UPDATE 1-Bank lending to Ukraine, Russia dropped in Q1 - BIS data

Wed Jul 23, 2014 10:22am EDT

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LONDON, July 23 (Reuters) - Lending to Ukraine and Russia by international banks fell sharply in the first three months of the year as tensions in the region escalated and currency falls cut the value of loans, lending data showed.

Conflicts in the region intensified in the first three months of the year, culminating in Russia's annexation of Crimea in March, and the recent downing of a passenger aircraft in an area of eastern Ukraine held by Russian-backed separatists has led to western calls for stronger sanctions against Moscow.

Foreign loans to Russia fell 7 percent to $209 billion compared with the previous three months, according to data released on Wednesday by the Bank for International Settlements (BIS), which tracks cross-border bank lending.

Lending to Ukraine dropped 14 percent to $22 billion.

BIS said much of the decline was due to the sharp depreciation of the value of the ruble and Ukrainian hryvnia against the U.S. dollar, which reduced the dollar value of loans booked in local currencies.

Locational banking statistics on an exchange rate-adjusted basis showed international loans to Russia fell by $300 million in the quarter and dropped by $1.5 billion in Ukraine, BIS said.

The drop in the value of lending to Ukraine and Russia bucked a sharp jump in cross-border bank lending globally in the first three months of this year, BIS said.

Overseas bank lending jumped by $580 billion in the first three months of the year, the biggest jump since late 2011 and reversing a contraction in lending seen through 2013.

The biggest increase in lending was to borrowers in China, where international lending rose to more than $1 trillion. There were also increases in lending to the rest of Asia, Latin America and Africa and the Middle East, BIS said.

Cross-border lending to emerging Europe fell by $14 billion, however, marking the fourth consecutive quarterly fall. BIS said the falls were biggest to borrowers in Turkey and Poland, by about $5 billion each. (Reporting by Steve Slater; Editing by Matt Scuffham and David Holmes)

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