Regulators urged to track rising US dollar liabilities for banks outside US

17 December 2018 10:11pm
Regulators should keep an eye on the steady rise in US dollar liabilities for banks outside the United States — especially in Japan, Canada and Australia — since the aftermath of the great financial crisis, a Bank for International Settlements quarterly report said.

“Cross-border funding, regardless of the source, may be fickle in a crisis, as the GFC demonstrated,” said the report yesterday by the forum for the world’s central banks. “The sheer size and complexity of non-US banks’ dollar liabilities warrants attention.”

These borrowings increased 21 percent in the last eight-and-a-half years, from $10.6 trillion at the end of 2009 to $12.8 trillion at the end of June 2018, the report by BIS researchers Inaki Aldasoro and Torsten Ehlers said.

Australian, Canadian and Japanese banks have expanded their dollar liabilities at a “rapid” pace, overtaking European banks in the first quarter of 2016, the report said.

European banks, which historically have had a major presence in the US, have shrunk their dollar borrowing.