Global lending has fallen at the steepest rate since records began this year, with cross-border loans worldwide plunging by $1.1 trillion in the first half, reflecting the scramble by the financial industry to cut leverage by pulling credit lines and slashing risky exposure, according to the Bank for International Settlements, reports the Daily Telegraph. Foreign lending by UK banks fell by a staggering $884bn, equal to 81% of the entire contraction in international lending, according to BIS data. The City of London -  the epicentre of Europe’s structured credit industry – is facing a double blow since worldwide issuance of bonds and securities has also gone into freefall, plummeting 77% from over a trillion dollars to $247bn in the third quarter The collapse in bond issuance reflects the near-total closure of the capital markets in the late summer as credit spreads surged. Bonds issued in euros dropped by 94% from $466bn to $28bn over the quarter. In its quarterly report, the BIS warned the US Fed, the Bank of England and other central banks that near-zero interest rates and emergency monetary stimulus may come at a cost.

This entry was posted by Gwen Robinson on Tuesday, December 9th, 2008 at 5:51 and is filed under Capital markets. Tagged with bis. Edit this entry.