French banks reduce overseas lending

French banks cut their overseas lending by almost $200bn in the final quarter of last year, adding to an even sharper retreat in the previous three months and highlighting the scale of their loan pull-back, international lending data show.

The Bank for International Settlements (BIS), which charts cross-border borrowing, said French banks cut their cross-border lending by $197bn (€158bn) or 5.3% in the fourth quarter.

That followed an even steeper drop of 7.1% in the previous quarter, the sharpest fall by French banks for at least 12 years, the BIS said.

BNP Paribas, Societe Generale and others in Europe are shrinking their loan books to meet tougher rules on capital requirements. But the pace of shrinking, or “deleveraging” is raising concern that it will choke off Europe’s recovery attempts.

Global lending by banks fell $799bn or 2.5% in the fourth quarter, the biggest fall since the drop seen after the collapse of US investment bank Lehman Brothers three years ago, the BIS data show.

It was led by deleveraging by banks based in the euro zone, which cut lending by $584bn or 4.7% in the fourth quarter.

* Reuters