Figures released by the Bank for International Settlements in Switzerland show Europe's banks cut more than $US8 billion ($7.56 billion) worth from the Australian economy as they began feeling the funding squeeze at home.
During the second half of last year, most European banks began selling down their international loan portfolio or simply turning off the lending tap, the BIS said.
This coincided with a period in which many large Australian companies were attempting to refinance loans they had locked in during the global financial crisis.
Advertisement
''Pressures on European banks to deleverage increased towards
the end of 2011 as funding strains intensified and regulators imposed
new [capital] targets,'' the BIS said in its March quarterly review,
released this morning. However, the report found it was largely an
orderly exit by European banks and other global banks and bond markets
were able to step in to replace financing. This helped Australian
businesses avoid a credit squeeze.Senior Australian bankers told BusinessDay that Asian banks have become more active in terms of financing large corporates in the market. At the same time, US banks have started lending again as they have started to return to financial health.
''Come the second half and with all the problems that were going on, you started to see a lot of European banks pull back and repatriating capital, whether it was to France or other parts of the region,'' one institutional banker with an Australian lender said. ''European names just aren't in the transactions that traditionally they've been in.''
Towards the end of last year, European banks were unable to raise funds on wholesale markets. And for those banks rolling over short-term loans, costs surged to levels last seen at the peak of the financial crisis.
While Australian banks were still able to raise funds through the year, it was these same pressures on global money markets that meant financing costs ran up.
Still, a massive injection of funds by the European Central Bank into the region's banking system has helped ease strains on financial markets and economic activity. The offer of more than €1 trillion ($1.24 trillion) worth of cheap loans to Europe's banks since December has helped improve funding conditions, the BIS said.
The BIS figures, which cover June to the end of September, show French banks pulled more than $4.5 billion worth of loans from the Australian economy. Italian, Irish and Spanish banks each cut their exposure by hundreds of millions of dollars. At the same time, Australian banks pulled billions of dollars in funds from Belgium, France and Spain.
Global banks also sharply reduced their exposure to Europe and the Middle East, the report found.
Separate figures from the bank regulator, the Australian Prudential Regulation Authority, show France's BNP Paribas sliced more than $1.67 billion from its direct lending book here over the past year, or almost a third of its book.
The APRA figures do not include syndicated loans
Read more: http://www.smh.com.au/business/feeling-the-squeeze-european-banks-pull-75b-from-australia-20120311-1uso3.html#ixzz2TJPRL2EV
