The Bank for International Settlements (BIS) published the Quarterly Review, which covers developments in global banking and financial markets and contains three special features that examine the non-bank lending in syndicated loan market, the growing role of global banks' foreign branches, and the post-pandemic prospects for global growth. The feature on lending offers an overview of global syndicated lending by non-banks and contrasts it with that by banks, before moving on to investigate the role of non-banks in cross-border spillovers during financial crises and the policy considerations around this issue. The feature notes that lending by non-banks is more across countries and industries and, in the wake of a crisis at home, non-banks curtail lending to foreign borrowers by more than they do to domestic ones, thus transmitting shocks across countries. BIS also released publications that discuss regulatory response to climate risks and topics related to technology and lending.
The key highlights of the aforementioned publications follow:
- The Financial Stability Institute (FSI) brief on regulatory response to climate risks highlights need for authorities to review their prudential frameworks with a view to taking full account of the implications of climate-related financial risks for financial stability. The paper suggests that standard Pillar 1 instruments might be suboptimal in addressing climate risks, instead the intrinsic flexibility of the Pillar 2 framework ensures that banks effectively manage such risks and have sufficient loss-absorbing capacity against them. The paper also notes that applying the current macro-prudential framework to contain systemic climate-related financial risks is likely to be ineffective and potentially counterproductive for financial stability.
- The BIS paper on the importance of information technology in banking and entrepreneurship builds a model of bank screening and lending, which predicts that in banking technology can spur entrepreneurship by making it easier for start-ups to borrow against collateral. Among other issues, the paper contributes to the recent literature that investigates how the rise of fintech affects credit-scoring and credit supply.
- The Irving Fisher Committee (IFC) paper on the use of big data in Asian central banks reveals that Asian central banks define big data in a more encompassing way that includes unstructured non-traditional as well as structured datasets. The interest in big data appears higher in Asia, including at the senior policy level while the focus is on projects developed to process natural language, conduct nowcasting/monitoring exercises, and develop applications to extract economy insights as well as suptech/regtech solutions. Asian central banks report dealing with big data to support a wide range of tasks, with big data posing challenges related to cyber-security and data strategy.
- Another paper from BIS estimates the conditional treatment effects of the European Investment Bank (EIB) lending to small and medium enterprises (SMEs) in Europe. The results show that positive effects of EIB-supported lending on job creation and investments were larger for smaller and younger firms. The benefits of EIB support appear to be linked to longer loan maturities. Moreover, better pricing conditions are associated with a stronger effect on employment and fixed assets growth, while no evidence was found that the effects vary depending on loan size.
- Press Release on BIS Quarterly Review
- BIS Quarterly Review (PDF)
- Regulatory Response to Climate Risks
- Paper on Technology in Banking and Entrepreneurship
- Paper on Use of Big Data in Asian Central Banks
- Paper on EIB Lending to SMEs
Keywords: International, Banking, Quarterly Review, Lending, Syndicated Loans, Credit Risk, Climate Change Risk, Basel, Big Data, Regtech, Suptech, SME, IFC, ESG, Loan Origination, Foreign Bank Branches, BIS, FSI
Hasan leads Moody’s Analytics ESG methodology development. He is expert on carbon transition, nature related risks and is a guest lecturer at ESSEC Business school on sustainable finance.
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