BIS: September 2015 BIS Quarterly Review - vulnerabilities of emerging market economies take centre stage
13 September 2015
The September issue of the Bank for International Settlements Quarterly Review highlights the increased focus of investors on vulnerabilities in emerging market economies and the consequences for global markets.
The September issue of the Bank for International Settlements Quarterly Review highlights the increased focus of investors on vulnerabilities in emerging market economies and the consequences for global markets.
The issue also introduces enhancements to the statistical series compiled and published by the BIS. In particular:
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The BIS locational and consolidated banking statistics have been enhanced and expanded in a number of ways. Taken together, the enhancements enrich analysis of banks' lending and funding and of their role in the transmission of shocks across countries.
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A new data set on general government debt contains consistent quarterly figures on core government debt for 40 advanced and emerging market economies.
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The BIS has started to estimate private sector debt service ratios (DSRs) - the ratio of principal and interest payments to income - for 32 advanced and emerging market economies.
Statistical special features describe these enhancements in more detail. In addition, an "Introduction to BIS Statistics" highlights the different statistical data sets compiled by the BIS and how they can be used in economic and financial monitoring and analysis.
The regular commentary on recent developments in financial markets and global financial flows notes the following:
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Investors are increasingly concerned about growing vulnerabilities in emerging market economies - in particular, China - as they reassess the global growth outlook.
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Developments in China, coupled with the Greek negotiations in June and early July, dented the confidence of investors and weighed on asset prices globally. A self-reinforcing cycle of weakness followed in commodity prices, then in emerging economy equity markets and exchange rates, leading to upsets in advanced economy equity markets.
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Many of these events were presaged by shifts in international banking, securities and global liquidity earlier in the year. Global liquidity conditions were strong in the early months of 2015, particularly among advanced economies, but showed signs of weakening for emerging economies.
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At end-March 2015, financing of non-bank borrowers in US dollars outside the United States totalled $9.6 trillion, while financing of non-banks in euros outside the euro area came to $2.8 trillion.
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Euro-denominated cross-border claims and lending to the euro area and other European countries surged during the first quarter of 2015, although Greece was a notable exception.
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In the first half of 2015, net debt securities issuance by advanced economy borrowers rose to its fastest pace since before the global financial crisis, while issuance by emerging economy borrowers slowed.
Finally, two special features address economic issues:
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US short- and long-term interest rates have a statistically and economically significant impact on the corresponding rates in emerging market and smaller advanced economies, even when one controls for economic and financial linkages. Furthermore, these effects reflect in part monetary policy spillovers, ie US policy rates influence policy rates elsewhere.
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Cross-border banking within Asia-Pacific has strengthened as European banks have retreated from the region post-crisis. Asia-Pacific authorities are seeking ways to balance the efficiency gains from greater regional integration with the need to confront regulatory and financial stability challenges, eg by monitoring and mitigating banks' liquidity and funding risks.
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