Bank for International Settlements reports further £235bn slide in global lending

By Ambrose Evans-Pritchard Published: 9:57PM GMT twenty-eight February 2010

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The Bank for International Settlements (BIS) reports that cross-border loans have depressed neatly for the fourth entertain in a row, despite at a slower pace. A tenth of tellurian credit has evaporated in a year, slicing lending by $3 trillion.

The liberation in debt holds ran out of steam in the last 3 months of 2009. Volume fell by 10pc to $1,778bn. Net distribution forsaken by a third to $303bn.

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Tim Congdon, from International Monetary Research, pronounced the scale of credit contraction given the burble detonate is deeply worrying. "What it tells us is that the predicament is not nonetheless over. The routine that done credit cheaper and some-more accessible for companies around the universe is still going in to reverse," he said.

The BIS pronounced banks have come to rely heavily on a form of "carry trade", borrowing low at short-term rates to suffer higher yields on longer- tenure holds a gamble that executive banks will keep rates nearby zero. This creates the sort of majority mismatch that valid the undoing of most lenders in the credit crisis.

"Financial institutions could be receiving on extreme generation risk. Once expectations shift and seductiveness rates proceed to rise, the unwinding of such suppositional positions could strengthen repricing in bound income markets and outcome in produce volatility," pronounced the BIS.

Europe saw the sharpest tumble in new securities, reflecting the split-level inlet of tellurian recovery. Net issues in the eurozone fell to $111bn, down by half. Borrowers in the UK redeemed some-more than they issued, slicing debt by $26bn.

Europe accounts for roughly all the decline in cross-border lending, with falls of $151bn in the eurozone, and $183bn in the UK. The thespian decline in Britain reflects the tellurian inter-bank market, heavily strong in the City of London.