BIS Quarterly Review

BIS Quarterly Review

December 2018

International banking and financial market developments

BIS Quarterly Review Monetary and Economic Department

Editorial Committee:

Claudio Borio

Stijn Claessens

Benjamin Cohen

Hyun Song Shin

General queries concerning this commentary should be addressed to Benjamin Cohen (tel +41 61 280 8421, e-mail: ben.cohen@), 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: philip.wooldridge@).

This publication is available on the BIS website (publ/qtrpdf/r_qt1812.htm).

? Bank for International Settlements 2018. 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

December 2018

International banking and financial market developments

Yet more bumps on the path to normal .................................................................................. 1 US real yields and term premia leapt ............................................................................... 2 Unsteady markets struggled to rebound ....................................................................... 5 EMEs stabilised but confront challenges ........................................................................ 8 Box A: Financial conditions indices: the role of equity markets ............................. 9 Political uncertainty continued to buffet euro area banks .................................... 11 Box B: Equity pledge financing and the Chinese stock market ........................... 13

Highlights feature: The geography of dollar funding of non-US banks .................. 15 I?aki Aldasoro and Torsten Ehlers

The relative decline of the US as a booking location ............................................. 17 Box A: Constructing the dollar positions of international banks

with BIS statistics ................................................................................................................ 19 The rise of dollar liabilities booked in the home country ..................................... 20 The large cross-border component of dollar liabilities ......................................... 22 Booking location versus counterparty residence ..................................................... 23 Box B: Estimating non-US banks' dollar debt securities

held by US residents ..................................................................................................... 24 Conclusion ............................................................................................................................... 25

Special features

The growing footprint of EME banks in the international banking system ............. 27 Eugenio Cerutti, Catherine Koch and Swapan-Kumar Pradhan

EME banks as cross-border lenders ............................................................................... 29 The importance of EME banks for EME borrowers .................................................. 32 EME banks' cross-border interbank positions on EMEs ......................................... 33 Conclusions .............................................................................................................................. 36

BIS Quarterly Review, December 2018

iii

The 2008 crisis: transpacific or transatlantic? ....................................................................... 39 Robert McCauley

Comparing and contrasting the two gluts ................................................................... 41 Which capital flow matches US mortgage market trends? ................................... 43 Box A: Capital inflows enable domestic credit growth in a boom ..................... 44 European banks as producers of MBS .......................................................................... 47 Did European banks hog private US MBS? ................................................................. 49 Box B: The Spanish and Irish cases: larger inflows from

European banks, bigger booms ..................................................................... 52 Conclusions .............................................................................................................................. 54

The financial cycle and recession risk ..................................................................................... 59 Claudio Borio, Mathias Drehmann and Dora Xia

A look at the data .................................................................................................................. 60 Methodology ........................................................................................................................... 64 In-sample results ................................................................................................................... 66 Out-of-sample results........................................................................................................... 68 Conclusion .............................................................................................................................. 69

Clearing risks in OTC derivatives markets: the CCP-bank nexus .................................. 73 Umar Faruqui, Wenqian Huang and Eld Tak?ts

Box A: Two defaults at CCPs, 10 years apart ............................................................... 75 Concentrated clearing .......................................................................................................... 77 The CCP-bank nexus ............................................................................................................ 79 Stress transmission in the CCP-bank nexus ................................................................ 82 Box B: Margining during the Brexit episode .............................................................. 84 Box C: CCP failures: a rare but present danger ......................................................... 86 Conclusion ............................................................................................................................... 88

BIS statistics: Charts ............................................................................................................... A1 Special features in the BIS Quarterly Review ...................................................... B1 List of recent BIS publications ....................................................................................... C1

iv

BIS Quarterly Review, December 2018

Notations used in this Review

billion e lhs, rhs $ ... . ?

thousand million estimated 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, December 2018

v

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download