U.S. banks reduced the amount of credit extended in Asia in the months preceding the region's financial crisis, the Federal Reserve Board reported Wednesday.
Japan suffered the biggest falloff as U.S. banks reduced their exposure to $47.9 billion, a $7.6 billion decrease during the three-month period ending Sept. 30.
South Korea and Thailand also suffered drops. Banks reduced their exposure in South Korea to $19.9 billion, a decrease of $254 million from the previous three-month period. Exposure in Thailand fell to $6.1 billion, a nearly $1 billion decrease.
U.S. banks, however, increased credit to Indonesian borrowers. The industry's exposure jumped $2.2 billion, to $6.85 billion, according to the Fed data.
The figures include loans and derivatives tied to the country's currency. U.S. banks had $54.32 billion extended to borrowers in Asian countries, a drop of $41 million. Worldwide, U.S. banks had $499.36 billion at risk, up $9 billion during the third quarter.
Six money-center banks extended the bulk of the credit. Their lending exposure-not including derivatives-was $385 billion worldwide as of Sept. 30, up $5 billion from the second quarter.
On Sept. 30 these six banks were owed $10.1 billion by South Koreans, $3.3 billion by Indonesians, and $2.2 billion by Thais. During the prior three months, they were owed $9.9 billion, $3.1 billion, and $2.7 billion, respectively.
The maturity of loans to Asia also changed during the three months ending Sept. 30. Over all, money-center banks increased debt with maturities of five years or more and decreased the amount of debt with shorter durations.
Economists said they were not surprised by the data. "Everyone is desperately trying to reduce their exposure in Asia, but they are not having much luck," one industry economist said. "This shows how tough it is to get your money out of these countries."
Sung Won Sohn, chief economist at Norwest Corp., said American banks began reducing their exposure in July just before the Thai currency crisis. He said they were being squeezed out of the market by German and Japanese banks, which were willing to cut rates to generate volume.
"U.S. economic conditions are very healthy, so U.S. banks have had plenty of opportunities to lend at home at a good spread," he said. "They didn't have to stay in Asia."
