Information Release 30 September 2013 The Domestic Irish Banks Consolidated Foreign Claims: An Overview Domestic banks 1 continued to retrench to home markets with foreign claims decreasing by 6 per cent during the quarter to almost 100 billion at end-q2 2013; this was driven by the decline in claims on foreign private and public sectors. The outstanding amount of local claims 2 at end-q2 2013 was approximately three times that of cross-border claims 3 ; however the annual rate of decline in local claims has outpaced that of cross-border claims for the second consecutive quarter. Domestic banks largest foreign claims continue to be on the UK and the majority of this is in the form of claims on the non-bank private sector. Table 1: Domestic Banks Claims on Foreign Residents: Summary Table Q 2 2013 Change in Quarter million % of total million % change By country United Kingdom 72,557 72.7-5,821-7.4 United States 5,167 5.2-348 -6.3 France 4,186 4.2 154 3.8 Spain 2,399 2.4-179 -6.9 Isle of Man 2,023 2.0-94 -4.4 Germany 1,912 1.9 121 6.8 Poland 254 0.3-3 -1.2 Rest of World 11,259 11.3-208 -1.8 Total 99,757 100-6,378-6.0 By sector Credit institutions 9,513 9.5-890 -8.6 Public sector 9,903 9.9-2,612-20.9 Private sector 80,341 80.5-2,876-3.5 1 In this case, the Central Bank of Ireland defines domestic banks as those banks whose ultimate parent entity is resident in Ireland. 2 Local claims refer to lending by non-resident affiliates of domestic banks in the country where the affiliate is located. 3 Cross-border claims cover exposures where the country of ultimate risk differs from the residency of the bank office making the loan. 1
The Domestic Irish Banks Consolidated Foreign Claims At end-june 2013, domestic banks had foreign claims of almost 100 billion, reflecting a decrease of 6.4 billion over the quarter. The decrease was mainly driven by a reduction in claims on both the foreign private and public sectors, which fell by 2.9 billion (3.5 per cent) and 2.6 billion (20.9 per cent), respectively, over the quarter. Claims on foreign credit institutions also fell during Q2 2013 by 890 million (8.6 per cent). Claims on foreign private sectors are predominant, accounting for 81 per cent of total foreign claims at end-june, while claims on foreign public sectors were relatively low. The decline over the quarter means that the domestic banks foreign claims have decreased by 21.4 per cent since end-june 2012. The annual reduction in total foreign claims is expected, given that the domestic banking groups continue to downsize their operations abroad. Chart 1: Quarter-on-Quarter Change in Foreign Claims billion Cross-Border Claims Local Claims Total Foreign Claims 30 20 10 - -10-20 -30-40 Consistent with the recent trend, the end-june 2013 data show that local claims, at 74 billion, were far greater than cross-border claims which stood at 26 billion. Since mid-2009 cross-border credit has been declining at a much faster annual rate than local claims, however, during the first two quarters of 2013 this trend has been reversed. At end-june 2013 the annual rate of change for local and cross-border claims stood at minus 22.2 per cent and minus 18.9 per cent, respectively. The equivalent figures for end-june 2012 show a decline of 31.5 per cent for cross-border claims and a more modest decline of 10.7 per cent for local claims. 2
Chart 2: Geographical Breakdown of Foreign Claims (Q2 2013) All Foreign Claims UK Claims Spain 2% ROW 14% France 4% US 5% Germany 2% UK 73% Public Sector 5 bn Credit Institutions 3 bn Private Sector 65 bn The domestic banks largest foreign claims are on the United Kingdom (including Northern Ireland), with exposures of 73 billion located there at end-june 2013. Foreign claims on the UK decreased by 7.4 per cent over the quarter. Claims on the UK public sector decreased by 37 per cent, while claims on UK credit institutions and the UK private sector decreased by 8 per cent and 3.8 per cent, respectively, over the quarter. Chart 2 shows that the vast majority of the domestic banks claims on the UK are on the non-bank private sector, while exposures to the public sector are very small relative to overall UK exposures. The outstanding amount of foreign claims on the US decreased by 6.3 per cent during Q2 2013, with the decrease in claims by domestic banks on US credit institutions more than offsetting the increase in claims by domestic banks on the US public and private sectors. Claims on the US private sector, which account for approximately 75 per cent of US claims, increased by 7.2 per cent during the quarter. Local claims on the US decreased by 23.5 per cent during the quarter, while cross-border claims increased by 6.1 per cent. France, Spain and Germany continue to maintain a sizeable share of the foreign claims which increased by a collective 96 million over the quarter. Claims on the Isle of Man decreased by 94 million over the same period, however, it remains the fifth largest in terms of foreign claims at end- June 2013. 3
Chart 3: Foreign Claims; Country Breakdown; Amounts Outstanding billion Q1 2013 Q2 2013 ROW Germany Isle of Man Spain France US UK 0 10 20 30 40 50 60 70 80 90 At end-june 2013, 81 per cent of foreign claims were on the non-bank private sector. Foreign claims on the non-bank private sector and credit institutions fell during the quarter by 3.5 per cent and 8.6 per cent, respectively, while claims on the foreign public sector decreased by 20.9 per cent. Credit institutions and the public sector each accounted for approximately 10 per cent of foreign claims at end-june 2013. 4
Chart 4: Foreign Claims; Sector Breakdown; Amounts Outstanding billion 250 Credit Institutions Public Sector Private Sector 200 150 100 50 0 Credit commitments, derivatives and guarantees are not included in the total claims figures but are detailed separately in the published tables. These series recorded decreases over Q2 2013. Derivatives declined by 1.1 billion, while guarantees and credit commitments declined by 88 million and 82 million respectively. These series have been relatively volatile over the period covered by the dataset. Note: The consolidated banking statistics detail the claims of the domestic banks on non-residents, by counterpart country and sector on an ultimate risk basis i.e. according to the country and sector where the ultimate guarantor of the risk resides. The dataset used is similar in methodology to the Consolidated Banking Statistics published by the Bank for International Settlements (BIS), but differs in coverage, as it refers only to the domestic Irish banks. The tables can be accessed on the Central Bank of Ireland website. The dataset begins in December 2004 and the latest data published relate to end-june 2013. 5