Cross-border bank lending falls in third quarter

LONDON Thu Jan 23, 2014 11:30am EST

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LONDON Jan 23 (Reuters) - Banks cut their cross-border lending by $508 billion in the third quarter of last year, or 1.8 percent, in one of the biggest contractions since the financial crisis as multinational banks reduced money flowing between their offices.

Lending to non-bank borrowers such as companies and governments fell by a far smaller amount - $37 billion, or 0.3 percent - according to data released on Thursday by the Bank for International Settlements (BIS), which tracks cross-border lending around the world.

The drop in non-bank lending followed a $229 billion contraction in the previous quarter which fuelled concern that companies are not getting enough funds to stimulate economic growth. The amount of cross-border lending to non-banks was $11.6 trillion at the end of September.

The sharp fall in overall cross-border lending followed a similar contraction in the second quarter and came against a backdrop of volatile financial markets after the U.S. Federal Reserve said it might start phasing out its quantitative easing programme.

The BIS said the drop was due mainly to a decline in interoffice positions, which tracks how multinational banks move money around within their group.

Changes in banks' funding strategies was one of the reasons for the contraction, the BIS said. It said interoffice lending has been declining steadily since late 2011. (Reporting by Steve Slater; editing by Tom Pfeiffer)

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