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June 14, 1983_____________




The Role of Banks in the
International Financial System

A paper by
Nancy H. Teeters

Member, Board of Governors of the Federal Reserve System

Presented to

The International Conference on Multinational
Banking and the World Economy at
the Leon Recanati Graduate School of
Business Administration

Tel Aviv, Israel

June 14, 1983

The Role of Banks in the International Financial System
by
Nancy H. Teeters
Member, Board of Governors of the Federal Reserve System

It is my pleasure to address this distinguished conference on the
timely subject of multinational banking and the world economy.

The role of

banks in the international financial system increased significantly in the
late sixties and throughout most of the seventies as banks from many
countries expanded their international activities.

International banking has

been an important factor contributing to a more integrated and interdependent
economic and financial system.

As a growing international trading system

permits participants to enjoy the benefits of specialization and diversity, a
more integrated international financial system enables banks to specialize as
lenders or as collectors of deposits on an international basis, depending on
the orientation of their customers, which can be of benefit to both savers
and borrowers.

Expansion of banks into international activities, however,

exposes banks to a whole new set of operating risks, although it permits
greater asset diversification than can be achieved from a purely domestic
portfolio.
The Federal Reserve, as the central bank of the United States, has
important policy responsibilities in the area of international banking. As a
supervisor of banks and bank holding companies, as an agency with
responsibilities for monitoring an effective payments mechanism in the United
States, and as a lender to banks through the discount window, the Federal

My special thanks to Henry S. Terrell, Chief, International Banking Section,
Division of International Finance, for the outstanding staff work that he
contributed to this paper.



Reserve must be aware of foreign as well as domestic factors that influence
the condition of individual banks and the banking system.

In a world where

financial integration is proceeding at a rapid pace at both domestic and
international institutions, the central bank must take account of credit
extended to U.S. borrowers from offshore sources and of deposits held by U.S.
residents at offshore banking offices.

These transactions by U.S. residents

at banking offices outside the United States are close substitutes in many
cases for banking transactions at domestic offices and therefore must be
integrated into our interpretation of the U.S.

monetary and credit

aggregates.
In addition to these responsibilities, the Federal Reserve is also
charged with responsibilities for maintaining a safe, competitive, and
equitable banking environment in the United States.

In this role the Federal

Reserve has been active in developing the statutory and regulatory
environment in which foreign banks compete in the United States with
domestically chartered banks.

The International Banking Act of 1978 and

subsequent regulations issued by the Federal Reserve and the other U.S.
banking agencies have established a broad framework of national treatment for
U.S. offices of foreign banks.

While sometimes overlooked because of more

immediate concern with other issues, the U.S. activities of foreign banks
have been an extremely dynamic part of the rapid expansion of international
banking.

Currently the U.S. offices of foreign banks (including

subsidiaries) account for 14 percent of total assets of all banks in the
United States, and about 40 percent of the assets of all banks in New York
State —

our most important financial center.

Indeed these figures would be

somewhat larger if they included dollar lending and deposit-taking




- 3 -

transactions with U.S. residents at offices of non-U.S. banks located abroad.
The increasing integration of the world economy and financial
system has meant that banking developments in one country can affect the
stability of banking activity in other financial centers.

Banks of various

nationalities are closely linked with each other through the international
interbank markets in deposits and foreign exchange.

To improve our awareness

of these activities, and to exchange information generally on developments in
international banking, the Federal Reserve participates in the Committee on
Banking Regulations and Supervisory Practices (the Cooke Committee) that
meets regularly at the Bank for International Settlements (BIS) in Basle as
well as other policy and technical bodies that meet at the BIS.
While each of the three main functions of the Federal Reserve is
worthy of a study, I will focus my remarks on the current situation in
international lending, including some background analysis of how the current
situation evolved and the role played by banking institutions.

Before

discussing the role of banks, I will review the broad economic setting, since
banks do not operate in a vaccuum.

In fact the condition of banking

institutions reflects the general environment in which they operate.
The last decade was characterized by high inflation in the OECD
countries on the order of ten percent per annum, compared with about four
percent inflation in the previous decade.

To a large extent the higher

inflation in the seventies resulted from the two oil shocks of 1973-74 and
1979-80, and excessive economic expansion of many OECD countries that failed
to sustain effective adjustment policies to the first oil shock as their
economies slipped into recession.
Since the second oil-price shock in 1979-80, the policy focus of
most OECD countries, including the United States, has been definitely




- 4 -

anti-inflationary#

Fiscal policy, when judged on a discretionary basis,

generally has been tightened, although actual budget deficits widened because
of weak economic activity.

Monetary authorities in several countries adopted

targets for monetary aggregates with the intention of lowering the inflation
rate and not accomodating inflationary pressures from oil price increases or
wage claims.
The concerted and simultaneous policy response to inflation has of
course had important implications for the international banking and financial
system, particularly through its impact on major borrowers.

Economic

activity in the OECD countries has been very depressed, with rapidly
increasing levels of unemployment.

The stagnation in the major industrial

countries has reduced the export earnings of the developing countries, both
in terms of reduced real volume of exports and through the impact on the
prices of primary commodities.
A second important impact on the major borrowing countries of the
policy focus on reducing inflation has been the rapid rise in real interest
rates associated with the monetary restraint programs.

Since interest paid

on much of the bank debt of these countries is adjusted periodically based
upon the costs of funds to the banks, rising real interest rates are
translated into rising real costs to borrowers in a very short time period.
Projects and development plans that were economically attractive at low or
even negative real interest rates have become uneconomic as real interest
rates approached the 5-10 percent range.

The relatively high levels of real

interest rates have in part resulted from demands by investors and depositors
for protection against the inflationary environment that dominated the
seventies.




High real interest rates have of course affected the economic

- 5 -

viability of domestic as well as international investment programs.
The results of these policies in the major industrial countries
have been that inflation rates (as shown in Table 1) have fallen more rapidly
than generally expected.

The success in fighting inflation has not been

universal; the United States, Japan, Germany, and lately the United Kingdom
have been quite successful in lowering inflation, while in France and Italy
inflation remains quite high.
The major conclusion I draw from this brief review of macroeconomic
policies in the developed countries is that a fundamental change occurred in
1979-80:

namely, that after a decade of inflation these countries are

willing to pay a substantial price for a sustained period to reduce inflation
because they believe that the long-run costs of inflation outweigh any
short-term benefits of increased income and employment. International
businesses, both banks and nonbanks, as well as policy making officials in
the developing as well as the industrial world, have to adjust their planning
strategies to take account of this revised environment.
Adjustment to a new economic and financial environment is a painful
experience, particularly when some major participants have made calculations
and commitments based upon the previous environment which tended to be more
highly inflationary and with significantly lower real interest rates.

To a

large degree this picture describes the position of borrowing countries that
based their development plans and borrowing programs on the expectation of
growing markets for their exports and relatively inexpensive costs of
external sources of savings.

Many of these investment programs had long

commitment and gestation periods; thus, it was very difficult to restrain




- 6 -

external needs for additional capital on short notice without severe costs to
partially completed investment projects.
While some of the problems of borrowing countries are attributable
to the abrupt shift in the international macroeconomic environment, it is
simplistic and incorrect to attribute the entire cause of the current
difficulties of developing countries to external circumstances.

A number of

major borrowing countries were pursuing rates of growth that implied growth
in external debt of 20-25 percent per year, rates which were clearly
unsustainable in any reasonably expected international economic environment.
Many countries failed to make significant adjustments to the two oil price
shocks.

The changes in macroeconomic policies that occurred in 1979 and

1980, and that have been sustained thereafter in the OECD countries,
accelerated the onset of difficulties for these countries.

It is, however,

impressive that a number of countries with well-managed external borrowing
programs, primarily but not exclusively in Asia, have retained their
creditworthiness internationally despite experiencing the same basic changes
that affected those countries currently having difficulties in servicing
their existing external indebtedness.
Since the early seventies commercial bank lending to many countries
has increased dramatically, and the growth in its share of financial flows to
developing countries has been especially notable.

As shown in Table 2,

borrowings from banks provided almost two-thirds of the financing of the
current account deficits and reserve accumulations of the developing
countries in the 1975-81 period.




- 7 -

The rapid growth in bank lending helped offset slower rates of
growth of official bilateral and multilateral financing. In the mid-seventies
IMF resources also dropped to historically low levels relative to global
imports and current account balances.

Moreover, increased access by member

countries to IMF credit, relative to their quotas, placed further strains on
IMF resources during most of this period.
Access by developing countries to credit from commercial banks
cushioned these countries from the need to adjust to the first oil shock and
has delayed and in some cases made more painful their adjustment to the
second oil-price shock.

A positive result has been that, as shown in Table

3, developing countries have been able to sustain significantly higher rates
of real economic growth than the OECD countries.

As shown in Table 3, the

higher level of developing country growth has been accompanied by a five-fold
increase in their external debt, a large increase in the ratio of export
earnings that are needed to service external debt, and a decline in the ratio
of their international reserves to their external debt from about one fourth
in 1973 to one-eighth in 1982.
The increasing participation of banks in international lending has
occurred both through participation by more banking institutions and by
increases in the exposure of the largest banks, which traditionally have been
active in international lending.

A survey by a G-30 study group on

international banking indicated that in the 1970s about 60 new banks a year
became active in international financing.

The increased participation by

more institutions certainly increased the competitiveness of a market that
had traditionally been dominated by a few large institutions, and in part




- 8 -

contributed to lower spreads.

Table 4 indicates the growth of total foreign

claims and claims on developing countries of the largest U.S. banks.

Clearly

both total foreign lending and lending to developing countries was growing
very rapidly at these institutions, and their lending to developing countries
was expanding relative to their assets and capital base.
During the period of the 1970s the supply of bank financing to
developing countries was quite elastic, at lending spreads which on an ex
post basis appear unjustifiably low in relation to the risks involved in such
lending.

Indeed, some more forward-looking observers, including my colleague

Governor Henry Wallich, expressed concerns before the fact that these lending
spreads did not justify the growing levels of bank exposure.
Why did this rapid growth in international lending by banks occur
in an environment of relatively low returns?

I don't believe there is a

simple answer to this question, but several factors appear important.

First,

international trade was growing more rapidly than purely domestic economic
activity, and bank lending was directed towards the more rapidly growing
economic sectors.

In the United States, e x p o r t s 1 share in the total gross

national product increased from 6.6 percent in 1970 to 12.5 percent in 1982.
As the importance of trade flows increased, individual banks felt themselves
under increasing pressure to expand their international activities to service
the needs of their traditional corporate customer base.

As noted above, this

generally rapidly growing sector encouraged entry by an increasing number of
financial institutions, which made the market more competitive.
Another important set of factors affecting bank lending were the
desires by many countries to support and sustain their economic development
programs through recourse to external sources of funds.




The oil-price

- 9 -

increases in the 1970s and the relatively stagnant amount of official
bilateral and multilateral sources of financing, shown in Table 2, directed
an increasing share of this financing to banks.

Borrowers facing an elastic

supply of funds at rates that appeared attractive did not always tailor their
borrowing programs to realistic assumptions about their prospects for general
economic growth or their ability to earn foreign exchange.

In some cases

borrowings were not used to finance additional investment but were utilized
at the margin to postpone needed downward adjustments in domestic
consumption.

A large proportion of the loans were to foreign sovereign

borrowers.
Banking institutions proved to be efficient at organizing
themselves to provide funds to these borrowers, and the lack of significant
problems in these markets encouraged more banks to become active.

The banks

themselves developed a variety of techniques which made such lending
attractive to more institutions.

Loans were priced on a frequently adjusted

rate basis, which protected the banks from risks of changing interest rates.
Other pricing techniques, including the right of some participants to base
their pricing on a prime rate basis, afforded smaller banks some protection
from external influences on their own pricing structure.

The rapid expansion

of the international interbank market increased the availability of funding
to individual banks.
Perhaps, however, the most significant financing innovation was the
syndicated Eurocurrency credit where a large bank, or group of large banks,
would put together a borrowing package and an information memorandum, and
smaller banks would be able to participate in the credit without any direct
contact with the borrower and without the need for any firsthand capability
of analyzing the creditworthiness of the borrower.




Large amounts of credit

-

10 -

could be raised for a single borrower on short notice, and the mechanism of
syndication meant such credits could be widely diffused among banks.
Syndicated credits allowed smaller banks to participate in international
lending with a limited need to develop their own inhouse analytic and
business development capability.

In the face of declining domestic loan

demand, international lending through participation in loan syndicates
allowed many banks to expand their total assets, although not necessarily
their return on assets, in a flexible way with a limited need to increase
their management capabilities.
Finally, it appears to me that in the latest stages of the
expansion of bank lending neither banks nor borrowers were alert to the
impending risks of such lending or, to the fact that economic policies would
be changed in a fundamental way that would affect the viability of continued
international lending.

The favorable record of the past lending reduced bank

managements1 attention to impending problems.

The result has been that we

have arrived at the current situation in which a number of major borrowers
are in the process of restructuring and rescheduling their debts.
Having arrived at a situation which is strained, which appears
somewhat disorderly, and which poses a threat to the stability of the
international financial system, the important question to be answered is how
to set policy to avoid a major disruption to that system in the short run
while in the longer-run establishing a system that is less unstable.

A

satisfactory solution to the current situation will involve a variety of
approaches; no simple gimmick or new institution with new borrowing or
insuring powers will yield any magical results.

A number of the schemes that

have been proposed recently involve relatively high costs of public funds




- u

which would have to be appropriated, direct assistance to countries not
necessarily in difficulty, and may have undesirable consequences for future
bank lending.
As noted earlier, the situation that has developed evolved because
of the actions of borrowers, macro-economic policies in industrlaJ countries,
and the behavior of lenders including banks*

Therefore It appears reasonable

that actions to remedy this situation will have to be undertaken by the same
participants.
The first two elements of a potential solution are interrelated:
more effective adjustment policies by borrowing countries, preferably
supported by and approved by the IMF; and, more rapid expansion of the
economies of the OECD countries.

Both of these measures will reduce the

current account financing needs of the borrowing countries.

Adjustment is

needed by borrowing countries to reduce the growth of their indebtedness to
some level below the rate of growth of their GNP or export earnings, and to
allow some improvement in the relationship of their external debt to their
ability to produce and export.

This adjustment period will involve some

reduction in their growth aspirations, and we are currently seeing declining
rates of growth in several major borrowing countries, and in the short run
negative growth in some countries.

As we have learned in the United States,

adjustment measures may be politically unpopular among some important groups
within society.

However, once a country establishes a more viable

relationship between growth in

outstanding debt and other magnitudes, its

access to external financing will improve and the rate of growth of external
debt should approximate the growth of other economic magnitudes.




This will

-

12 -

imply smaller capital inflows than those experienced in recent years.
A second vital adjustment measure is the need for sustained growth
in the industrial countries, which would improve the ability of developing
countries to export.

While experts may disagree on the precise magnitudes,

current estimates suggest that every one percent increase in the growth of
the OECD countries increases the exports of developing countries on the order
of $5-7 billion*

Most recent information indicates that some economic

recovery is underway in most industrial countries, and if sustained, will
contribute to lessening the debt problem of some major borrowing countries.
While both adjustment by borrowers and faster economic growth in
OECD countries will reduce current account deficits, these current account
deficits, which should be sharply below the deficits of 1980-81, will of
course require financing.

It is unrealistic and inappropriate to expect

developing countries in the aggregate to shrink their current account
deficits to zero, or to bring their current account position into surplus,
since this would imply a capital transfer from developing to developed
countries.

As a structural matter developing countries will continue to need

to import capital, and this net importation of capital should help them
sustain rates of growth in economic activity that exceed growth rates in the
developed countries.
An important source of financing will continue to be banks.

Banks

have been a major source of financing to borrowing countries, and banks
collectively and individually have a large stake in the continued economic
viability of these borrowers.

Therefore, it is also unrealistic and

inappropriate to expect banks which expanded their lending rapidly in recent
years to pull back entirely from providing new finance, or worse, attempting




- 13 -

as a group to effect net repayment.

While there is always a great danger in

mentioning a specific figure, particularly as circumstances can change, an
illustrative calculation is that an increase in international bank exposure
to non-OPEC developing countries on the order of 7 percent in 1983 would
result in an increase in bank claims on these countries on the order of
$15-20 billion, a sharp reduction from new bank credits extended in 1981,
and, a further reduction from credits from banks in 1982.

This amount of new

bank financing would provide a reasonable share of financing of a vastly
reduced aggregate current account deficit for these countries.

A 7 percent

increase in bank exposure combined with an increase in bank capital on the
order of 10 percent in 1983 would allow banks to reduce their exposure
relative to their capital in 1983, particularly if the increase in exposure
is diffused widely throughout the banking system so that a disproportionate
share of the burden does not fall on any group of banks.

These new flows of

bank credit will of course have to be distributed in a satisfactory way among
borrowing countries.
In addition to bank financing there are two other elements which
would be important parts of an adequate financing package for developing
countries.

The IMF must be provided ample resources to perform its

functions.

As a multilateral official institution the IMF is uniquely

equipped to examine the policies of borrowing countries and make
recommendations.

For its recommendations to have any effect, the IMF must

have assurances of sufficient resources so that it is in the borrowing
country's interest to accept the IMF's policy guidance.




A final element of an adequate financing network involves a source

- 14 -

of funds which can be utilized on short notice when there are problems
affecting major borrowers, or liquidity problems affecting banking
institutions.

Central banks, and in some cases Treasuries or Finance

Ministries, are institutionally in the best position to provide such funding.
Recent experience with credit packages to major borrowers suggests that these
coordinated official actions can have an important stabilizing impact on
international markets.

I would hasten to add that such financing Is not

intended to be a longer-term source of funding, but is of a temporary or
bridging nature until longer-term solutions can be worked out and
implemented.

1 would also note that use of this type of official funding

would generally be done on a very selective basis where failure of the
borrower to perform threatens the international financial system.
Having sketched out a response for the immediate situation, I would
also like to comment briefly on developing a more stable long-run environment
to avoid recurrence of these problems.

In order not to overpromise, I must

state that a fully risk-free international or domestic environment is not
attainable.
The major elements of a reduced risk international environment
would appear to me to be better and more stable economic policies in both
developed and developing countries.

While this may seem a bit of a platitude

to some, there are lessons that we have learned in the seventies that should
guide us into the future.

We have learned that over the long run little is

gained from inflation and that the costs of fighting inflation increase
dramatically as it becomes more deeply imbedded in our economic system.
Developing countries, I believe, have learned that they cannot sustain rates
of growth of external borrowing that exceed the growth of their economies or



- 13 -

exports over a long period of time.

Or? a more technical level, developing

countries have also learned more about: the costs of overvalued exchange rates
and disequilibrium levels of domestic interest rates which induce private
capital outflows in a period when a country may be borrowing heavily abroad®
Finally, we have usually analyzed the costs of trade protection in terms of
higher dommestic prices and reduced consumer choice«

The recent experience

has taught us that an additional cost of restricting trade is to make it more
difficult for many borrowing countries to achieve a growth of export earnings
needed to service their outstanding debts*
As mentioned earlier« a contribution to greater long-run stability
can be made by the IMF, which as a regular matter consults on the economic
policies of its member countries»

While the IMF has no direct leverage over

a country's economic policies unless that country is applying for IMF credit,
countries increasingly are respecting the technical capabilities of the IMF
and may become more responsive to its opinions even if they are not seeking
access to credit.

The desire to stay in the good graces of the IMF will

become especially important as more countries realize that at some future
date they may wish to borrow from the Fund, particularly if the Fund has
adequate resources to be a credible lender.

Finally, the IMF is exploring

more ways to improve the flow of statistical information on all countries, a
step that should improve the environment in which international lending
decisions are made.
Banks also should learn from this experience and rethink their role
in international lending.

Bank managements need to monitor and control

country risk more carefully, and pay more attention to analysts within their
banks. Indeed it is important for major banks to have country analysts that




- 16 -

do not have marketing responsibilities*

Large concentrations of country

exposure should be reviewed very carefully because large concentrations of
any kind can result in problems for a bank.

Banks which are participants in

loan syndications with no other direct contact or collateral business with
the borrower should review the expected returns to participations closely,
and if the returns are not satisfactory, participations should not be
undertaken simply to increase total assets of the bank.
Finally, bank regulatory agencies in the United States and abroad
must review their supervisory policies on country risk.

The agreement by the

Governors of the G-10 countries and Switzerland that country risk must be
reviewed and supervised on a consolidated basis is a necessary development in
this area.
Bank regulatory authorities cannot and should not become
international country-rating agencies.

Their expertise in this area is not

necessarily greater than expertise lodged at commercial banks.

Bank

regulators can and should review bank portfolios to encourage diversification
and to comment on heavy concentrations in general, and especially in cases
where the bank does not have some special expertise or is not enjoying some
important commercial advantage from having the large concentration.

Banks

enjoy deposit insurance on a wide range of their liabilities and have access
to liquidity support at the discount window.

Both of these factors give

banks important advantages over other lenders in competing for funds.
Because of these advantages, and because of the importance of a
smoothly-functioning payments mechanism, it seems reasonable indeed that
regulators play a role in monitoring, analyzing, and commenting upon any
international or domestic risks which might threaten the position of their
banks.



- 17 -

In the United States, as part of the process of reviewing the U.S.
participation in the increased IMF quotas, the Federal bank regulators have
been working with Congress to develop a statutory and regulatory framework
for an improved longer-term environment for international lending by U.S.
banks.

The major elements of that new environment are: (1) tightened

supervision of the foreign exposures of U.S. banks, including more frequent
and forceful comments on large international exposures; (2) more frequent and
more timely public disclosure of large concentrations of country risk of U.S.
banks which should result in better market surveillance of their activities;
(3) adjustment to the accounting conventions for increased spreads and fees
that result from reschedulings which should make banks more careful, and it
is hoped price more accurately, credits in which rescheduling is a
possibility; and (4) some reserve provisions for troubled international
credits which should make the banks reported earnings and assets conform more
closely to economic realities, and act as a further caution to banks to
restrain commitments, or demand higher compensation, for credits where there
is a chance that a rescheduling or restructuring will be needed.
In developing this new framework U.S. regulators were aware of the
need to balance the longer-term objective of setting the appropriate signals
and incentives for banks to engage international lending against the need to
avoid excessive restraint in the short-run where such restraint could
threaten the stabilization packages being put together for major borrowers.
I understand that other countries are also reviewing their supervisory
procedures to improve their surveillance and to avoid situations of
competitive inequities favoring lending by banks chartered in a particular
country.




- 18 -

The conclusion one can draw from this brief overview is that the
international financial system in which banks are operating has changed
considerably in recent years, and that all participants are in the process of
adapting their behavior to that change.

The changed environment, while

necessary to avoid the more serious consequences of continued unrestrained
inflation, has imposed serious costs on all participants.

The challenge for

the immediate future is for all participants in the system to recognize their
long-term interests in a stable, but certainly not risk-free, system and to
adapt their own behavior in such a manner that the transition can occur as a
relatively orderly and well-managed process.

The management of this process

presents important challenges to macroeconomic policy to maintain the gains
that have been made in combating inflation while at the same time allowing
sufficient economic growth to permit servicing of outstanding debts, or in
some cases restructuring of debt on terms that are acceptable to both
borrowers and lenders.

Agencies charged with responsibility for regulating

banks must adjust their policies to ensure development of an appropriate
environment for international bank lending.

While these challenges are

formidable and will require considerable coordination, there appears to be a
very reasonable chance of a successful outcome in light of the growing
awareness and understanding of the problem at hand.




- 19 -

Table 1
Percentage Change in Consumer Price Index
(Fourth Quarter over Fourth Quarter in Previous Year)

Country
Year

U.S.

1973

GNP Weighted
Change in CPI in
6 Major Foreign
Countries
U.K.
(Percem

Canada

France

Germany

Italy

Japan

8.3

9.1

8.3

7.2

11.6

15.0

10.3

10.7

1974

12.2

12.0

15.0

6.5

24.8

23.9

18.2

16.9

1975

7.4

10.2

9.9

5.5

11.4

9.2

25.3

10.7

1976

5.1

5.9

10.0

3.8

21.1

9.4

14.9

9.8

1977

6.5

9.1

9.2

3.7

15.1

6.3

13.1

8.1

1978

9.0

8.7

9.5

2.3

11.5

3.9

8.1

6.1

1979

12.8

9.5

11.5

5.4

17.7

4.9

17.3

9.2

1980

12.5

11.1

13.6

5.3

21.4

7.4

15.3

10.5

1981

9.6

12.3

14.1

6.5

18.4

4.1

11.9

9.3

1982

4.5

9.7

9.5

4.7

16.6

2.9

6.2

6.7




Table 2

(billions of dollars)
1

.

Balance on goods, services
and private transfers

2.

Official transfers

3.

Current account

1973

1974

1975

1976

1977

1978

1379

1980

1981

1982

-11

-31

-39

-26

-22

-37

-54

-76

-93

-81

5

7

7

7

8

8

12

12

13

12

-6

-24

-14 ~ =29

-42

-64

-80

-68

-32

-19

Financed by:
4.

Direct investment

4

5

5

5

5

6

8

8

11

8

5.

Borrowing from official
cources (excluding IMF)

5

7

11

9

11

12

14

18

18

19

6.

Borrowing from banks

9

16

19

18

11

22

37

43

48

24

7.

IMF credit (net)

—

2

2

2

—

-I

0

2

5

5

8.

Misc. and residual

-4

-4

-6

-4

-2

5

-7

-7

-6

3

9.

Net accumulation (-) or reduction
(+) in official reserves 1/
-8

-2

1

-11

-11

-15

-10

0

4

9

1/ Excluding changes due to fluctuations in the value of gold or to the allocation of SDRs«

e/ estimate.




Ni

o

Table 3

Selected Data for Non-OPEC Developing Countries

Year

Growth Rate
OECD
(percent)

Growth Rate
Developing
Countries
(percent)

of which:
Western
Hemisphere
(percent)

Gross External
Debt
(billions of
dollars)

Debt to
Foreign
Banks
(billions
of dollars)

Total Reserves
minus gold
(billions of
dollars)

Debt Service
to
Exports
(percent)

1973

6.1

6.7

8.4

110 jy

35 j7

26.1

15.3

1974

0.7

5.6

6.9

135 JJ

50 J7

28.2

15.9

1975

-0.2

4.2

3.1

165

62.7

27.2

17.9

1976

4.8

6.6

5.5

200

80.9

38.2

16.8

1977

3.8

5.4

5.0

250

94.3

49.9

17.3

1978

4.0

5.6

4..5

310

131.3

64.6

22.0

1979

3.1

5.0

6.7

365

171.0

74.7

21.9

1980

1.2

4.7

6.0

430

210.2

74.4

20.0

1981

1.4

2.3

-0.1

505

253.5

69.9

23.1

1982

-0.2

0.8

-1.5

555 e

275 e

60.6

27.7 e

\j The estimates for these years were done without the benefit of BIS-reported bank lending data, which are

only available beginning in 1975.
e - estimate.




Table 4
Claims on Non-OPEC Developing Countries:
Country Exposure Lending Survey Data for Nine Largest U.S. Banks
(billions of dollars)

Claims on
Total Foreign
Non-OPEC DeClaims
veloping Countries

Date

Reporting
Banks 1
Total
Assets

Reporting
Banks'
Total
Capital

Claims on Non-OPEC
Developing Countries
________as a percent of:_______
Total Assets
Total Capital

1977 December

132.7

30.0

372.5

18.4

8.1

163

1978 June
December

135.9
147.3

31.0
33.4

390.2
422.5

19.0
20.0

8.0
7.9

164
176

1979 June
December

151.8
168.2

35.0
39.9

449.8
486.1

21.1
21.9

7.8
8.2

166
182

1980 June
December

17;6.7
186.1

41.9
47.9

508.4
531.0

23.0
24.0

8.2
9.0

182
199

1981 June
December

196.0
205.0

51.6
57.6

553.7
564.6

25.0
26.1

9.3
10.2

206
220

1982 June
December

209.5
205.3

60.3
64.2

566.3
588.0

27.1
29.0

10.6
10.9

222
221

Source:




Semi-annual Country Exposure Report and Report of Condition.