Mapping Global Liquidity - imf.org · Mapping Global Liquidity Hyun Song Shin Brazil/IMF Conference...
Transcript of Mapping Global Liquidity - imf.org · Mapping Global Liquidity Hyun Song Shin Brazil/IMF Conference...
Mapping Global Liquidity
Hyun Song Shin
Brazil/IMF Conference on“Managing Capital Flows in Emerging Markets"
Rio de Janeiro, May 26-27 2011
Three Waves of Global Liquidity
40% 42%34%
20%
41%
18%
40%
17%
48%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1995Q4-1998Q2 2006Q4-2008Q2 2009Q3-2010Q2
Portfolio Inflows
Other Inflows (incl.Banking)
Direct Inflows
Source: IMF SPR Dept
Feb 2011
GlobalBanks
WholesaleFundingMarket
Topography of Global BankingFrom Bruno and Shin (2011): “Mapping Global Liquidity”
Borrowersin A
Borrowersin B
Borrowersin C
Banksin A
Banksin B
Banksin C
GlobalBanks
WholesaleFundingMarket
Borrowersin A
Borrowersin B
Borrowersin C
Banksin A
Banksin B
Banksin C
GlobalBanks
WholesaleFundingMarket
Borrowersin A
Borrowersin B
Borrowersin C
Banksin A
Banksin B
Banksin C
GlobalBanks
WholesaleFundingMarket
Borrowersin A
Borrowersin B
Borrowersin C
Banksin A
Banksin B
Banksin C
GlobalBanks
WholesaleFundingMarket
Interoffice Assets of Foreign Banks in US
31-Dec-08
30-Jun-08
0
100
200
300
400
500
600
700
800
900
Mar-85
Sep-86M
ar-88Sep-89M
ar-91Sep-92M
ar-94Sep-95M
ar-97Sep-98M
ar-00Sep-01M
ar-03Sep-04M
ar-06Sep-07M
ar-09Sep-10
Bill
ion
Dol
lars
Interoffice Assets of Foreign Banks in the United States
Interoffice Assets of Foreign Banks in Japan
Feb‐07
‐
50
100
150
200
250
Apr-87Jun-88Aug-89O
ct-90D
ec-91Feb-93Apr-94Jun-95Aug-96O
ct-97D
ec-98Feb-00Apr-01Jun-02Aug-03O
ct-04D
ec-05Feb-07Apr-08Jun-09Aug-10
Hun
dred
Billion Ye
n
Interoffice Assets of Foreign Banks in Japan
Feb‐07
‐200
‐150
‐100
‐50
0
50
100
Apr-87Jun-88Aug-89O
ct-90D
ec-91Feb-93Apr-94Jun-95Aug-96O
ct-97D
ec-98Feb-00Apr-01Jun-02Aug-03O
ct-04D
ec-05Feb-07Apr-08Jun-09Aug-10
Hun
dred
Billion Ye
n
Net Interoffice Assets of Foreign Banks in Japan
Net Interoffice Assets of Foreign Banks in US
31-Dec-08
30-Jun-08
-100
0
100
200
300
400
500
600
700
Mar-85
Sep-86
Mar-88
Sep-89
Mar-91
Sep-92
Mar-94
Sep-95
Mar-97
Sep-98
Mar-00
Sep-01
Mar-03
Sep-04
Mar-06
Sep-07
Mar-09
Sep-10B
illio
n D
olla
rs
Net Interoffice Assets of Foreign Banks in the United States
Amounts Outstanding under Federal Reserve’sTerm Auction Facility (TAF)
0
50
100
150
200
250
Dec-07
Feb-08
Apr-08
Jun-08
Aug-08
Oct-08
Dec-08
Feb-09
Apr-09
Jun-09
Aug-09
Oct-09
Dec-09
Feb-10
Bill
ion
Dol
lars
DZ BK DeutscheBayerische HVHSH NordbankWestLBCommerzbankBayerische LBUnicreditDeutsche BKDresdnerDepfaCredit Indus et CommDexiaBNP ParibasNatixisSociete GeneraleUBSFortisMizuho CorporateBK Tokyo-MitsubishiSumitomo GroupNorinchukinArab BKG CorpAllied IrishBK of Nova ScotiaToronto Dominion BKRoyal BK of CanadaStandard CharteredBK of ScotlandRBSBarclays
Borrowersin A
Borrowersin B
Borrowersin C
Banksin A
Banksin B
Banksin C
GlobalBanks
WholesaleFundingMarket
Borrowersin A
Borrowersin B
Borrowersin C
Banksin A
Banksin B
Banksin C
GlobalBanks
WholesaleFundingMarket
External Claims of BIS Reporting Country Banks (March 2003 = 100)
100
0
50
100
150
200
250
300
350
400
450
500
Mar.1999
Mar.2000
Mar.2001
Mar.2002
Mar.2003
Mar.2004
Mar.2005
Mar.2006
Mar.2007
Mar.2008
Mar.2009
Mar.2010
Ireland
Spain
Turkey
Australia
South Korea
Chile
Brazil
Egypt
South Africa
100
0
500
1,000
1,500
2,000
2,500
3,000
Mar.1999
Mar.2000
Mar.2001
Mar.2002
Mar.2003
Mar.2004
Mar.2005
Mar.2006
Mar.2007
Mar.2008
Mar.2009
Mar.2010
Latvia
Lithuania
Estonia
Iceland
External Claims of BIS Reporting Country Banks (March 2003 = 100)
100
0
100
200
300
400
500
600
700
800
Mar.1999
Mar.2000
Mar.2001
Mar.2002
Mar.2003
Mar.2004
Mar.2005
Mar.2006
Mar.2007
Mar.2008
Mar.2009
Mar.2010
Slovakia
Poland
Ireland
Spain
Turkey
External Claims of BIS Reporting Country Banks (March 2003 = 100)
100
0
50
100
150
200
250
300
350
Mar.1999
Mar.2000
Mar.2001
Mar.2002
Mar.2003
Mar.2004
Mar.2005
Mar.2006
Mar.2007
Mar.2008
Mar.2009
Mar.2010
Australia
South Korea
Indonesia
Malaysia
Thailand
External Claims of BIS Reporting Country Banks (March 2003 = 100)
Some Observations• Baltics and emerging Europe stand out
– Surge of banking sector FDI (not all FDI is benign…)• Synchronization across the globe
– Spain, Ireland, Turkey, Korea, Australia…• But some diversity
– Brazil and Chile come late to the banking credit boom
– Thailand and Indonesia were deleveraging until mid-2000s
Clues from Term Auction Facility (TAF) Recipient Banks
0
50
100
150
200
250
Dec-07
Feb-08
Apr-08
Jun-08
Aug-08
Oct-08
Dec-08
Feb-09
Apr-09
Jun-09
Aug-09
Oct-09
Dec-09
Feb-10
Bill
ion
Dol
lars
DZ BK DeutscheBayerische HVHSH NordbankWestLBCommerzbankBayerische LBUnicreditDeutsche BKDresdnerDepfaCredit Indus et CommDexiaBNP ParibasNatixisSociete GeneraleUBSFortisMizuho CorporateBK Tokyo-MitsubishiSumitomo GroupNorinchukinArab BKG CorpAllied IrishBK of Nova ScotiaToronto Dominion BKRoyal BK of CanadaStandard CharteredBK of ScotlandRBSBarclays
Three Groups of Global Banks
• Centralized Portfolio Allocators– Non-Spanish European Banks (UK, German, French,
Dutch, Swiss…) plus some US banks
• Decentralized (Autonomous) Subsidiaries– Subsidiaries of Spanish and US banks in Latin America
• Yield Chasers– German public banks and Japanese savings banks
(German Landesbanken, Norinchukin)
External Claims of BIS Reporting Banks by Nationality
0
100
200
300
400
500
600
700
800
Greece Ireland Spain Australia South Korea
Bill
ion
Dol
lars
Other
Japan
United States
United Kingdom
Netherlands
France
Germany
Source: BIS Banking Statistics Table 9D
December 2010
External Claims of BIS Reporting Banks by Nationality
Source: BIS Banking Statistics Table 9D
December 20100%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Greece Ireland Spain Australia SouthKorea
Other
Japan
United States
United Kingdom
Netherlands
France
Germany
External Claims of BIS Reporting Banks by Nationality
Source: BIS Banking Statistics Table 9D
December 20100
100
200
300
400
500
600
Brazil Chile Mexico
Bill
ion
Dol
lars
Other
Japan
United States
Spain
United Kingdom
Netherlands
France
Germany
External Claims of BIS Reporting Banks by Nationality
Source: BIS Banking Statistics Table 9D
December 20100%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Brazil Chile Mexico
Other
Japan
United States
Spain
United Kingdom
Netherlands
France
Germany
Korean Lessons
Non-Core Liabilities for Korea
0
100
200
300
400
500
600
700
800
Jan-91
Jan-93
Jan-95
Jan-97
Jan-99
Jan-01
Jan-03
Jan-05
Jan-07
Jan-09
Trill
ion
Won
[Other] FX borrowing
[Lf] Debt Securities
[Lf] Repos
[M2] Promissory Note 2
[M2] Promissory Note 1
[M2] Certificate of Deposit
Source: Shin and Shin (2010)
Non-Core Liabilities as Fraction of M2
Jan-98
Jan-09
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
0.50
0.55
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10Ratio of Non-Core Liabilities to M2 in Korea
Source: Shin and Shin (2010)
-25
-20
-15
-10
-5
0
5
10
15
2005/0
1
2005/0
4
2005/0
7
2005/1
0
2006/0
1
2006/0
4
2006/0
7
2006/1
0
2007/0
1
2007/0
4
2007/0
7
2007/1
0
2008/0
1
2008/0
4
2008/0
7
2008/1
0
2009/0
1
2009/0
4
2009/0
7
2009/1
0$ Billion
Bank FXliabilities
Equity
Equity and FX Bank Liability Flows (Korea)Lehman
bankruptcy
Inflows
Outflows
Lesson from Korea:Beware Hedging Activity with FX Derivatives
Foreign Bank Branch in Korea
Korean Export
firm
Long-dated $ receivables
A L
ForwardLong $
Lesson from Korea:Beware Hedging Activity with FX Derivatives
Korean Export
firm
₩ $
Long-dated $ receivables
A L
ForwardLong $
₩
Shortdebt
Bonds
Foreign Bank Branch in Korea
Lesson from Korea:Beware Hedging Activity with FX Derivatives
Korean Banking sector
Korean Export
firm
₩ $
Long-dated $ receivables
A L
ForwardLong $
₩
Shortdebt
Bonds
No currency mismatch but maturity mismatch,
vulnerable to deleveraging
Foreign Bank Branch in Korea
Case of Brazil:Hedging the Circumvention of Tax on Transactions (IOF)
ForeignPortfolioInvestor
Sell $ Forward (Buy Real)
A L
ForwardLong $
Brazilian Bank
Case of Brazil:Hedging the Circumvention of Tax on Transactions (IOF)
ForeignPortfolioInvestor
$
Sell $ Forward (Buy Real)
A L
ForwardLong $
Shortdebt
Brazilian Bank
BRLbonds
Case of Brazil:Hedging the Circumvention of Tax on Transactions (IOF)
ForeignPortfolioInvestor
$
Sell $ Forward (Buy Real)
A L
ForwardLong $
Shortdebt
No currency mismatch but maturity mismatch,
vulnerable to deleveraging
Brazilian Bank
BRLbonds
-25
-20
-15
-10
-5
0
5
10
15
2005/0
1
2005/0
4
2005/0
7
2005/1
0
2006/0
1
2006/0
4
2006/0
7
2006/1
0
2007/0
1
2007/0
4
2007/0
7
2007/1
0
2008/0
1
2008/0
4
2008/0
7
2008/1
0
2009/0
1
2009/0
4
2009/0
7
2009/1
0$ Billion
Bank FXliabilities
Equity
Equity and FX Bank Liability Flows (Korea)Lehman
bankruptcy
Inflows
Outflows
What’s Next?
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
Jan-93
Mar-93
May-93
Jul-93
Sep-93
Nov-93
Jan-94
Mar-94
May-94
Jul-94
Sep-94
Nov-94
Jan-95
Mar-95
May-95
Jul-95
Sep-95
Nov-95
3 mo 10 yr 30 yr
2012 = 1994?U
S Tr
easu
ry Y
ield
s (%
)