Bank offshore borrowings rose in Sept quarter

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By Leith van Onselen

The release today of the quarterly balance of payments data by the Australian Bureau of Statistics (ABS) revealed that gross external liabilities held by depository corporations (mostly banks, but also building societies, credit unions, and registered finance corporations) rose by $9.8 billion over the September quarter of 2013 to $642.9 billion, and are now just $12.3 billion below the peak level of $655.2 billion reached in September 2011 (see below chart).

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The proportion of gross external liabilities that are short-term – that is, with a term-to-maturity of less than 12 months – was steady at 45%, and are well below the peak levels recorded in March 2001, when 62% of offshore funding was short-term (see below charts). This is good news from a financial stability perspective, since it reduces the risk of the banks experiencing difficulties in rolling-over their debts in the event that offshore capital markets freeze, as they did during the Global Financial Crisis (GFC).

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The next chart shows the breakdown by component:

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And the growth in the various components since the onset of the GFC in 2008 is plotted below. As you can see, offshore deposits have grown significantly, whereas long-term bonds have also increased but by a smaller amount. By contrast, the other components have all fallen over this period:

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Comments

  1. A large part of the increase in offshore long term bonds is covered bonds. As these secured bonds suck more assets off the balance sheet circa 20% than bonds issued, banks balance sheets are weakened.

    So perhaps the latest figures are demonstrating that the financial stability risk is increasing, not decreasing, and the taxpayer is increasingly likely to foot the bill

  2. Thanks for the point Deep T

    “rose by $9.8 billion over the September quarter of 2013 to $642.9 billion, and are now just $12.3 billion below the peak level of $655.2 billion reached in September 2011 (see below chart).”

    In addition we have the Govt borrowing offshore that injects domestic deposits into the banking system.

    As well how many Billions of dollars of assets have we sold to foreign intersts over that period? We weaken the nation whether we sell assets or borrow more.
    Does nobody see what is going on?

  3. “Does nobody see what is going on?”

    Perhaps Less Big Joe Hockey does and that is why he is encouraging Graincorp to raise some capital from local sources.

    There has been a lot of bollocks on the news over the last few days as the hysterics who think being in debt to foreigners is national destiny, take to the airways to claim that we cannot afford to invest in our own businesses. Good grief they are probably worried about diverting capital from glossy red splash backs and bank shares.

    Tales of woe about $200m of investment that ADM were going to shower the business to fix holes in silos and replace railway sleepers etc. Yeah sure they were.

    $200M is the over investment in just 400 houses that should be $500k but have been bid up to $1M.

    Less dumb investment encouraged by tax law and there would be plenty of capital for Australian businesses with a good project in mind.

    • There are just too many Banksters and advisers get a cut as foreign dollars move in and out.
      I made the observation this morning that perhaps Joe or his advisers weren’t as silly as the media (and MB) were making him out to be. In any case, as you more colourfully explain, paying for consumption items by selling mature enterprises to foreigners is hardly good business. Not too sure why MB is supporting the MSM hystrionics!