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The recent turmoil in global financial markets is probably the first of many, as investors adapt to a world characterized by tighter monetary conditions and the threat of capital inflows. an economic downturn, said the Bank for International Settlements (BIS)) this Sunday.
This year has been tough, with significant declines in European and Asian equities, and even US equities, which have recently turned red in 2018 after a decade of rising.
In the last quarter, fears about the world and US economic growth grew stronger as the trade war intensified and central banks tightened their monetary policies or tightened their policies. prepare to remove the extraordinary stimulants granted after the crisis. "The market tensions observed during this quarter were not an isolated event," said BRI chief economist and monetary director Claudio Borio.
"The normalization of (monetary) policy will certainly be a challenge, especially in the light of trade tensions and political uncertainties," Borio added in a quarterly report from the BIS.
Among the challenges facing the global economy, Borio has raised the possibility of an increase in inflation, a "black cloud" of US corporate debt with lower ratings in an overburdened market and weak European banking sector.
The BIS is a group of banks, and their reports are seen as an indicator of the ideas discussed behind closed doors at their quarterly meetings.
In recent weeks, US government short-term bond yields have been slightly above medium-term rates. , a phenomenon called "inversion of the curves of interest".
However, the BIS indicated that studies on the state of the financial cycle were more likely to signal recession risks than the interest rate curve.
] Borio, Mathias Drehmann and Dora Xia said that their study indicated that since the early 1980s, slowdowns have generally occurred after a financial boom rather than after significant monetary tightening.
But they did not apply their results to the observed conditions.
FUNDING IN US DOLLARS
Constantly rising in the United States, interest rates can also put pressure on the availability of dollars – the chosen global financial currency. But the BIS said the ability of the financial sector to increase dollar funding outside the US could mitigate this risk.
A BIS study, published as part of the quarterly report, revealed that non-US banks are different banks. more than 50% of their debt in dollars is now registered in their home country, well above the levels prior to the 2008-2009 financial crisis.
As a result of this change, US dollar liabilities in the balance sheets of banks outside the United States rose to $ 12.8 trillion at the end of June 2018, an increase of % compared to the end of 2009.
The growth in international dollar financing of non-US banks – banks borrowing from investors from different countries – points out that central banks around the world can provide liquidity in Dollars all at once The BIS also reported that banks in developing countries now account for more than 12% of international loans, up from 3% in mid-2008.
In many countries, more than half of cross-border lending to non-bank corporations and financial institutions is financed by lenders based in other emerging markets, the BIS added.
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