Title Page
Occasional Paper No. 1
International Capital Markets
Recent Developments and Short-Term Prospects
By a Staff Team Headed by R. C. Williams
Exchange and Trade Relations Department
International Monetary Fund
Washington, D.C.
September 1980
Copyright
International Monetary Fund.
International capital markets : recent developments and short-term prospects / by a staff team, headed by R. C. Williams, Exchange and Trade Relations Department.—Washington : The Fund, 1980.
(Occasional paper—International Monetary Fund ; no. 1)
1. International finance. 2. Banks and banking, International. 3. Investments, Foreign. I. Williams, Richard C. II. Title. III. Series: International Monetary Fund. Occasional paper ; no. 1.
Contents
Foreword
Preface
I. Introduction and Summary
Introduction
Summary of major topics
Recent developments in the markets
Bank regulation and supervision: policy issues
Prospects for recycling oil surpluses by the international capital markets
II. Prudential Constraints on Bank Lending
The 1974–75 period
Prudential constraints in 1980
Implications for bank lending
III. The Impact of Bank Regulation and Supervision
Regulation for macroeconomic purposes
Supervision of prudential behavior
Implications for bank lending
IV. Current Macroeconomic Environment
Current account prospects and demand for international market finance
Macroeconomic environment for international lending
Outlook for international bond markets
V. Short-Term Prospects for International Bank Lending
APPENDICES
I. Financing of Payments Imbalances Through International Capital Markets, 1974–78
Payments imbalances following the oil price increase of 1973–74
Role of international capital markets in 1974–75
Dimension and direction of international lending
Main factors affecting banks’ role as international intermediaries
Bond markets
International capital markets in 1976–78
II. Developments in International Capital Markets in 1979
Macroeconomic factors affecting international lending
Global current account imbalances
Changes in non-oil developing countries’ gross foreign reserves
Growth of world trade
Growth in industrial country investment
Lessened exchange market instability
Other factors
Developments in international banking
Bank lending and deposit taking
Medium-term publicized bank credit commitments
Terms and conditions
Bond market developments
III. Implications of Growth of the Eurocurrency Market for Monetary Policy and Inflation
Background
Impact on the market of changing circumstances: three examples
A preference shift from demand deposits into Eurodollar deposits
Open market sales
Exogenous increase in credit demand
Reactions by policymakers
Incomplete knowledge
Policy dilemmas
Equity argument
IV. Statistical Tables
LIST OF TABLES
Section
I.
1. Aspects of International Bank and Bond Financing, 1976–79
II.
2. Non-Oil Developing Countries: Public and Publicly Guaranteed Long-Term External Debt, 1973–79
3. Distribution of International Bank Claims, 1973–79
III.
4. Current Account Balances, 1977–80
5. Non-Oil Developing Countries: Current Account Deficits and External Financing, 1977–80
Appendices
I.
6. Current Account Balances, 1971–78
7. Net Borrowing Through International Capital Markets, 1971–78
8. Publicized Medium-Term Credit Commitments, 1972–78
9. Borrowing Through International Capital Markets by Non-Oil Developing Countries, 1971–78
10. Terms On Publicized Medium-Term Credit Commitments, 1973–78
11. Publicized Medium-Term Credit Commitments: Evolution of Volume and Terms, 1974 and 1975
12. International Bond Issues and Placements, 1973–78
II.
13. International Bank and Bond Finance, 1974–79
14. Growth in International Lending and Selected Factors Influencing International Lending, 1974–79
15. Destination of International Lending, 1977–79
16. External Lending and Deposit Taking of Banks in BIS Reporting Area, 1977–79
17. Medium-Term Publicized International Banking Credit Commitments, 1977–80
18. Terms on Publicized Medium-Term Bank Credit Commitments, 1977–First Quarter 1980
19. Undisbursed Credits as Per Cent of Outstanding Bank Claims, June 1978–June 1979
20. International Bond Issues and Placements, 1975–First Quarter 1980
21. Interest Rate Developments, 1975–79
22. Secondary Market Yields on Eurobonds, 1978–March 1980
III.
23. Growth of Eurocurrency Market, 1964–79
IV.
24. Detailed Current Account Balances, 1971–80
25. External Lending and Deposit Taking of Banks in BIS Reporting Area by Major Group of Countries, 1971–79
26. External Claims of Banks in BIS Reporting Area by Borrowing Country, 1975–79
27. External Liabilities of Banks in BIS Reporting Area by Depositing Country, 1975–79
28. External Claims as Reported by Banks in BIS Reporting Area or by Country or Region of Lending Bank, 1975–79
29. External Claims by Maturity and Undisbursed Credit Commitments of Banks in Major Financial Markets, June 1978–June 1979
30. Medium-Term Publicized International Bank Credit Commitments, 1971 -First Quarter 1980
31. Maturity Distribution of Eurocurrency Bank Credit Commitments, 1973–79
32. Distribution of Spreads on Variable Interest Rate Eurocurrency Bank Credits, 1973–79
33. Oil Exporting Countries: Estimated Disposition of Current Account Surplus, 1974–79
34. Non-Oil Developing Countries: Current Account Positions and Aspects of Their Financing, 1971–80
35. Share of Claims on Developing Countries and Centrally Planned Economies in International Claims of Banks, 1970 and 1973–79
36. Growth in Gross International Claims of Banks of Major Capital Market Countries, 1974–79
37. Capital-Asset Ratios of Banks in Major Capital Market Countries, 1972–79
38. Maturity Distribution of New International Bond Issues and Placements by All Borrowers, 1975–79
39. Foreign Bond Issues and Placements by Market Country, 1975–79
40. Total Eurobond Issues and Placements by Currency of Denomination by All Countries, 1975–79
LIST OF CHARTS
Section
I.
1. Net Lending Through International Capital Markets, 1971–79
2. Non-Oil Developing Countries: Financing Through International Capital Markets, 1971–79
3. Terms on Lending Through International Capital Markets, 1973–80
Appendices
II.
4. Interest Rates on Eurodollar Deposits and on Dollar Eurobonds, 1972–80
III.
5. Annual Growth Rate of Eurocurrency Market, 1965–79
The following symbols have been used throughout this paper:
(…) indicate that data are not available;
(—) indicates that the figure is zero or less than half the final digit shown, or that the item does not exist;
(–) is used between years or months (e.g., 1970–78 or January–June) to indicate the years or months covered, including the beginning and ending years or months;
(/) is used between years (e.g., 1977/78) to indicate a fiscal year.
“Billion” means a thousand million.
Minor discrepancies between constituent figures and totals are due to rounding.
Foreword
The publication of this paper, International Capital Markets: Recent Developments and Short-Term Prospects, begins a new series, Occasional Papers, designed to fill a gap in the range of publications of the International Monetary Fund.
In addition to the Annual Report of its Executive Directors and the Annual Report on Exchange Arrangements and Exchange Restrictions, both published in accordance with the Articles of Agreement, the Fund also publishes a scholarly quarterly, Staff Papers; a topical news survey, the IMF Survey; papers on the Fund and its work, in a Pamphlet Series; a quarterly periodical, Finance and Development, jointly with the World Bank; and several statistical bulletins and yearbooks. The new series will make it possible to provide policymakers, technicians, and the interested public with studies in greater depth and with greater flexibility in timing and content than is possible with existing Fund publications. While the emphasis will be on current topics, the series will also include papers on subjects of longer-term interest. Occasional Papers will not be on a particular theme but will contain studies on a variety of economic and financial subjects of importance to the work of the Fund, such as overall developments in national economies, the behavior of international capital markets, and problems related to the functioning of the international monetary system. It is hoped that the new series will contribute to the clarification of current economic issues and promote a wider understanding of the Fund’s work.
/s/
Azizali F. Mohammed
Director
Office of External Relations
International Monetary Fund
September 1980
Prefatory Note
This study was prepared in the International Capital Markets Division of the Exchange and Trade Relations Department of the International Monetary Fund under the direction of Richard C. Williams, Assistant Director. The members of the division who contributed were G. G. Johnson (who also shared in the supervision of the study), Ulrich Baumgartner, Henri Ghesquière, and Nancy Happe. Saul Rothman of the European Department also contributed, and helpful comments were received from a number of colleagues. Background for the study was provided by informal discussions which the staff had with bankers and monetary and bank supervisory authorities in Canada, France, the Federal Republic of Germany, Japan, Luxembourg, the Netherlands, Switzerland, the United Kingdom, and the United States in March, April, and May 1980, as well as with staff of the Bank for International Settlements, the European Communities, and the Organization for Economic Cooperation and Development. The study was completed in June 1980 and does not reflect developments since then.
The paper has benefited from comments by staff in other departments of the Fund and by members of the Executive Board. However, opinions expressed are those of the authors and do not necessarily represent the views of other staff members or of Executive Directors.