DELEVERAGING AND CREDIT MONITOR October 12, 217 Key developments in BIS Banks External Positions and Domestic Credit Adjusting for one-off factors, the external position of BIS reporting banks in Central, Eastern, and Southern Europe () has improved somewhat in the first half of this year. The improvement in the external positions is corroborated by BOP data. Foreign bank funding for the region as a whole has improved, despite reductions in foreign funding for some countries. Outside the Commonwealth of Independent States (CIS), credit accelerated, with the credit to the household sector recovering firmly in almost all the countries. After accounting for one-off factors, the external position of BIS reporting banks in has broadly stabilized in 217H1. Following a prolonged period of deleveraging, external positions of BIS reporting banks stabilized towards the end of 216 (Figure 1). Accounting for one-off factors, which were mainly driven by the rapid increase in exposure to the Czech banks in 217Q1 (Figure 3) associated with the removal of the exchange rate floor by the Czech National bank, external positions have improved somewhat in the first half of this year (Figure 2, Table 1). 1 Accordingly, the stock of BIS reporting banks external positions for the region as a whole has remained broadly stable since end-216 and is now about 11 percent of GDP below its peak (16 percent excluding and, Figure 2). Notwithstanding reductions in foreign bank funding in some countries, foreign bank funding for the region as a whole has improved in 217H1 (Figure 3, Table 1). Compared to 216, the overall foreign bank funding to (in percent of GDP) improved in 217H1. This reflects an increase in foreign bank funding in a number of countries (,, the,,, Macedonia,, and ) which have compensated for the decline of foreign funding in some countries (Bosnia and Herzegovina,,,, Slovakia,, and ). The changes in foreign bank funding were mostly driven by claims on banks, but the role of foreign funding directed to non-financial sector increased (Figure 4, Table 2). Compared to 216, reductions in claims on banks were recorded in,,, Macedonia,,,, Slovakia,,, and, while increases were recorded in, Bosnia and Herzegovina,, 1 The large increase of the exposure to the is likely associated with the expected exit from the koruna floor by the Czech National Bank in early April 217.
2 the,,,, and. Compared to 216, the role of foreign funding directed to non-financial sector increased, driven by higher exposure to nonfinancial sectors in the,,,,,, and. The balance of payments (BoP) data suggest similar movements in 217H1 to external positions based on BIS data (Figure a&b). After divergence in 216, BoP data were broadly consistent with BIS data for the region in 217H1, although there were differences for some of the countries. 2 BoP data suggest notably larger inflows into Slovakia,,,, and, while outflows were larger than implied by BIS data in and. Similar to external positions, foreign claims of BIS banks on appear to have recovered somewhat in the first half of this year (Figures 6&7). Foreign claims, which include cross-border claims and total local claims of foreign banks affiliates, have generally traced developments in external positions and stabilized since 2Q1, with a considerable decline in 216H2, and recovery in 217Q1. Credit developments suggest a firm recovery. Total credit to the private sector as well as non-financial corporations continued to recover, both in and excluding CIS and (Figure 8). In June 217, outside the CIS credit contracted only in and, while credit growth reached robust levels in Slovakia, the Czech Republic, Bosnia and Herzegovina,,, and. However, lending to non-financial corporations remains relatively subdued in several countries (Figure 9). banks continue to experience robust deposit growth, while gradually reducing their loan to deposit ratios. Domestic deposit growth (year on year) remained strong in the vast majority of countries in 217H1, balancing the decline in parent bank funding and raising overall bank funding (Figures 1). This helped the average loan-todeposit ratio for the whole region decline further, reaching around 1 percent level in June 217. 2 Data referred here are other investment liabilities in BoP (include investments other than FDI, portfolio investment, and financial derivatives, which includes loans and deposits, trade credit, etc.). They correspond more closely in terms of coverage to BIS-reporting banks external claims based on locational banking statistics., Bosnia and Herzegovina, Macedonia,,,, and are on net basis, and others are on gross basis. In general, such BoP statistics do not report flows by external creditors so direct comparison with the BIS statistics is difficult in terms of the source of reduction by creditors
3 Figure 1. : Change in External Positions of BIS-reporting Banks, 211Q1-217Q2 (Percent of 216 GDP) 2. : all sectors & instruments excl. & : all sectors & instruments 1. 1. Figure 2. : External Position of BISreporting Banks, 23Q1-217Q2 (Billions of US$, exchange-rate adjusted, vis-à-vis all sectors) 1,1 ex. RUS & TUR 1, 1. 9 1... -. -1..7.6.2 -.3 -.2 -.3 -.2 -.-.4 -.7 -.9 -.9.7.2..1 -.1 -.1 -.3 -.3 -.1 -.3 -.4 -. -.2 -.2 -.3-.4 -.3 -. -.7 -.7 -.8 -.8 8 7 6 4 3 US$399b (11% of 216 GDP) US$246b (16% of 216 GDP) -1. -2. -1.6-1.7 211Q1 211Q2 211Q3 211Q4 212Q1 212Q2 212Q3 212Q4 213Q1 213Q2 213Q3 213Q4 214Q1 214Q2 214Q3 214Q4 2Q1 2Q2 2Q3 2Q4 216Q1 216Q2 216Q3 216Q4 217Q1 217Q2 2 1 23Q1 23Q4 24Q3 2Q2 26Q1 26Q4 27Q3 28Q2 29Q1 29Q4 21Q3 211Q2 212Q1 212Q4 213Q3 214Q2 2Q1 2Q4 216Q3 217Q2 Figure 3. : Change in External Positions of BIS-reporting Banks, 216Q3-217Q2 (Change, percent of 216 GDP) Figure 4. : Change in External Positions of BIS-reporting Banks, 216H2-217H1 (Change, percent of 216H2 position) 2 16 12 8 216Q3 216Q4 217Q1 217Q2 Total 2 2 1 Nonbank Bank Total 4 -.6-1.6-1.8-4 -.1.8 1. -1 - -8-12 Slovakia Macedonia ex. RUS & TUR ex. CIS & TUR -2-2 Macedonia Slovakia ex. RUS & TUR ex. CIS & TUR
4 Figure a. : Change in BIS External Positions and Other Investment Liabilities Macedonia, FYR Kosovo Slovak republic from BOP, 217H1 (Percent of 216 GDP) BOP: other investment liabilities Change in BIS external position -2-1 1 2 3 4 6 7 Sources: Haver Analytics; IMF, World Economic Outlook; and IMF staff Figure b. excl. and : Change in BIS External Positions and Other 3 2 2 1-1 - -2 Investment Liabilities from BOP (Billions of US dollars, 212Q1-217Q2) BOP: other investment liabilities Change in BIS external position 212Q1 213Q1 214Q1 2Q1 216Q1 217Q2 Sources: Haver Analytics; IMF, World Economic Outlook; and IMF staff Figure 6. : External Positions and Foreign Claims, 28Q3-217Q2 (28Q3 = 1, not exchange-rate adjusted) External positions Foreign claims 1 9 9 8 8 7 7 6 6 4 1 9 9 8 8 7 7 6 6 4 Figure 7. excl. &: External Positions and Foreign Claims, 28Q3-217Q2 (28Q3 = 1, not exchange-rate adjusted) External positions Foreign claims 4 28Q3 28Q4 29Q1 29Q2 29Q3 29Q4 21Q1 21Q2 21Q3 21Q4 211Q1 211Q2 211Q3 211Q4 212Q1 212Q2 212Q3 212Q4 213Q1 213Q2 213Q3 213Q4 214Q1 214Q2 214Q3 214Q4 2Q1 2Q2 2Q3 2Q4 216Q1 216Q2 216Q3 216Q4 217Q1 217Q2 Sources: BIS, Locational and Consolidated Banking Statistics; and IMF staff Note: Data on foreign claims for 217Q2 is not available yet. 4 28Q3 28Q4 29Q1 29Q2 29Q3 29Q4 21Q1 21Q2 21Q3 21Q4 211Q1 211Q2 211Q3 211Q4 212Q1 212Q2 212Q3 212Q4 213Q1 213Q2 213Q3 213Q4 214Q1 214Q2 214Q3 214Q4 2Q1 2Q2 2Q3 2Q4 216Q1 216Q2 216Q3 216Q4 217Q1 217Q2 Sources: BIS, Locational and Consolidated Banking Statistics; and IMF staff Note: Data on foreign claims for 217Q2 is not available yet.
Figure 8. Credit to Private Sector, Jan 213 - June 217 (Percent change, year-over-year, nominal, exchangerate adjusted, GDP-weighted) 2 Total: excl. CIS & TUR Total: CIS & TUR 2 NFCs: excl. CIS & TUR NFCs: CIS & TUR Figure 9. : Growth of Credit to Households and Corporations, June 217 (Percent, year-on-year, nominal, exchange-rate adjusted) 2 Households Corporates Total 1 1-1 - Jan-13 Jun-14 Nov- Jun-17 Apr-17 Sources: National authorities; ECB; BIS; EBRD; and IMF staff Figure 1. Main Bank Funding Sources, 217H1 (Percent of 216 GDP, year-on-year, exchange-rate adjusted) 24 24 Δ BIS banks' external position 21 Δ Domestic deposits 21 18 Total 18 FYR Macedonia Bosnia and Herzegovina Slovakia Sources: National authorities; ECB; BIS; EBRD; and IMF staff Figure 11. Domestic Loan to Domestic Deposit Ratio 18 16 (Percent change, year-over-year, nominal, exchangerate adjusted) Range (2 & 7 percentile) Average ex. RUS & TUR ex. CIS & TUR 12 9 6 3-3 Slovak Republic Macedonia, FYR ex. CIS & TUR ex. RUS & TUR 12 9 6 3-3 14 12 1 8 6 Jan-4 Jul-6 Jan-9 Jul-11 Jan-14 Jul-16 Sources: Sources: IMF, Monetary and Financial Statistics; and IMF staff Sources: IMF, Monetary and Financial Statistics; and IMF staff
Table 1. : External Position of BIS-reporting Banks, 2H2 217H1 (Vis-à-vis all sectors, based on partial sample) 217H1 stocks Exchange-rate adjusted flows (US$m) Exchange-rate adjusted flows (% of previous stock) Exchange-rate adjusted flows (% of 216 GDP) US$ m % of 216 GDP 2H2 216H1 216H2 217H1 Total 2H2 216H1 216H2 217H1 Total 2H2 216H1 216H2 217H1 Total 1,317 11.1 14-14 164 29 193 1.2-1.2 14.6 2.3 17.2.1 -.1 1.4.2 1.6 1,989 4.2-23 -17-192 -381-1.7-8. -7.7 1.7-16.1 -. -.4 -.3.4 -.8 Bosnia-Herzegovina 1,618 9.8 79-141 171-141 -32 4.8-8.2 1.8-8. -1.9. -.9 1. -.9 -.2 1,2 19.4-3 648-1,11 717-86 -3.4 6.6-1.4 7.6 -.8 -.7 1.2-2.1 1.4 -.2,83 31.2-1,696-682 -1,971-1,126,47-8. -3. -1.4-6.6-2.7-3.3-1.3-3.9-2.2-1.8 82,766 42.4 3,121 3,61 6,44 2,634 38,86 7.1 7.8 12.7 44.9 88. 1.6 1.9 3.3 13.1 19.9 7,48 3.2 73-44 86-297 84 1.6.7 1.2-4. 1.2 3.2-1.9.4-1.3.4 21,889 17.6-4,666 267-2,27 248-6,426-16. 1.1-9. 1.1-22.7-3.8.2-1.8.2.2 6,49 23.1-262 -764-1 69-68 -3.7-11.3-2. 9.7-8.7 -.9-2.8 -. 2.1-2.2 9,39 21.1 8 624-381 639 824 -.7 7.6-4.3 7.6 1. -.1 1. -.9 1. 1.9 Macedonia 1,232 11.3-36 369-34 32 2-29.7 42.7-28.7 4..2-3.3 3.4-3.2 3.2. 23 3. -22-6 -63 1-9 -7. -2.2-23.8. -3.7 -.3 -.1 -.9. -1.3 693 16.6 2-19 31 76 36-7.9-3.1.3 12.3. -1.2 -..7 1.8.9 82,826 17.6-9,646 6,376-416 -8,33-11,989-1.2 7. -. -9.1-12.6-2.1 1.4 -.1-1.8-2.6 27,442 14.6-1,3-1,179-1,648-313 -4,67-4.8-3.9.6-1.1-14. -.8 -.6 -.9 -.2-2. 74,29.8-12,11-11,198-6,714 3,174-27,249-12.3-12. -8.6 4.4-26.8-1. -.9 -..2-2.1,317 14.1 9-9 -29 3-179 2.9-2.8-3.8.6-3.3.4 -.4 -.6.1 -. Slovakia 17,89 2. 73-1,976-673 -1,44-3,336 3. -9. -3.4-7.4 -.7.8-2.2 -.8-1.6-3.7 9,6 21. -798-179 -96-133 -1,26-7.4-1.8-1. -1.4-11.1-1.8 -.4 -.2 -.3-2.7 16,442 18.6 3,727-1,329-1,619-8,226 2.2. -6. -1. -4.9.4. -1.2 -.2-1. 4,27 4.6-1,14 269-2,481 716-2,636-16. 4.7-41.1 2.1-38.2-1.2.3-2.7.8-2.8 1/ 42,21 14.7-24,761-4,728-22,16 19, -32,9-4.3 -.9-4.1 3.6.7 -.7 -.1 -.6. -.9 Emerging Europe 2/ 49,74 12.6-28,22,644-27,34,967-67,28.9-1.3-6.2-1.4-14.1 -.9 -.2 -.8 -.2-2.1 ex. RUS & TUR 37, 2. -,977 6,47,63 17,4 2,88.2 2.2-1.7 6..9-1..4 -.3 1.1.2 ex. CIS & TUR 3/ 31,88 21.7-14,62 6,382-2,369 16,41,992-4.9 2.3 -.8.8 2. -1.. -.2 1.2.4 Sources: BIS; and IMF staff 1/ All countries listed above. 2/ excluding the,,,, Slovakia, and. 3/ CIS =,, and.
7 Table 2. : External Position of BIS-reporting Banks, 2H2 217H1 (Exchange rate adjusted flows, based on partial sample) 217H1 Banks (US$m) Non-banks (US$m) Loans-Banks Loans-Non-Banks US$ m % of 216 GDP 2H2 216H1 216H2 217H1 Total 2H2 216H1 216H2 217H1 Total 2H2 216H1 216H2 217H1 Total 2H2 216H1 216H2 217H1 Total 29..2 1-4 -8 7-6 6-1 172-28 199-6 32 8-21 6-7 178-28 23 192..4-37 -193-94 191-466 117 23 6 1 8-376 -19-96 -97-764 117 26 7 4 9 Bosnia-Herzegovina -141. -.9 9-16 17-8 87-11 24 1-133 -119-129 98 2 44-1 24 2-133 -117 717. 1.4-283 37 2 998 33-67 278 49-281 -619-11 -9 17-26 -1-178 234 68-28 -792-1,126. -2.2-1,897 24-1,28-16 -3,264 21-76 -686-1,2-2,211-1,84-17 -934-221 -2,99 1-881 -44-1,18-2,224 2,634. 13.1 3, 3,366 7,183 22,379 36,33 16 28-729 3,2 2,827-3,113 2,419,162 18,296 22,764-631 -181 27 1,461 122-297. -1.3 1,182-6 -29-296 792-447 -37 1-1 -78 1,8-2 29-233 934-386 -414 142-19 -677 248..2-3,324 782-84 886-2,46-1,342-1,471-638 -3,966-3,77 617-1,273 93-3,491-1,289-463 -4-486 -2,693 69. 2.1-324 -36-168 467-38 62-44 17 12-223 -331 43-136 481 7-16 -346-96 69-389 639. 1. -311 1,24-368 333 899 23-621 -13 36-7 -332 1,264-34 18 1,11 9-24 38-66 Macedonia 32. 3.2-36 333-39 361-3 36-9 32-37 293-311 317-71 -9 48 4 38 1.. -14-2 -63 3-26 -8-4 2-64 -1-7 -2-6 -48-8 -4 2-64 76. 1.8-1 11 7 1 9-42 -3 24 2-23 -12 16 3 63 7-14 -1 43 64 92-8,33. -1.8-8,817 6,629-677 -9,38-12,223-829 -23 261 1, 234-7,97 7,397 1,739-7,42-6,173-273 88 9 17 877-313. -.2-1,278-1,96-1,974-32 -4,38-22 -83 326-281 -29-1,4-1,133-1,813-78,28-364 6 7-188 -339 3,174..2-6,66-6,989-238 3,979-9,314-6,44-4,29-6,476-8 -17,93-3,1,12-1,241 3,2-6,22,48-4,87-6,81-1,419-18,3 3..1 24-33 21 87 18-86 176-23 7-197 166-213 134-7 17-183 36-131 -218-496 Slovakia -1,44. -1.6 84-1,74-326 -87-2,87-11 -236-347 6-1,249 83-1,829-243 -1,33-2,22 442-27 -77-18 -27-133. -.3-789 -2-84 -8-1,28-9 71-12 -48 2-86 -32-27 -68-1,46-281 26 163-42 -364-1,619. -.2 1,329-6,23-9,9-1,731-16,37 2,398 6,22-424 112 8,311-1,67-3,84-9,193-1,234 -,96 1,723 4,94 119-13 6,783 716..8-46 9-1,88 27-1,48-734 -24-623 9-1,88 1 92-1,47 2-1,44-661 -288 91 431-1,19 1/ 19,.. -17, -4,16-11,411 17,8 -,13-7,261 68-1,69 1,447-17,77-23,299-347 -1,14 12,32-21,489-7,9-1,37-8,894-2,24-19,6 Emerging Europe 2/,967. -.2-21,217-6,36-17,619-4,36-49,7-7,3 712-9,726-1,62-17,61-2,669-1,899-14,41,389-42,367-6,382-161 -8,4-3,7-18,24 ex. RUS & TUR 17,4. 1.1-12,763 9,9-1,268,31 1,338-3,214-2,84-3,79 2,14-7,43-18,73 8,19 289 1,484 719-3,474-1,436-2,212-813 -7,93 ex. CIS & TUR 3/.. -11,973 8,74 747 14,89 12,378-2,89-2,363-3,116 1,682-6,386-17,677 8,129 1,97 1,62 2,971-2,922-1,17-1,64-1,196-6,82 Sources: BIS; and IMF staff 1/ All countries listed above. 2/ excluding the,,,, Slovakia, and. 3/ CIS =,, and.