Cross-border lending rise hints at capital investment

LONDON - Global cross-border lending jumped over 14 per cent in late 2004 as interbank borrowing and borrowing by companies and financial firms increased, central bank data shows.

The Bank for International Settlements data shows total cross-border claims in the last quarter of 2004 rose by US$571 billion ($798 billion) to a total of US$19.2 trillion.

The BIS said banks' lending to other banks explained most of the increase in the quarter, at US$338 billion, with much of it due to a rise in US dollar-denominated loans made to banks in offshore financial centres.

Loans to non-bank borrowers - including manufacturers and other companies plus financial firms such as insurers - explained the rest of the rise at US$233 billion.

Rising corporate borrowing can signal investment in capital goods and herald economic growth. The data possibly also indicates a rise in hedge fund activity.

The quarterly data from the BIS, which is based in the Swiss city of Basel, includes lending statistics by central banks and commercial banks but does not distinguish between the two.

- REUTERS