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BIS Quarterly Review September 2015 International Banking and Financial Market Developments

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BIS Quarterly Review September 2015 International Banking and Financial Market Developments BIS Quarterly Review September 2015 International banking and financial market developments BIS Quarterly Review Monetary and Economic Department Editorial Committee: Claudio Borio Benjamin Cohen Dietrich Domanski Hyun Song Shin Philip Turner General queries concerning this commentary should be addressed to Benjamin Cohen (tel +41 61 280 8421, 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 Philip Wooldridge (tel +41 61 280 8006, e-mail: [email protected]). This publication is available on the BIS website (www.bis.org/publ/qtrpdf/r_qt1509.htm). © Bank for International Settlements 2015. 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 September 2015 International banking and financial market developments EME vulnerabilities take centre stage ........................................................................................... 1 Markets roiled as China jolts investors ................................................................................ 1 Strong dollar, commodity plunge add to EME weakness ............................................ 4 Diverging monetary policies continue to drive markets .............................................. 8 Bond yields stuck at low levels ............................................................................................... 9 Box 1: Volatility and evaporating liquidity during the bund tantrum ................. 10 Box 2: Dislocated markets .................................................................................................... 14 Highlights of global financing flows ........................................................................................... 17 Takeaways .................................................................................................................................... 17 Recent developments in the international bank and debt markets ..................... 18 Global foreign currency credit to the non-financial sector ...................................... 21 Global cross-border credit .................................................................................................... 21 Box : Capital flowed out of China through BIS reporting banks in Q1 2015 ... 28 International debt securities ................................................................................................. 31 Early warning indicators ......................................................................................................... 34 Statistical Features Introduction to BIS statistics .......................................................................................................... 35 Locational banking statistics ................................................................................................. 36 Consolidated banking statistics ........................................................................................... 37 Debt securities statistics ......................................................................................................... 39 Box 1: Changes to the BIS international debt securities statistics ........................ 40 Derivatives statistics ................................................................................................................. 41 Box 2: Revisions to BIS exchange-traded derivatives statistics ............................. 42 Global liquidity indicators ...................................................................................................... 44 Credit to the non-financial sector ...................................................................................... 45 Debt service ratios .................................................................................................................... 46 Residential property price indices ...................................................................................... 47 Effective exchange rate indices ........................................................................................... 48 BIS Quarterly Review, September 2015 iii Enhanced data to analyse international banking ................................................................... 53 Stefan Avdjiev, Patrick McGuire and Philip Wooldridge Overview of the enhancements ........................................................................................... 54 Putting banks’ international business in context .......................................................... 57 Box 1: The geography of international banking ........................................................... 58 Box 2: New tables on the international banking statistics ....................................... 60 Understanding banks’ counterparties ............................................................................... 61 Monitoring sources of funding ............................................................................................ 62 Box 3: Revisions to historical LBS and CBS ..................................................................... 64 Dissecting the currency composition ................................................................................. 65 Completing the enhancements ............................................................................................ 67 A new database on general government debt ....................................................................... 69 Christian Dembiermont, Michela Scatigna, Robert Szemere and Bruno Tissot Measuring government debt across countries .............................................................. 70 Features of the new BIS data set ......................................................................................... 72 Box 1: Why do government debt figures differ so widely across data sets? .... 74 Measuring valuation effects .................................................................................................. 76 Box 2: Where do the data come from? ............................................................................ 78 Tracking debt dynamics around crises .............................................................................. 82 Conclusions .................................................................................................................................. 86 How much income is used for debt payments? A new database for debt service ratios ......................................................................................................................................... 89 Mathias Drehmann, Anamaria Illes, Mikael Juselius and Marjorie Santos Methodology ............................................................................................................................... 91 Box 1: Does using aggregate information to construct aggregate DSRs introduce distortions? ............................................................................................... 94 Box 2: Derivation of the DSR formula ............................................................................... 98 The evolution of DSRs over the last 15 years ................................................................ 99 Conclusion ................................................................................................................................. 102 Economic Features International monetary spillovers ............................................................................................. 105 Boris Hofmann and Előd Takáts Interest rate correlations ...................................................................................................... 107 Spillovers in short- and long-term interest rates ....................................................... 109 Policy rate spillovers .............................................................................................................. 111 iv BIS Quarterly Review, September 2015 Economic impact of monetary spillovers ...................................................................... 114 Conclusions ............................................................................................................................... 115 The rise of regional banking in Asia and the Pacific .......................................................... 119 Eli Remolona and Ilhyock Shim Trends in regional banking activity .................................................................................. 120 Box 1: The importance of Hong Kong SAR and Singapore ................................... 122 Regional banks’ foreign affiliates and business models .......................................... 124 Box 2: ASEAN banking integration and lessons from Europe ............................. 128 Selected financial stability issues ...................................................................................... 130 Conclusion ................................................................................................................................. 133 BIS statistics: Charts ................................................................................................................... A1 Special features in the BIS Quarterly Review ......................................................... B1 List of recent BIS publications ........................................................................................... C1 Notations
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