In its latest quarterly review, the Bank for International Settlements reports that banks’ international balance sheets continued to contract in the second quarter, albeit at a much slower pace.

The BIS says that total gross international claims declined by US$477 billion. This drop was considerably smaller than in the previous two quarters, but was still the fourth largest in the last decade, it said. The shrinkage in international balance sheets was entirely driven by a contraction in interbank claims, which fell by US$481 billion, it added.

In the first half, notional amounts of all types of over-the-counter derivatives contracts rebounded somewhat to stand at US$605 trillion at the end of June, 10% higher than six months before, the BIS reported. The increase was largely due to interest rate derivatives. By contrast, outstanding notional amounts of credit default swap contracts fell to US$36 trillion at the end of June.

Finally, it said that net issuance of international debt securities almost halved in the third quarter to US$475 billion, the lowest level since the third quarter of 2008. Much of this is due to seasonal factors the BIS said, adding that, depending on the calculation method used, seasonally adjusted issuance either remained stable at a high level or went up slightly.

IE