Issuance so far this year of a mainstay of bank funding is at its most depressed since the financial crisis, as lenders face additional regulations and weak economic growth.
Highlighting retrenchment in the sector, banks around the world issued just $150 billion of senior unsecured debt in January and February this year – the lowest level of issuance since 2008. The crisis in the eurozone and stiff requirements under Basel III global bank capital rules have had a particularly noticeable impact on banks in Europe. Many have either have less need for funding or have hung on to money borrowed cheaply a year ago from the European Central Bank. The amount of senior unsecured debt issued by banks in Europe in the first two months of this year was also at its lowest level since 2008 and at just $66 billion, half what it was just two years ago.
January saw a series of banks in eurozone “periphery” countries, such as Spain and Italy, issuing debt as they continued to take advantage of strong investor demand for high-yielding assets and better sentiment in the wake of action by the ECB last year to contain the crisis in the eurozone. However, the fact that elections in Italy came so soon after many banks emerged from earnings season blackouts may have contributed to a slowdown in February.
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