (23%). These figures overstate the share of short-term claims on NFCs in those countries that receive more (short-term) interbank credit overall (eg EMEs in Asia). That said, (net) interbank borrowing can be relevant to the NFC sector through the indirect channel shown in Graph 2. Applying a simple standard reserve-adequacy rule suggests that the EMEs shown here should be able to weather plausible contractions in short-term credit to their NFCs over the near term (yellow dots in Graph 3). The ratio of short-term debt to international reserves became a key metric characterising the EME crises in the 1990s (Chang and Velasco (1999), IMF (2016)). The ratios here lie well below 100% for most of the countries shown, although they will of course be higher when the external liabilities of other sectors are included as well. Any vulnerability assessment would recognise that many EMEs have substantial external assets and natural hedges in the form of export revenues too.

8 International claims include loans, bonds and other financial claims extended cross-border or locally in foreign currencies. By including all sectors, they overstate credit to the NFCs but are correlated with both external and foreign currency bank credit.

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Measures of EME short-term debt At end-2019 Graph 3

International bonds issued by non-financial corporates Banks’ international claims on all sectors2 Per cent USD bn Per cent USD bn

8 160 72 400

6 120 54 300

4 80 36 200

2 40 18 100

0 0 0 0 MX CL IN BR SA TR TH HU CN BR MX ID PL RU CZ TH KR CN ID RU CZ ZA MY PL KR IN TR SA MY CL ZA HU 1 ≤ Ratio of short-term to FX reserves (lhs) Remaining maturity (rhs): 1 year > 1 year 1 Outstanding amount with a remaining maturity of one year or less. 2 BIS reporting banks’ international claims on all counterparty sectors from the BIS consolidated banking statistics. International claims comprise cross-border claims in all currencies and claims extended locally in a non-local currency by banks’ affiliates in the borrower country.

Sources: IMF; Dealogic; Euroclear; Thomson Reuters; TRAX; BIS consolidated banking statistics (immediate counterparty basis); BIS calculations.

Foreign currency debt

Total foreign currency debt (FCD) includes any loans and debt securities denominated in foreign currencies (see box). Foreign currency debt, if not hedged, can pose financial stability risks through the financial channel of the exchange rate (Chang and Velasco (1999), Bruno and Shin (2015)). Sharp depreciations of EME currencies against the US dollar (such as those that took place during the Covid-19 stress period) reduce the creditworthiness of currency-mismatched EME borrowers and lead to a tightening of financial conditions thorough both demand and supply effects. Rankings of EMEs based on the level and relative importance of FCD (Graph 4) are similar to those based on EFD discussed above, albeit with exceptions. This is not surprising given that most external debt is denominated in foreign currencies. By outstanding stocks at end-2019 (left-hand panel), China, Mexico and India were among the top five EMEs on both measures. And when FCD is scaled by GDP (centre panel), the five EMEs (Chile, Turkey, Mexico, Czech Republic and Malaysia) that emerge on top are exactly the same as in the case of EFD, albeit in a different order. That said, the two indicators differ for several EMEs. FCD is considerably higher (15% of GDP) than EFD for Turkey. By contrast, EFD exceeds FCD by a wide margin in the Czech Republic (17% of GDP) and Malaysia (10% of GDP). US dollar debt accounted for the bulk of FCD in most EMEs (Graph 4, left-hand panel, red bars). The dominance of the dollar is most pronounced in emerging Asia and Latin America. By contrast, emerging Europe relies more on euro-denominated credit (blue bars).

BIS Quarterly Review, June 2020 7

Foreign currency debt of non-financial corporates (NFCs) in selected EMEs1 At end-2019 Graph 4

By currency Relative to GDP and NFCs’ total debt USD credit by instrument USD bn USD bn Per cent Per cent USD bn USD bn Lhs Rhs Lhs Rhs 560 240 28 80 800 200

420 180 21 60 600 150

280 120 14 40 400 100

140 60 7 20 200 50

0 0 0 0 0 0 CN TR IN BR CL MY CZ ZA CL MX MY ID SA PL BR IN CN MX IN TR CL MY TH MX RU ID KR SA PL TH HU TR CZ HU RU ZA KR TH CN BR RU ID KR SA ZA

Denominated in: Relative to: GDP (lhs) Local loans 2 USD JPY GBP Total debt of NFCs (rhs) Cross-border loans EUR CHF Other FX Bonds issued by: / Onshore/offshore entities 1 For details on the calculations, see box. 2 Blue dots are shown for countries that compile financial balance sheet accounts and/or have comprehensive total debt measures (Graph 1).

Sources: Dealogic; Euroclear; Thomson Reuters; TRAX; national data; BIS locational banking statistics by residence; BIS calculations.

Any assessment of vulnerabilities related to FCD should take into account several additional points about the incompleteness of available data. First, the benchmark FCD estimates in the left-hand panel of Graph 4 actually underestimate the foreign currency debt since they are based on the residence (as opposed to the nationality) of borrowers.9 They ignore the fact that some NFCs have issued debt securities through offshore entities (McCauley et al (2015b), Coppola et al (2020)). Once this offshore issuance is taken into account, the US dollar debt of several major EMEs, notably Brazil, China, India and Russia, rises considerably (Graph 4, right-hand panel). Second, the amounts owed in foreign currencies could be higher still, since the estimates in Graph 4 capture only on-balance sheet liabilities; they do not include borrowing through FX derivatives. Many NFCs sell commodities and finished products, or buy manufacturing inputs on global markets, where the US dollar is used as an invoicing currency. They may hedge future foreign currency payment and revenue streams using FX forwards. While exact numbers for EME borrowers are not available, a rough estimate suggests around $2 trillion in dollar repayment obligations via FX derivatives at end-2019, on top of nearly $2.6 trillion in on-balance sheet dollar debt.10 Even when derivatives are used to hedge FX risk, they can still involve significant liquidity risk due to maturity mismatches.

9 See Avdjiev, McCauley and Shin (2016) for a discussion of why the traditional assumption of a “triple coincidence” of GDP area, decision-making unit and currency area in international finance is often misleading.

10 The BIS over-the-counter derivatives statistics on which this estimate is based do not break out dollar borrowing via FX swaps by non-banks in EMEs. However, at-end 2019, EMEs accounted for about half of global trade, which importers/exporters hedge using FX forwards and swaps, and for 43% of outstanding US dollar debt securities, which are hedged by currency swaps (Borio, McCauley and McGuire (2017)). Applying these shares to all non-financials’ $7.8 trillion in dollar positions in these instruments and dividing by two yields the estimate for EME non-financials.

8 BIS Quarterly Review, June 2020

At the same time, there are several important factors that tend to mitigate FCD- related risks. For example, commodity exporters (eg Chile, Mexico, Russia and Saudi Arabia) have natural hedges in the form of dollar-denominated revenues. That said, the recent sharp fall in commodity prices may leave these exporters exposed. Meanwhile, NFCs, as well as other sectors in EMEs, hold foreign currency assets that can be drawn on to service debt in times of need. NFCs from EMEs have placed nearly $1 trillion in dollar and euro deposits with BIS reporting banks, and may have other foreign currency assets, such as foreign direct investment, that are more difficult to observe (and liquidate). Broadening this to all sectors, Hungary, South Africa, the Czech Republic, Chile and Malaysia each hold foreign currency assets worth more than 100% of GDP; many other EMEs also have more foreign currency assets than liabilities in their international investment position (IMF (2019), Bénétrix et al (2019)). The precise impact of the above factors on alleviating currency mismatches is not clear in the aggregate data, but authorities in some EMEs (eg Chile) monitor corporates’ FX exposures to ensure they are properly hedged (Central Bank of Chile (2018)).

Dollar debt in early 2020

How has US dollar credit to EME NFCs evolved during the pandemic? The most recent BIS international banking statistics relate to end-2019, and thus do not cover that period.11 For their part, the BIS IDS statistics are available at end-Q1 2020, and show that outstanding stocks of EME NFCs’ international debt securities actually increased marginally in the first quarter. To examine these dollar debt stocks further into 2020, we employ Dealogic data on syndicated loans and bond issuance, which are less complete but available on a timelier basis. Graph 5 juxtaposes the estimated stock of cross-border dollar debt of several major EMEs through to end-2019 (black line) against the stock derived from Dealogic data (stacked bars) for selected EMEs.12 On the surface, the latest data do not show a contraction in NFCs’ cross-border dollar debt stocks during the pandemic, mainly due to the long maturity of this debt (recall Graph 3). Indeed, it is possible that outstanding debt stocks may have increased, since corporates facing cash flow problems are likely to have tapped their credit lines in early 2020. Such drawdowns generate new credit, adding to outstanding bank claims.13

11 Data for Q1 2020 are expected to be released by end-July 2020.

12 The Dealogic data capture bonds and term loans as well as credit lines, although it is not known whether the credit lines have been drawn (and thus included in debt stocks) or remain untapped. The match between the two series is not perfect because some cross-border loans are not syndicated (and thus not captured in Dealogic data) and because of an imperfect overlap of the debt securities captured in Dealogic and in the BIS IDS statistics.

13 Graph 3 in the Statistical Release of the BIS international banking statistics at end-December 2019 shows a snapshot for key EMEs of the outstanding stock of foreign claims (guarantor basis) and the amount of undisbursed credit commitments. For most EMEs, the undisbursed credit commitments at end-2019 amounted to 10−15% of the outstanding stock of claims. Borrowers in Mexico even had undrawn credit lines worth $70 billion, or 19% of foreign claims on Mexico.

BIS Quarterly Review, June 2020 9

US dollar cross-border credit to non-financial corporates Amounts outstanding, in billions of US dollars Graph 5

Brazil India

125 125 100 100

100 100 80 80

75 75 60 60

50 50 40 40

25 25 20 20

0 0 0 0

01 04 07 10 13 16 Feb 20 Apr 20 01 04 07 10 13 16 Feb 20 Apr 20

Mexico Saudi Arabia

200 200 80 80

150 150 60 60

100 100 40 40

50 50 20 20

0 0 0 0

01 04 07 10 13 16 Feb 20 Apr 20 01 04 07 10 13 16 Feb 20 Apr 20

Debt securities Cross-border USD debt1 Term loans Credit lines

The left-hand panel for each country juxtaposes cross-border debt (black line) through to end-2019 with the stocks of outstanding bonds, syndicated loans and credit lines as tracked in Dealogic data. The data are presented at a quarterly frequency to show how well the Dealogic data track the BIS locational banking and international debt securities figures over the longer term. The right-hand panel extends the Dealogic data on a weekly basis through to end-April 2020.

1 Estimates based on the sum of cross-border loans to non-financial corporates and outstanding international debt securities (see box).

Sources: Dealogic; Euroclear; Thomson Reuters; TRAX; BIS locational banking statistics.

Several additional indicators, however, do show signs of a deterioration in financing conditions in EMEs (Graph 6). Net issuance of new dollar debt by EME NFCs plunged into negative territory after the pandemic went global (–$14 billion during March and April). Compiling the debt stocks on a nationality basis (which includes the debt of domestic NFCs’ non-resident affiliates) shows an even sharper contraction: –$37 billion in March and April, the largest bimonthly decline since the GFC (left-hand panel). Data from the Institute of International Finance (IIF) also point in the same direction.15 They reveal that, during the first three months of the Covid-19 stress period, portfolio debt outflows from the EMEs tracked by the IIF exceeded $30 billion and were considerably larger than the respective outflows during the GFC.

15 The IIF data capture net transactions by non-residents (rather than new debt creation) and do not have sector or currency breakdowns. Nevertheless, they do give an indication of foreign investors’ treatment of NFCs’ dollar bonds, which are a large share of EMEs’ externally held bonds. See also Hofmann, Shim and Shin (2020) and Hördahl and Shim (2020).

10 BIS Quarterly Review, June 2020

EME NFCs’ dollar debt in 20201 In billions of US dollars Graph 6

Net issuance2 Cumulative redemptions3

40 0 0

20 –60 –4

0 –120 –8

–20 –180 –12

–40 –240 –16 15 16 17 18 19 20 Jun 20 Aug 20 Oct 20 Dec 20 By residence Lhs: Rhs: IN CL ZA EMEs By nationality ID MX CN BR RU

1 Figures are based on issues/redemptions of international bonds, syndicated term loans and credit lines. 2 Monthly net issuance covering cross-border and local issuance through to end-April 2020. 3 By nationality of the borrower.

Source: Dealogic.

If financial conditions were to continue to deteriorate, many EME NFCs might have problems refinancing the portion of their dollar debt that is scheduled to mature over the next few months. For EMEs as a group, close to $200 billion in dollar debt (or 8% of the end-2019 debt stock) will mature between June and December 2020 (Graph 6, right-hand panel). Across individual countries, corporates from China ($57 billion, or 10% of the outstanding stock), Brazil ($12 billion, 6%), India ($11 billion, 9%) and Mexico ($10 billion, 4%) will have the highest refinancing needs for the rest of the year.

Conclusion

The international dimensions of debt expose corporates and other borrowers to heightened funding risk when global markets become unsettled. External financing, particularly if short-term, can disappear when creditors get skittish. And foreign currency debt can be difficult to roll over when local currencies depreciate. Many of the EMEs examined in this feature, and many other countries around the world, are exporters of commodities, goods and services priced and traded in dollars. The associated dollar revenue has served as a natural hedge against currency mismatches. However, falling sales and commodity prices portend difficulties for NFCs in servicing their international debt. This debt bears watching as the pandemic’s impact on the global economy continues to unfold.

BIS Quarterly Review, June 2020 11

References

Avdjiev, S, R McCauley and H S Shin (2016): "Breaking free of the triple coincidence in international finance”, Economic Policy, vol 31, issue 87, pp 409–51. Bénétrix, A, D Gautam, L Juvenal and M Schmitz (2019): “Cross-border currency exposures”, IMF Working Papers, no WP/19/299. Borio, C, R McCauley and P McGuire (2011): “Global credit and domestic credit booms”, BIS Quarterly Review, September, pp 43–57. Borio, C, R McCauley and P McGuire (2017): “FX swaps and forwards: missing global debt?”, BIS Quarterly Review, September, pp 37–54. Bruno, V and H S Shin (2015): “Global dollar credit and carry trades: a firm-level analysis”, Review of Financial Studies, vol 30, pp 703–49. Calvo, G (1998): “Capital flows and capital-market crises: the simple economics of sudden stops”, Journal of Applied Economics, vol 1, no 1, pp 35–54. Cantú, C, T Goel and J Schanz (2020): “EME government debt: cause for concern?”, BIS Quarterly Review, June, pp 15–16. Central Bank of Chile (2018): “Financial volatility and external debt”, Monetary Policy Report, September. Chang, R and A Velasco (1999): “Liquidity crises in emerging markets: theory and policy”, NBER Macroeconomics Annual 1999, vol 14. Coppola, A, M Maggiori, B Neiman and J Schreger (2020) “Redrawing the map of global capital flows: the role of cross-border financing and tax havens”, working paper, April. Dembiermont, C, M Drehmann and S Muksakunratana (2013): “How much does the private sector really borrow? A new database for total credit to the private nonfinancial sector”, BIS Quarterly Review, March, pp 65–81. Ehlers, T and P McGuire (2017): “Foreign banks and credit conditions in EMEs”, BIS Papers, no 91, March. Eichengreen, B (2020): “Managing the coming global debt crisis”, Project Syndicate, 13 May. Forbes, K and F Warnock (2012): “Capital flow waves: surges, stops, flight, and retrenchment”, Journal of International Economics, 88, pp 235–51. Garcia Luna, P and B Hardy (2019): “Non-bank counterparties in international banking”, BIS Quarterly Review, September, pp 15–33. Hardy, B (2019): “Emerging markets’ reliance on foreign bank credit”, BIS Quarterly Review, March, pp 15–28. Hofmann, B, I Shim and H S Shin (2020): “Emerging market economy exchange rates and local currency bond markets amid the Covid-19 pandemic”, BIS Bulletin, no 5, 7 April. Hördahl, P and I Shim (2020): “EME bond portfolio flows and long-term interest rates during the Covid-19 pandemic”, BIS Bulletin, no 18, 20 May. International Monetary Fund (IMF) (2016): “Guidance note on the assessment of reserve adequacy and related considerations”, June.

12 BIS Quarterly Review, June 2020

——— (2019): External Sector Report, July. McCauley, R, P McGuire and V Sushko (2015a): “US monetary policy, leverage and offshore dollar credit”, Economic Policy, vol 30, no 82, April, pp 187–229. ——— (2015b): “Dollar credit to emerging market economies”, BIS Quarterly Review, December, pp 27–41. Tissot, B (2016): “Globalisation and financial stability risks: is the residency-based approach of the national accounts old-fashioned?”, BIS Working Papers, no 587, October.

BIS Quarterly Review, June 2020 13

EME government debt: cause for concern? Carlos Cantú, Tirupam Goel and Jochen Schanz

In emerging market economies (EMEs), the Covid-19 pandemic increased governments’ funding needs at the very moment that investor appetite waned. In March, local currency bond yields rose rapidly and international investors withdrew on a massive scale. While government debt markets have since started to stabilise, the economic crisis triggered by the pandemic has brought into sharp focus two international dimensions of EME governments’ funding risk: their vulnerability to currency depreciations and their dependence on non-resident portfolio investors. Even before the crisis, government debt relative to GDP had risen in many EMEs over the previous two decades (Graph A1, left-hand panel). Some EMEs now have a stock of government debt to GDP as high as 70%. However, as interest rates fell over the same period, the debt service burden of those economies rose by less.

Refinancing needs surge amid high levels of indebtedness in some EMEs Graph A1

Government debt1 to GDP has Financing needs increase on the back SOEs’ bonds outstanding4 increased in most EMEs of larger deficits Percentage of GDP Percentage of GDP AR BR 80 20 8

IN ZA HU IL 60 15 6 CN MY CO PL 40 10 4 MX CZ TR TH ID 20 5 2

SA Average during 2019 (%) RU 0 0 0 20 40 60 80 ZA BR TR IN PL CL ID RU MX MY AE CZ RU AR CN PE IN AR CN MX MY CO PH KR TH ZA CL SG ID CO KR TH BR Average during 2000–18 (%) Debt maturing by end-2020 2018: 2 Deficit forecast (Oct 19) Local currency 3 Increase in deficit forecast (Apr 20) Foreign currency 1 General government. Nominal value of core debt (currency/deposits, loans and debt securities); assets and liabilities between government entities are netted. 2 IMF estimates. 3 Includes fiscal relief packages announced in response to the Covid-19 outbreak as of early April 2020. Several countries have since announced more packages, which are not included. April 2020 budget deficit estimates are not available for Argentina. 4 Data of state-owned enterprises (SOEs) included in JPMorgan’s CEMBI and EMBI indices. Sources: IIF Global Debt database; IMF, Fiscal Monitor; S&P Capital IQ; BIS total credit statistics; authors’ calculations.

Owing to the crisis, financing needs have increased for most EMEs. Several governments already had large annual refinancing needs in 2020 (Graph A1, centre panel). Fiscal expenditure is set to increase in all EMEs because of relief packages aimed at alleviating the economic fallout of virus containment measures. At the same time, revenues are expected to fall as economic activity declines. Commodity-producing EMEs are additionally hit by the decline in oil and other commodity prices in 2020. Across EMEs, the overall refinancing need in 2020 is expected to be around 10% of GDP on average, and up to 20% for some especially hard-hit countries (centre panel). The crisis may also crystallise some contingent liabilities for governments, particularly in relation to state-owned enterprises (SOEs). In some EMEs, SOEs outside the general government sector have high debt levels (Graph A1, right- hand panel), including liabilities incurred by their affiliates abroad. The weak profitability of some of these SOEs makes their liabilities more likely to fall on government balance sheets. Indeed, already prior to the crisis, direct transfers to SOEs were weighing on budgets in some countries (eg Mexico and South Africa). Against this backdrop, two aspects of the external funding structure of government debt are of potential concern. The first concern is the currency composition of EME debt. Most EME governments have reduced their exposure to currency devaluations by developing their local currency government bond (LCGB) markets. At end-2019, around 80% of central government bonds were denominated in local currency, mostly at fixed rates (Graph A2, left-hand panel). However, a few EMEs still have a substantial share of their bonds denominated in foreign currencies and thus

BIS Quarterly Review, June 2020 15

Small share of FX debt, yet foreign ownership is high for some EMEs Graph A2

Most central government bonds are Non-residents own a large share of Sovereign debt ratings3 in local currency1 local currency government bonds2 Per cent Per cent Rating

87.5 49 AAA

75.0 42 AA

62.5 35 A

50.0 28 BBB

37.5 21 BB

25.0 14 B

12.5 7 CCC

0.0 0 SD AR ID RU MX BR KR TH PE ZA RU PL HU CL TR UA IN KR CN PL PH RU ID ZA TR TR PL CO ZA MY IN ID MX CO MY TH BR CN PH CL MY TH MX CO IN BR AR

Domestic: International: 2019 2009 Negative outlook: Stable outlook: Floating rate Foreign currency 22 May Inflation-indexed End-2019 Straight fixed rate Foreign currency 1 Based on amounts outstanding at end-2018. Domestic bonds exclude money market instruments. International bonds are typically issued in foreign currency; some countries, such as Argentina, also issue foreign currency debt domestically. 2 Central government bonds. 3 The dashed line indicates the investment grade threshold. For Argentina, the rating outlook as of 22 May is “not meaningful”. Sources: S Arslanalp and T Tsuda, “Tracking global demand for emerging market sovereign debt”, IMF Working Papers, no WP/14/39, March 2014; Bloomberg; Dealogic; Euroclear; S&P Capital IQ; Thomson Reuters; Xtrakter ltd; national data; BIS calculations.

remain vulnerable to valuation changes linked to exchange rate depreciation. In addition, SOEs’ liabilities can be sensitive to currency devaluations when they have substantial amounts of foreign currency-denominated debt and face a decline in their foreign currency incomes. For example, about 90% of the debt of the oil-producing SOEs of Brazil, Colombia and Mexico is denominated in US dollars. The collapse in commodity prices is now weighing on the financial position of SOEs that have relied on income from commodity sales as a “natural hedge” to service their foreign currency debt. The second potential concern is the challenges posed by the participation of foreign investors in LCGB markets. As of mid-2019, non-residents held about 20% of the LCGBs (Graph A2, centre panel), up from 10% a decade ago. Increased foreign participation has many advantages when the domestic institutional investor base is less developed. It provides funding and adds to the liquidity of domestic government bond markets. It has also helped EMEs to reduce short-term foreign currency borrowing, a key driver of past crises. Yet foreign portfolio investment does not fully insulate EMEs from funding strains. A large increase in domestic currency bond yields often coincides with currency depreciation. The two can combine to raise EME governments’ funding costs. In addition, large market moves can trigger unhedged foreign investors’ risk limits, leading to asset sales or more hedging. These adverse dynamics have played out in recent months. A potential rating downgrade is another structural vulnerability for several EMEs (Graph A2, right-hand panel). As of late May 2020, several large EMEs were borderline investment grade. A downgrade below investment grade could reduce the pool of potential investors, forcing some to sell their security holdings if they, for instance, have investment grade mandates or match investment grade indices. This cliff effect risks a severe market disruption.

 The views expressed are those of the authors and do not necessarily reflect the views of the Bank for International Settlements.  The Mexican government has a hedging programme in place to protect public finances from oil price fluctuations.  See K Micic, “Recent trends in EME government debt volume and composition”, BIS Quarterly Review, September 2017, pp 22–4.  See A Aguilar, V Alfonso, R Barbone and C Cantú, “Oil dependence in Latin America”, BIS Bulletin, forthcoming.  “Original sin redux” is the term coined to describe the risks associated with non-resident ownership of LCGBs; see A Carstens and H S Shin, “Emerging markets aren’t out of the woods yet”, Foreign Affairs, 15 March 2019.  See B Hofmann, I Shim and H S Shin, “Emerging market economy exchange rates and local currency bond markets amid the Covid-19 pandemic”, BIS Bulletin, no 5, April 2020; and P Hördahl and I Shim, “EME bond portfolio flows and long- term interest rates during the Covid-19 pandemic”, BIS Bulletin, no 18, May 2020.

16 BIS Quarterly Review, June 2020

Annexes

BIS Statistics: Charts

The statistics published by the BIS are a unique source of information about the structure of and activity in the global financial system. BIS statistics are presented in graphical form in this annex and in tabular form in the BIS Statistical Bulletin, which is published concurrently with the BIS Quarterly Review. For introductions to the BIS statistics and a glossary of terms used in this annex, see the BIS Statistical Bulletin. The data shown in the charts in this annex can be downloaded from the BIS Quarterly Review page on the BIS website (www.bis.org/publ/quarterly.htm). Data may have been revised or updated subsequent to the publication of this annex. For the latest data and to download additional data, see the statistics pages on the BIS website (www.bis.org/statistics/index.htm). A release calendar provides advance notice of publication dates (www.bis.org/statistics/relcal.htm).

A Locational banking statistics

A.1 Cross-border claims, by sector, currency and instrument ...... A4

A.2 Cross-border claims, by borrowing region ...... A5

A.3 Cross-border claims, by borrowing country ...... A6

A.4 Cross-border claims, by nationality of reporting bank and currency of denomination ...... A7

A.5 Cross-border liabilities of reporting banks ...... A8

B Consolidated banking statistics

B.1 Consolidated claims of reporting banks on advanced economies ...... A9

B.2 Consolidated claims of reporting banks on emerging market economies ..... A10

C Debt securities statistics

C.1 Global debt securities markets ...... A11

C.2 Total debt securities, by sector of issuer ...... A11

C.3 Net issuance of international debt securities ...... A12

C.4 International debt securities issued by financial and non-financial corporations ...... A12

D Derivatives statistics

D.1 Exchange-traded derivatives ...... A13

BIS Quarterly Review, June 2020 A1

D.2 Global OTC derivatives markets ...... A14

D.3 OTC foreign exchange derivatives ...... A14

D.4 OTC interest rate derivatives ...... A15

D.5 OTC equity-linked derivatives ...... A15

D.6 OTC commodity derivatives ...... A16

D.7 Credit default swaps ...... A16

D.8 Concentration in global OTC derivatives markets ...... A17

D.9 Growth of central clearing ...... A17

E Global liquidity indicators

E.1 Growth of international bank credit...... A18

E.2 Global bank credit to the private non-financial sector, by residence of borrower ...... A19

E.3 Global credit to the non-financial sector, by currency ...... A20

E.4 US dollar-denominated credit to non-banks outside the United States ...... A21

E.5 Foreign currency credit to non-banks in EMDEs ...... A21

F Statistics on total credit to the non-financial sector

F.1 Total credit to the non-financial sector (core debt) ...... A22

F.2 Total credit to the private non-financial sector (core debt) ...... A23

F.3 Bank credit to the private non-financial sector (core debt) ...... A24

F.4 Total credit to households (core debt) ...... A25

F.5 Total credit to non-financial corporations (core debt) ...... A26

F.6 Total credit to the government sector at market value (core debt)...... A27

F.7 Total credit to the government sector at nominal value (core debt) ...... A28

G Debt service ratios for the private non-financial sector

G.1 Debt service ratios of the private non-financial sector ...... A29

G.2 Debt service ratios of households ...... A30

G.3 Debt service ratios of non-financial corporations ...... A31

A2 BIS Quarterly Review, June 2020

H Property price statistics

H.1 Real residential property prices ...... A32

I Effective and US dollar exchange rate statistics

I.1 Real effective exchange rates ...... A33

I.2 US dollar exchange rates ...... A34

J Credit-to-GDP gaps

J.1 Credit-to-GDP gaps ...... A35

K Consumer price indices

K.1 Consumer prices ...... A36

L Central bank policy rates

L.1 Central bank policy or representative rates ...... A37

BIS Quarterly Review, June 2020 A3

A Locational banking statistics

Cross-border claims, by sector, currency and instrument Graph A.1

Amounts outstanding, in USD trn1 Adjusted changes, in USD bn2 Annual change, in per cent3 By sector of counterparty

1,000 30 10

500 20 0 0

10 –10 –500

0 –1,000 –20 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 4 Non-bank Related offices Unrelated banks Unallocated By currency

1,000 30 10

500 20 0 0

10 –10 –500

0 –1,000 –20 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 5 US dollar Euro Yen Other currencies Unallocated By instrument

1,000 30 15

500 20 0 0

10 –15 –500

0 –1,000 –30 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 Loans and deposits Debt securities Other instruments Unallocated Further information on the BIS locational banking statistics is available at www.bis.org/statistics/bankstats.htm. 1 At quarter-end. Amounts denominated in currencies other than the US dollar are converted to US dollars at the exchange rate prevailing on the reference date. 2 Quarterly changes in amounts outstanding, adjusted for the impact of exchange rate movements between quarter-ends and methodological breaks in the data. 3 Geometric mean of quarterly percentage adjusted changes. 4 Includes central banks and banks unallocated by subsector between intragroup and unrelated banks. 5 Other reported currencies, calculated as all currencies minus US dollar, euro, yen and unallocated currencies. The currency is known but reporting is incomplete. Source: BIS locational banking statistics.

A4 BIS Quarterly Review, June 2020

Cross-border claims, by borrowing region Graph A.2

Amounts outstanding, in USD trn1 Adjusted changes, in USD bn2 Annual change, in per cent3 On all countries

30 750 8

20 0 0

10 –750 –8

0 –1,500 –16 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 Advanced economies Offshore centres EMEs On developed countries

20 1,000 10

15 500 5

10 0 0

5 –500 –5

0 –1,000 –10 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 Euro area Other European Other advanced advanced On emerging market economies

3.6 150 20

2.4 0 0

1.2 –150 –20

0.0 –300 –40 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 Emerging Asia and Pacific Emerging Latin America and Caribbean Emerging Europe Emerging Africa and Middle East Further information on the BIS locational banking statistics is available at www.bis.org/statistics/bankstats.htm. 1 At quarter-end. Amounts denominated in currencies other than the US dollar are converted to US dollars at the exchange rate prevailing on the reference date. 2 Quarterly changes in amounts outstanding, adjusted for the impact of exchange rate movements between quarter-ends and methodological breaks in the data. 3 Geometric mean of quarterly percentage adjusted changes. Source: BIS locational banking statistics.

BIS Quarterly Review, June 2020 A5

Cross-border claims, by borrowing country Graph A.3

Amounts outstanding, in USD trn1 Adjusted changes, in USD bn2 Annual change, in per cent3 On selected advanced economies

15 450 15

10 0 0

5 –450 –15

0 –900 –30 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 United States United Kingdom France Germany Japan On selected offshore centres

4 150 20

3 0 0 2

–150 –20 1

0 –300 –40 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 Cayman Islands Hong Kong SAR Singapore Jersey Bahamas On selected emerging market economies

1.5 100 40

1.0 0 0

0.5 –100 –40

0.0 –200 –80 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 China Brazil India Russia South Africa Further information on the BIS locational banking statistics is available at www.bis.org/statistics/bankstats.htm. 1 At quarter-end. Amounts denominated in currencies other than the US dollar are converted to US dollars at the exchange rate prevailing on the reference date. 2 Quarterly changes in amounts outstanding, adjusted for the impact of exchange rate movements between quarter-ends and methodological breaks in the data. 3 Geometric mean of quarterly percentage adjusted changes. Source: BIS locational banking statistics.

A6 BIS Quarterly Review, June 2020

Cross-border claims, by nationality of reporting bank and currency of denomination Graph A.4

Amounts outstanding, in USD trn1 Adjusted changes, in USD bn2 Annual change, in per cent3 All currencies

30 750 10

20 0 0

10 –750 –10

0 –1,500 –20 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 Japan France Other United States Germany US dollar

15 500 15

10 0 0

5 –500 –15

0 –1,000 –30 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 Japan United Kingdom Other United States Switzerland Euro

9 400 20

6 0 0

3 –400 –20

0 –800 –40 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 Germany Netherlands Other France United Kingdom Further information on the BIS locational banking statistics is available at www.bis.org/statistics/bankstats.htm. 1 At quarter-end. Amounts denominated in currencies other than the US dollar are converted to US dollars at the exchange rate prevailing on the reference date. 2 Quarterly changes in amounts outstanding, adjusted for the impact of exchange rate movements between quarter-ends and methodological breaks in the data. 3 Geometric mean of quarterly percentage adjusted changes. Source: BIS locational banking statistics.

BIS Quarterly Review, June 2020 A7

Cross-border liabilities of reporting banks Graph A.5

Amounts outstanding, in USD trn1 Adjusted changes, in USD bn2 Annual change, in per cent3 To emerging market economies

3 100 15

2 0 0

1 –100 –15

0 –200 –30 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 Emerging Asia and Pacific Emerging Latin America and Caribbean Emerging Europe Emerging Africa and Middle East To central banks

1.2 50 50

0.8 0 0

0.4 –50 –50

0.0 –100 –100 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 US dollar Euro Yen Other currencies Unallocated By currency type and location

30 600 5

20 0 0

10 –600 –5

0 –1,200 –10 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 Cross-border in all currencies Unallocated Resident in foreign currencies Further information on the BIS locational banking statistics is available at www.bis.org/statistics/bankstats.htm. 1 At quarter-end. Amounts denominated in currencies other than the US dollar are converted to US dollars at the exchange rate prevailing on the reference date. 2 Quarterly changes in amounts outstanding, adjusted for the impact of exchange rate movements between quarter-ends and methodological breaks in the data. 3 Geometric mean of quarterly percentage adjusted changes. Source: BIS locational banking statistics.

A8 BIS Quarterly Review, June 2020

B Consolidated banking statistics

Consolidated claims of reporting banks on advanced economies Graph B.1

Foreign claims and local positions, Foreign claims of selected creditors, International claims, by sector and in USD bn1, 2 in USD bn1, 3 maturity, in per cent4 On the euro area

7,500 1,200 45

5,000 800 30

2,500 400 15

0 0 0 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 Foreign claims (immediate)5 FR GB DE Banks 6 Foreign claims (guarantor) JP US Official sector Local claims in local currency Non-bank private sector Local liabilities in local currency Up to and including 1 year On the United States

6,000 1,500 60

4,000 1,000 40

2,000 500 20

0 0 0 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 JP CH DE GB FR

On Japan

1,050 450 50

700 300 25 350 150

0 0 0

15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 US GB AU FR TW Further information on the BIS consolidated banking statistics is available at www.bis.org/statistics/bankstats.htm. 1 Amounts outstanding at quarter-end. Amounts denominated in currencies other than the US dollar are converted to US dollars at the exchange rate prevailing on the reference date. 2 Excludes domestic claims, ie claims on residents of a bank’s home country. 3 Foreign claims on a guarantor basis, by nationality of reporting bank. The banking systems shown are not necessarily the largest foreign bank creditors on each reference date. 4 As a percentage of international claims outstanding. 5 On an immediate counterparty basis. Includes the unconsolidated claims of banks headquartered outside but located inside CBS-reporting countries. 6 On a guarantor basis. Source: BIS consolidated banking statistics (CBS).

BIS Quarterly Review, June 2020 A9

Consolidated claims of reporting banks on emerging market economies Graph B.2

Foreign claims and local positions, Foreign claims of selected creditors, International claims, by sector and in USD bn1, 2 in USD bn1, 3 maturity, in per cent4 On China

1,200 180 75

800 120 50

400 60 25

0 0 0

15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 Foreign claims (immediate)5 GB JP FR Banks 6 Foreign claims (guarantor) US TW Official sector Local claims in local currency Non-bank private sector Local liabilities in local currency Up to and including 1 year On Turkey

300 75 60

200 50 40

100 25 20

0 0 0

15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 ES GB DE FR US On Brazil

450 180 60

300 120 40

150 60 20

0 0 0

15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 ES GB FR US JP Further information on the BIS consolidated banking statistics is available at www.bis.org/statistics/bankstats.htm. 1 Amounts outstanding at quarter-end. Amounts denominated in currencies other than the US dollar are converted to US dollars at the exchange rate prevailing on the reference date. 2 Excludes domestic claims, ie claims on residents of a bank’s home country. 3 Foreign claims on a guarantor basis, by nationality of reporting bank. The banking systems shown are not necessarily the largest foreign bank creditors on each reference date. 4 As a percentage of international claims. 5 On an immediate counterparty basis. Includes the unconsolidated claims of banks headquartered outside but located inside CBS-reporting countries. 6 On a guarantor basis . Source: BIS consolidated banking statistics (CBS).

A10 BIS Quarterly Review, June 2020

C Debt securities statistics

Global debt securities markets1 Amounts outstanding, in trillions of US dollars2 Graph C.1

By market of issue By sector of issuer By currency of denomination3

120 60 60

80 40 40

40 20 20

0 0 0

15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 TDS DDS GG NFC USD JPY IDS FC IO EUR OTH DDS = domestic debt securities; IDS = international debt securities; TDS = total debt securities. FC = financial corporations; GG = general government; HH = households and non-profit institutions serving households; IO = international organisations; NFC = non-financial corporations. Further information on the BIS debt securities statistics is available at www.bis.org/statistics/secstats.htm. 1 Sample of countries varies across breakdowns shown. For countries that do not report TDS, data are estimated by the BIS as DDS plus IDS. For countries that do not report either TDS or DDS, data are estimated by the BIS as IDS. 2 At quarter-end. Amounts denominated in currencies other than the US dollar are converted to US dollars at the exchange rate prevailing on the reference date. 3 Where a currency breakdown is not available, DDS are assumed to be denominated in the local currency. Sources: Dealogic; Euroclear; Refinitiv; Xtrakter Ltd; national data; BIS debt securities statistics; BIS calculations.

Total debt securities, by residence and sector of issuer1 Amounts outstanding for the latest available data, in trillions of US dollars2 Graph C.2

Lhs Rhs 40 4

30 3

20 2

10 1

0 0 US CN JP GB FR DE CA IT NL KY ES AU KR IE General government Non-financial corporations Financial corporations Households and non-profit institutions serving households Further information on the BIS debt securities statistics is available at www.bis.org/statistics/secstats.htm. 1 For countries that do not report TDS, data are estimated by the BIS as DDS plus IDS. 2 Amounts denominated in currencies other than the US dollar are converted to US dollars at the exchange rate prevailing on the reference date. Sources: National data; BIS debt securities statistics.

BIS Quarterly Review, June 2020 A11

Net issuance of international debt securities By issuer sector and currency of denomination, in billions of US dollars Graph C.3

US dollars Euro Pound Sterling

225 150 40

150 75 20 75 0

0 0 –75

–75 –150 –20 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 Banks Non-financial corporations General government Other financial institutions International organizations Further information is available at www.bis.org/statistics/secstats.htm.

Sources: Dealogic; Euroclear; Refinitiv; Xtrakter Ltd; BIS debt securities statistics.

International debt securities issued by financial and non-financial corporations1 Net issuance by region, in billions of US dollars2 Graph C.4

Developed countries Developing countries Offshore centres

200 60 100

100 30 50

0 0 0

–100 –30 –50 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 Nationals Residents Further information is available at www.bis.org/statistics/secstats.htm.

1 Excluding general government. 2 For a list of countries in each region, see Table C1 (http://stats.bis.org/statx/srs/table/c1). Sources: Dealogic; Euroclear; Refinitiv; Xtrakter Ltd; BIS debt securities statistics.

A12 BIS Quarterly Review, June 2020

D Derivatives statistics

Exchange-traded derivatives Graph D.1

Open interest, by currency1 Daily average turnover, Daily average turnover, by currency2 by location of exchange2 Foreign exchange derivatives, USD bn3

375 150 150

250 100 100

125 50 50

0 0 0 12 14 16 18 20 12 14 16 18 20 12 14 16 18 20

Interest rate derivatives, USD trn3

12 75 9

9 50 6 6

25 3 3

0 0 0 12 14 16 18 20 12 14 16 18 20 12 14 16 18 20 US dollar Pound sterling Other North America Asia and Pacific Euro Yen Europe Other markets Further information on the BIS derivatives statistics is available at www.bis.org/statistics/extderiv.htm. For definitions, see the online glossary. 1 At quarter-end. Amounts denominated in currencies other than the US dollar are converted to US dollars at the exchange rate prevailing on the reference date. 2 Quarterly averages of daily turnover. 3 Futures and options. Sources: Euromoney TRADEDATA; Futures Industry Association; The Options Clearing Corporation; BIS derivatives statistics.

BIS Quarterly Review, June 2020 A13

Global OTC derivatives markets1 Graph D.2

Notional principal Gross market value Gross credit exposure USD trn USD trn Per cent USD trn

600 30 30 4.5

400 20 20 3.0

200 10 10 1.5

0 0 0 0.0 13 15 17 19 13 15 17 19 13 15 17 19 Interest rate Commodities Share of gross market value (lhs) FX CDS Amounts (rhs) Equity Further information on the BIS derivatives statistics is available at www.bis.org/statistics/derstats.htm. For definitions, see the online glossary. 1 At half-year end (end-June and end-December). Amounts denominated in currencies other than the US dollar are converted to US dollars at the exchange rate prevailing on the reference date. Source: BIS derivatives statistics.

OTC foreign exchange derivatives Notional principal1 Graph D.3

By currency By maturity By sector of counterparty USD trn Per cent Per cent USD trn

80 100 8 80

60 75 6 60

40 50 4 40

20 25 2 20

0 0 0 0 13 15 17 19 13 15 17 19 13 15 17 19 US dollar Pound sterling ≤ 1 year Share of CCPs (lhs) ≤ Rhs: Euro Yen > 1 year & 5 years Reporting dealers > 5 years Other financial institutions Non-financial institutions Further information on the BIS derivatives statistics is available at www.bis.org/statistics/derstats.htm. For definitions, see the online glossary. 1 At half-year end (end-June and end-December). Amounts denominated in currencies other than the US dollar are converted to US dollars at the exchange rate prevailing on the reference date. Source: BIS derivatives statistics.

A14 BIS Quarterly Review, June 2020

OTC interest rate derivatives Notional principal1 Graph D.4

By currency By maturity By sector of counterparty USD trn Per cent Per cent USD trn

240 100 82 600

180 75 80 450

120 50 78 300

60 25 76 150

0 0 74 0 13 15 17 19 13 15 17 19 13 15 17 19 US dollar Pound sterling ≤ 1 year Share of CCPs (lhs) ≤ Rhs: Euro Yen > 1 year & 5 years Reporting dealers > 5 years Other financial institutions Non-financial institutions Further information on the BIS derivatives statistics is available at www.bis.org/statistics/derstats.htm. For definitions, see the online glossary. 1 At half-year end (end-June and end-December). Amounts denominated in currencies other than the US dollar are converted to US dollars at the exchange rate prevailing on the reference date. Source: BIS derivatives statistics.

OTC equity-linked derivatives Notional principal1 Graph D.5

By equity market By maturity By sector of counterparty USD trn Per cent Per cent USD trn

4 100 8 8

3 75 6 6

2 50 4 4

1 25 2 2

0 0 0 0 13 15 17 19 13 15 17 19 13 15 17 19 United States Japan ≤ 1 year Share of CCPs (lhs) ≤ Rhs: European countries Other > 1 year & 5 years Reporting dealers > 5 years Other financial institutions Non-financial institutions Further information on the BIS derivatives statistics is available at www.bis.org/statistics/derstats.htm. For definitions, see the online glossary. 1 At half-year end (end-June and end-December). Amounts denominated in currencies other than the US dollar are converted to US dollars at the exchange rate prevailing on the reference date. Source: BIS derivatives statistics.

BIS Quarterly Review, June 2020 A15

OTC commodity derivatives1 Graph D.6

Notional principal, by instrument Notional principal, by commodity Gross market value, by commodity Per cent USD trn USD trn

100 4 0.8

75 3 0.6

50 2 0.4

25 1 0.2

0 0 0.0 13 15 17 19 13 15 17 19 13 15 17 19

Forwards and swaps Options Other commodities Gold Other precious metals Further information on the BIS derivatives statistics is available at www.bis.org/statistics/derstats.htm. For definitions, see the online glossary. 1 At half-year end (end-June and end-December). Amounts denominated in currencies other than the US dollar are converted to US dollars at the exchange rate prevailing on the reference date. Source: BIS derivatives statistics.

Credit default swaps1 Graph D.7

Notional principal Notional principal with central Impact of netting counterparties (CCPs) Per cent USD trn Per cent USD trn Per cent USD trn

20 40 60 6.0 30 1.2

15 30 45 4.5 25 0.9

10 20 30 3.0 20 0.6

5 10 15 1.5 15 0.3

0 0 0 0.0 10 0.0 15 17 19 14 15 16 17 18 19 14 15 16 17 18 19 Gross market value/notional (lhs) CCPs/total (lhs) Net/gross market values (lhs) Rhs: Single-name notional Rhs: Single-name notional Rhs: Gross market values Multi-name notional Multi-name notional Net market values Further information on the BIS derivatives statistics is available at www.bis.org/statistics/derstats.htm. For definitions, see the online glossary. 1 At half-year end (end-June and end-December). Amounts denominated in currencies other than the US dollar are converted to US dollars at the exchange rate prevailing on the reference date. Source: BIS derivatives statistics.

A16 BIS Quarterly Review, June 2020

Concentration in global OTC derivatives markets Herfindahl index1 Graph D.8

Foreign exchange derivatives2 Interest rate swaps Equity-linked options

1,000 1,400 6,400

800 1,000 4,400

600 600 2,400

400 200 400 13 15 17 19 13 15 17 19 13 15 17 19 USD GBP CHF SEK United States Latin America EUR JPY CAD Japan Other Asia Europe Further information on the BIS derivatives statistics is available at www.bis.org/statistics/derstats.htm. For definitions, see the online glossary. 1 The index ranges from 0 to 10,000, where a lower number indicates that there are many dealers with similar market shares (as measured by notional principal) and a higher number indicates that the market is dominated by a few reporting dealers. 2 Foreign exchange forwards, foreign exchange swaps and currency swaps. Source: BIS derivatives statistics.

Growth of central clearing Notional amounts outstanding by counterparty, in per cent Graph D.9

Interest rate derivatives Credit default swaps

80 80

60 60

40 40

20 20

0 0 07 09 11 13 15 17 19 07 09 11 13 15 17 19 Reporting dealers1 Central counterparties1, 3 1, 2 4 Other financial institutions Estimated minimum clearing rate Further information on the BIS derivatives statistics is available at www.bis.org/statistics/derstats.htm. For definitions, see the online glossary. 1 As a percentage of notional amounts outstanding against all counterparties. 2 Including central counterparties but excluding reporting dealers. 3 For interest rate derivatives, data for CCPs prior to end-June 2016 are estimated by indexing the amounts reported at end-June 2016 to the growth since 2008 of notional amounts outstanding cleared through LCH’s SwapClear service. 4 Proportion of trades that are cleared, estimated as (CCP / 2) / (1 – (CCP / 2)), where CCP represents the share of notional amounts outstanding that dealers report against CCPs. CCPs’ share is halved to adjust for the potential double-counting of inter- dealer trades novated to CCPs. Sources: LCH.Clearnet Group Ltd; BIS OTC derivatives statistics (Table D7 and Table D10.1); BIS calculations.

BIS Quarterly Review, June 2020 A17

E Global liquidity indicators

US dollar credit outside the United States1 Annual change, in per cent Graph E.1

20

10

0

–10

–20 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2 Total credit Loans Debt securities NEER Further information on the BIS global liquidity indicators is available at www.bis.org/statistics/gli.htm. 1 Annual growth of US dollar-denominated credit to non-banks outside the United States. 2 Annual growth of the US dollar nominal effective exchange rate. Sources: Datastream; Dealogic; Euroclear; Refinitiv; Xtrakter Ltd; national data; BIS locational banking statistics; BIS effective exchange rate statistics; BIS calculations.

A18 BIS Quarterly Review, June 2020

Global bank credit to the private non-financial sector, by residence of borrower Banks’ cross-border credit plus local credit in all currencies1 Graph E.2

All countries2 United States Euro area3 % of GDP Annual change, % % of GDP Annual change, % % of GDP Annual change, %

120 24 120 24 120 24

90 12 90 12 90 12

60 0 60 0 60 0

30 –12 30 –12 30 –12

0 –24 0 –24 0 –24 01 04 07 10 13 16 19 01 04 07 10 13 16 19 01 04 07 10 13 16 19 Emerging Asia4 Latin America5 Central Europe6 % of GDP Annual change, % % of GDP Annual change, % % of GDP Annual change, %

120 50 120 50 120 50

90 25 90 25 90 25

60 0 60 0 60 0

30 –25 30 –25 30 –25

0 –50 0 –50 0 –50 01 04 07 10 13 16 19 01 04 07 10 13 16 19 01 04 07 10 13 16 19 Amounts outstanding Annual changes (lhs): (rhs): Cross-border credit Local credit Further information on the BIS global liquidity indicators is available at www.bis.org/statistics/gli.htm. 1 Cross-border claims of LBS reporting banks to the non-bank sector plus local claims of all banks to the private non-financial sector. Weighted averages of the economies listed, based on four-quarter moving sums of GDP. 2 Australia, Canada, Denmark, Japan, New Zealand, Norway, Russia, Saudi Arabia, South Africa, Sweden, Switzerland, Turkey and the United Kingdom, plus the countries in the other panels. 3 Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Portugal and Spain. 4 China, Hong Kong SAR, India, Indonesia, Korea, Malaysia, Singapore and Thailand. 5 Argentina, Brazil, Chile and Mexico. 6 The Czech Republic, Hungary and Poland. Sources: BIS credit to the non-financial sector; BIS locational banking statistics; BIS calculations.

BIS Quarterly Review, June 2020 A19

Global credit to the non-financial sector, by currency Graph E.3

Amounts outstanding, in trillions of currency units1 Annual change, in per cent2 Credit denominated in US dollars (USD)

60 30 30

45 15 15

30 0 0

15 –15 –15

0 –30 –30 00 02 04 06 08 10 12 14 16 18 20 01 03 05 07 09 11 13 15 18 19 Credit denominated in euros (EUR)

28 30 30

21 15 15

14 0 0

7 –15 –15

0 –30 –30 00 02 04 06 08 10 12 14 16 18 20 01 03 05 07 09 11 13 15 18 19 Credit denominated in yen (JPY)

2,000 40 40

1,500 20 20

1,000 0 0

500 –20 –20

0 –40 –40 00 02 04 06 08 10 12 14 16 18 20 01 03 05 07 09 11 13 15 18 19 Credit to residents3 Credit to non-residents: Credit to Credit to non-residents: 3 Of which: Debt securities4 residents Debt securities4 Credit to government Bank loans5 Bank loans5

Further information on the BIS global liquidity indicators is available at www.bis.org/statistics/gli.htm. 1 Amounts outstanding at quarter-end. 2 Based on quarterly break- and exchange rate-adjusted changes. 3 Credit to non-financial borrowers residing in the United States/euro area/Japan. National financial accounts are adjusted using BIS banking and securities statistics to exclude credit denominated in non-local currencies. 4 Excluding debt securities issued by special purpose vehicles and other financial entities controlled by non-financial parents. EUR-denominated debt securities exclude those issued by institutions of the European Union. 5 Loans by LBS-reporting banks to non-bank borrowers, including non-bank financial entities, comprise cross-border plus local loans. Sources: Datastream; Dealogic; Euroclear; Refinitiv; Xtrakter Ltd; national data; BIS locational banking statistics (LBS); BIS calculations.

A20 BIS Quarterly Review, June 2020

US dollar-denominated credit to non-banks outside the United States1 Graph E.4

World EMDEs Per cent USD tn Per cent USD tn

58 12 65 3

54 8 60 2

50 4 55 1

46 0 50 0 01 03 05 07 09 11 13 15 17 19 01 03 05 07 09 11 13 15 17 19 Lhs: Amounts outstanding (rhs): Share of bank loans Bonds issued by non-banks 2 Bank loans to non-banks Further information on the BIS global liquidity indicators is available at www.bis.org/statistics/gli.htm. 1 Non-banks comprise non-bank financial entities, non-financial corporations, governments, households and international organisations. 2 Loans by LBS- reporting banks to non-bank borrowers, including non-bank financial entities, comprise cross-border plus local loans. Sources: Datastream; Dealogic; Euroclear; Refinitiv; Xtrakter Ltd; national data; BIS locational banking statistics (LBS); BIS calculations.

Foreign currency credit to non-banks in EMDEs Graph E.5

US dollar-denominated credit by region Foreign currency credit to selected EMDEs1 USD trn USD bn

3 450

2 300

1 150

0 0 01 03 05 07 09 11 13 15 17 19 CN MX TR RU ID BR SA KR AR IN CL TW ZA MY Emerging Europe Africa and Middle East Denominated in: USD EUR JPY Latin America and Caribbean Emerging Asia-Pacific Further information on the BIS global liquidity indicators is available at www.bis.org/statistics/gli.htm. 1 Amounts outstanding for the latest available data. Sources: Datastream; Dealogic; Euroclear; Refinitiv; Xtrakter Ltd; national data; BIS locational banking statistics (LBS); BIS calculations.

BIS Quarterly Review, June 2020 A21

F Statistics on total credit to the non-financial sector

Total credit to the non-financial sector (core debt) As a percentage of GDP Graph F.1

Euro area: aggregate and major countries Euro area: other countries

320 360

280 320

240 280

200 240

160 200 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Euro area Germany France Italy Belgium Netherlands Spain Other European countries Major advanced economies

300 360

270 300

240 240

210 180

180 120 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Sweden Switzerland United Kingdom Australia Canada Japan United States Emerging Asia Other emerging Asia

360 160

270 120

180 80

90 40 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 China Hong Kong SAR Korea Singapore India Indonesia Malaysia Thailand Latin America Other emerging market economies

140 120

100 90

60 60

20 30 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Argentina Brazil Mexico Poland Saudi Arabia Turkey Russia South Africa Further information on the BIS credit statistics is available at www.bis.org/statistics/totcredit.htm. Source: BIS total credit statistics.

A22 BIS Quarterly Review, June 2020

Total credit to the private non-financial sector (core debt) As a percentage of GDP Graph F.2

Euro area: aggregate and major countries Euro area: other countries

200 275

160 225

120 175

80 125 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Euro area Germany France Italy Belgium Netherlands Spain Other European countries Major advanced economies

240 210

210 180

180 150

150 120 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Sweden Switzerland United Kingdom Australia Canada Japan United States Emerging Asia Other emerging Asia

280 120

210 80

140 40

70 0 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 China Hong Kong SAR Korea Singapore India Indonesia Malaysia Thailand Latin America Other emerging market economies

60 80

40 60

20 40

0 20 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Argentina Brazil Mexico Poland Saudi Arabia Turkey Russia South Africa Further information on the BIS credit statistics is available at www.bis.org/statistics/totcredit.htm. Source: BIS total credit statistics.

BIS Quarterly Review, June 2020 A23

Bank credit to the private non-financial sector (core debt) As a percentage of GDP Graph F.3

Euro area: aggregate and major countries Euro area: other countries

100 150

90 120

80 90

70 60

60 30 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Euro area Germany France Italy Belgium Netherlands Spain Other European countries Major advanced economies

160 120

140 90

120 60

100 30

80 0 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Sweden Switzerland United Kingdom Australia Canada Japan United States Emerging Asia Other emerging Asia

240 120

180 80

120 40

60 0 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 China Hong Kong SAR Korea Singapore India Indonesia Malaysia Thailand Latin America Other emerging market economies

60 75

45 60

30 45

15 30

0 15 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Argentina Brazil Mexico Poland Saudi Arabia Turkey Russia South Africa Further information on the BIS credit statistics is available at www.bis.org/statistics/totcredit.htm. Source: BIS total credit statistics.

A24 BIS Quarterly Review, June 2020

Total credit to households (core debt) As a percentage of GDP Graph F.4

Euro area: aggregate and major countries Euro area: other countries

70 120

60 100

50 80

40 60

30 40 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Euro area Germany France Italy Belgium Netherlands Spain Other European countries Major advanced economies

120 120

100 100

80 80

60 60

40 40 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Sweden Switzerland United Kingdom Australia Canada Japan United States Emerging Asia Other emerging Asia

80 80

60 60

40 40

20 20

0 0 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 China Hong Kong SAR Korea Singapore India Indonesia Malaysia Thailand Latin America Other emerging market economies

28 40

21 30

14 20

7 10

0 0 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Argentina Brazil Mexico Poland Saudi Arabia Turkey Russia South Africa Further information on the BIS credit statistics is available at www.bis.org/statistics/totcredit.htm. Source: BIS total credit statistics.

BIS Quarterly Review, June 2020 A25

Total credit to non-financial corporations (core debt) As a percentage of GDP Graph F.5

Euro area: aggregate and major countries Euro area: other countries

150 175

120 150

90 125

60 100

30 75 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Euro area Germany France Italy Belgium Netherlands Spain Other European countries Major advanced economies

150 120

125 105

100 90

75 75

50 60 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Sweden Switzerland United Kingdom Australia Canada Japan United States Emerging Asia Other emerging Asia

200 60

150 40

100 20

50 0 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 China Hong Kong SAR Korea Singapore India Indonesia Malaysia Thailand Latin America Other emerging market economies

45 75

30 50

15 25

0 0 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Argentina Brazil Mexico Poland Saudi Arabia Turkey Russia South Africa Further information on the BIS credit statistics is available at www.bis.org/statistics/totcredit.htm. Source: BIS total credit statistics.

A26 BIS Quarterly Review, June 2020

Total credit to the government sector at market value (core debt)1 As a percentage of GDP Graph F.6

Euro area: aggregate and major countries Euro area: other countries

150 125

125 100

100 75

75 50

50 25 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Euro area Germany France Italy Belgium Netherlands Spain Other European countries Major advanced economies

100 200

80 150

60 100

40 50

20 0

05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Sweden Switzerland United Kingdom Australia Canada Japan United States Emerging Asia Other emerging market economies

55 55

45 45

35 35

25 25

15 15 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Korea Poland Turkey Further information on the BIS credit statistics is available at www.bis.org/statistics/totcredit.htm. 1 Consolidated data for the general government sector. Source: BIS total credit statistics.

BIS Quarterly Review, June 2020 A27

Total credit to the government sector at nominal value (core debt)1 As a percentage of GDP Graph F.7

Euro area: aggregate and major countries Euro area: other countries

125 100

100 75

75 50

50 25 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Euro area Germany France Italy Belgium Netherlands Spain Other European countries Major advanced economies

90 200

75 150

60 100

45 50

30 0

05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Sweden Switzerland United Kingdom Australia Canada Japan United States Emerging Asia Other emerging Asia

125 75 100 60 75 45 50 30 25 0 15

05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 China Hong Kong SAR Singapore India Indonesia Malaysia Thailand Latin America Other emerging market economies

100 80

75 60

50 40

25 20

0 0

05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Argentina Brazil Mexico Poland Saudi Arabia Turkey Russia South Africa Further information on the BIS credit statistics is available at www.bis.org/statistics/totcredit.htm. 1 Consolidated data for the general government sector; central government for Argentina, Indonesia, Malaysia, Mexico, Saudi Arabia and Thailand. Source: BIS total credit statistics.

A28 BIS Quarterly Review, June 2020

G Debt service ratios for the private non-financial sector

Debt service ratios of the private non-financial sector Deviation from country-specific mean, in percentage points1 Graph G.1

Euro area: major countries Euro area: other countries

6 4 3 2 0 0 –3 –2 –6 –4 –9 –6 01 03 05 07 09 11 13 15 17 19 01 03 05 07 09 11 13 15 17 19 France Germany Italy Spain Belgium Finland Netherlands Portugal Other European countries Other economies

6 4

3 2

0 0

–3 –2

–6 –4 01 03 05 07 09 11 13 15 17 19 01 03 05 07 09 11 13 15 17 19 Denmark Norway Sweden United Kingdom Australia Japan Korea Canada United States Major emerging markets2 Emerging Asia2

20 14

10 7

0 0

–10 –7 01 03 05 07 09 11 13 15 17 19 01 03 05 07 09 11 13 15 17 19 Brazil China Russia Turkey Hong Kong SAR Indonesia Thailand India Malaysia Other emerging markets2

4

2

0

–2

–4 01 03 05 07 09 11 13 15 17 19 Mexico Poland South Africa Further information on the BIS debt service ratio statistics is available at www.bis.org/statistics/dsr.htm. 1 Country-specific means are based on all available data from 1999 onwards. 2 Countries which are using alternative measures of income and interest rates. Further information is available under “Metholodogy and data for DSR calculation” at www.bis.org/statistics/dsr.htm. Source: BIS debt service ratios statistics.

BIS Quarterly Review, June 2020 A29

Debt service ratios of households Deviation from country-specific mean, in percentage points1 Graph G.2

Euro area: major countries Euro area: other countries

4 4

2 2

0 0

–2 –2

–4 –4 01 03 05 07 09 11 13 15 17 19 01 03 05 07 09 11 13 15 17 19 France Germany Italy Spain Belgium Finland Netherlands Portugal Other European countries Other economies

4 2

2 0

0 –2

–2 –4

–4 –6 01 03 05 07 09 11 13 15 17 19 01 03 05 07 09 11 13 15 17 19 Denmark Norway Sweden United Kingdom Australia Japan Korea Canada United States Further information on the BIS debt service ratio statistics is available at www.bis.org/statistics/dsr.htm. 1 Country-specific means are based on all available data from 1999 onwards. Source: BIS debt service ratios statistics.

A30 BIS Quarterly Review, June 2020

Debt service ratios of non-financial corporations Deviation from country-specific mean, in percentage points1 Graph G.3

Euro area: major countries Euro area: other countries

20 20

10 10

0 0

–10 –10

–20 –20 01 03 05 07 09 11 13 15 17 19 01 03 05 07 09 11 13 15 17 19 France Germany Italy Spain Belgium Finland Netherlands Portugal Other European countries Other economies

20 20

10 10

0 0

–10 –10

–20 –20 01 03 05 07 09 11 13 15 17 19 01 03 05 07 09 11 13 15 17 19 Denmark Norway Sweden United Kingdom Australia Japan Korea Canada United States Further information on the BIS debt service ratio statistics is available at www.bis.org/statistics/dsr.htm. 1 Country-specific means are based on all available data from 1999 onwards. Source: BIS debt service ratios statistics.

BIS Quarterly Review, June 2020 A31

H Property price statistics

Real residential property prices CPI-deflated, 2010 = 100 Graph H.1

Euro area: aggregate and major countries Euro area: other countries

120 120

100 100

80 80

60 60 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Euro area Germany France Italy Belgium Netherlands Spain Other European countries Major advanced economies

140 140

120 120

100 100

80 80

60 60 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Sweden Switzerland United Kingdom Australia Canada Japan United States Emerging Asia Other emerging Asia

180 160

140 140

100 120

60 100

20 80 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 China Hong Kong SAR Korea Singapore India Indonesia Malaysia Thailand Latin America Other emerging market economies

125 125

100 100

75 75

50 50

25 25 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Brazil Mexico Poland Russia South Africa Turkey Further information on the BIS property price statistics is available at www.bis.org/statistics/pp.htm. Source: BIS property prices statistics.

A32 BIS Quarterly Review, June 2020

I Effective and US dollar exchange rate statistics

Real effective exchange rates CPI-based, 1995–2005 = 1001 Graph I.1

Euro area: aggregate and major countries Euro area: other countries

120 120

110 110

100 100

90 90

80 80 06 08 10 12 14 16 18 20 06 08 10 12 14 16 18 20 Euro area Germany France Italy Belgium Netherlands Spain Other European countries Major advanced economies

120 125

100 100

80 75

60 50 06 08 10 12 14 16 18 20 06 08 10 12 14 16 18 20 Sweden United Kingdom Switzerland Australia Canada Japan United States Emerging Asia Other emerging Asia

125 120

100 100

75 80

50 60 06 08 10 12 14 16 18 20 06 08 10 12 14 16 18 20 China Hong Kong SAR Korea Singapore India Indonesia Malaysia Thailand Latin America Other emerging market economies 130 150 100 125 70 100

40 75

10 50 06 08 10 12 14 16 18 20 06 08 10 12 14 16 18 20 Argentina Brazil Mexico Poland Saudi Arabia Turkey Russia South Africa Further information on the BIS effective exchange rate statistics is available at www.bis.org/statistics/eer.htm. 1 An increase indicates a real-term appreciation of the local currency against a broad basket of currencies. Source: BIS effective exchange rates statistics.

BIS Quarterly Review, June 2020 A33

US dollar exchange rates Indices, 1995–2005 = 1001 Graph I.2

Major advanced economies Other advanced economies

140 175

120 150

100 125

80 100

60 75 06 08 10 12 14 16 18 20 06 08 10 12 14 16 18 20 Euro area Japan United Kingdom Australia Canada Sweden Switzerland Emerging Asia Other emerging Asia

140 125

120 100

100 75

80 50

60 25 06 08 10 12 14 16 18 20 06 08 10 12 14 16 18 20 China Hong Kong SAR Korea Singapore India Indonesia Malaysia Thailand Latin America Other emerging market economies

100 140

75 100

50 60

25 20

0 06 08 10 12 14 16 18 20 06 08 10 12 14 16 18 20 Argentina Brazil Mexico Poland Saudi Arabia Turkey Russia South Africa Further information on the exchange rate statistics is available at www.bis.org/statistics/xrusd.htm. 1 An increase indicates an appreciation of the local currency against the US dollar. Source: BIS US dollar exchange rates statistics.

A34 BIS Quarterly Review, June 2020

J Credit-to-GDP gaps

Credit-to-GDP gaps In percentage points of GDP Graph J.1

Euro area: aggregate and major countries Euro area: other countries

10 25

0 0

–10 –25

–20 –50

–30 –75 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Euro area Germany France Italy Belgium Netherlands Spain Other European countries Major advanced economies

20 10

0 0

–20 –10

–40 –20

–60 –30 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Sweden Switzerland United Kingdom Australia Canada Japan United States Emerging Asia Other emerging Asia

40 20

20 0

0 –20

–20 –40

–40 –60 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 China Hong Kong SAR Korea Singapore India Indonesia Malaysia Thailand Latin America Other emerging market economies

10 10

0 0

–10 –10

–20 –20 05 07 09 11 13 15 17 19 05 07 09 11 13 15 17 19 Argentina Brazil Mexico Poland Saudi Arabia Turkey Russia South Africa 1 Estimates based on series on total credit to the private non-financial sector. The credit-to-GDP gap is defined as the difference between the credit-to-GDP ratio and its long-term trend; the long-term trend is calculated using a one-sided Hodrick-Prescott filter with a smoothing parameter of 400,000. Further information on the BIS credit-to-GDP gaps is available at www.bis.org/statistics/c_gaps.htm. Source: BIS credit-to-GDP gaps statistics.

BIS Quarterly Review, June 2020 A35

K Consumer prices

Consumer prices Year-on-year percentage changes Graph K.1

Euro area: aggregate and major countries Euro area: other countries

4 4

2 2

0 0

–2 –2 06 08 10 12 14 16 18 20 06 08 10 12 14 16 18 20 Euro area Germany France Italy Belgium Netherlands Spain Other European countries Major advanced economies

4 4

2 2

0 0

–2 –2

–4 –4 06 08 10 12 14 16 18 20 06 08 10 12 14 16 18 20 Sweden Switzerland United Kingdom Australia Canada Japan United States Emerging Asia Other emerging Asia

9 15

6 10

3 5

0 0

–3 –5 06 08 10 12 14 16 18 20 06 08 10 12 14 16 18 20 China Hong Kong SAR Korea Singapore India Indonesia Malaysia Thailand Latin America Other emerging market economies

40 20

20 10

0 0

06 08 10 12 14 16 18 20 06 08 10 12 14 16 18 20 Argentina Brazil Mexico Poland Saudi Arabia Turkey Russia South Africa Further information on the BIS consumer prices is available at www.bis.org/statistics/cp.htm. Source: BIS consumer price statistics.

A36 BIS Quarterly Review, June 2020

L Central bank policy rates

Central bank policy or representative rates Month-end; in per cent Graph L.1

Major advanced economies Other advanced economies

6 6

4 4

2 2

0 0

–2 –2 06 08 10 12 14 16 18 20 06 08 10 12 14 16 18 20 Euro area United Kingdom Australia Canada Sweden Switzerland Japan United States Emerging Asia Other emerging Asia

6 12

4 9

2 6

0 3

–2 0 06 08 10 12 14 16 18 20 06 08 10 12 14 16 18 20 China Hong Kong SAR Korea India Indonesia Malaysia Thailand Latin America Other emerging market economies

80 20

60 15

40 10

20 5

0 0 06 08 10 12 14 16 18 20 06 08 10 12 14 16 18 20 Argentina Brazil Mexico Poland Saudi Arabia Turkey Russia South Africa Further information on the policy rates is available at www.bis.org/statistics/cbpol.htm. Source: BIS policy rates statistics.

BIS Quarterly Review, June 2020 A37