Banks Shortened Foreign Loans in 1990
LONDON - Running scared over major uncertainties such as the Gulf crisis, major commercial banks drastically reduced the maturities of their international loans last year.
Short-term loans with maturities up to one year accounted for 47% of the $660 billion of international lending outstanding, a record high, at the end of 1990, the Bank for International Settlements reported.
The central banking agency, based in Basel, Switzerland, said that "caution and wariness" were the main features in international lending during the final six months of 1990 as banks displayed more selectivity over where they put their money.
No Precedent Seen
As a result, the proportion of credit that was in short-term loans was "without historical precedent" and compared with a ratio of 45.4% in the opening half of last year, it added.
At a time when the oil markets were badly disrupted by the developing Gulf conflict, short-term credits to countries in the Organization of Petroleum Exporting Countries were a major factor while Mexico, another oil-exporter, also borrowed more short-term, it said.
But overall lending to Middle East OPEC nations fell by $3 billion in response to the Gulf crisis and the related funding problems experienced by some Arab banks last year, it said.
Problems in Norway
Among other influences, international bank loans to Norway declined by more than 5%, or $1.3 billion, as difficulties experienced by some Norway banks resulted in a sharp fall in "short-term interbank positions," the Basel bank said.
The data track loans made by banks in the major industrial nations of the United States, Europe, and Japan to other regions, including developing countries.
The 6.5% increase to $660 billion in total lending showed a basically static position in international finance, as about one-third of this gain reflected the inclusion of loans by banks in eastern Germany after unification, the agency said.
East Europe Loans Cut
As well as depressed lending to the Middle East, banks continued to pare their exposures to Eastern Europe. There, loans declined by 4.1%, or $3.3 billion.
Loans to the Soviet Union alone dropped by $2 billion to $41.3 billion, despite the $5 billion German credit made to the Soviets late last year.
Lending to Latin America rose by $3.3 billion, to $161 billion, chiefly because of increased borrowing by Mexico. Its loans were up almost $3 billion, or 6%, to more than $50 billion. The nation "benefited from a reflux of flight capital," the settlements bank commented.
Most new lending was directed to Asia, particularly those pursuing what the Basel bank called successful export-led development strategies.