Banks Continue To Borrow From Foreign Sources, But Shift To Long Maturities

05.19.2011 ZF English

Banks continued to borrow from abroad in the first quarter, as the savings capacity of local companies and households is diminishing, but the trend is to switch from shorter maturities to longer ones.

The long-term foreign debt taken out by banks, which largely reflects funding secured from foreign shareholders, went up by more than EUR1 billion in a year, to EUR16.2 billion at the end of the first quarter, while the growth rate of short-term debt was much slower.

"Most of banks' foreign loans used to be short-term, with the debt being rolled over, but there are advantages related to the minimum reserve requirements. Deposits with maturities of over two years are exempt from payment of the minimum mandatory reserves.

The decline in banks' short-term debt could be explained by the attempt to turn some of the short-term funding into long-term loans in order to improve cash flow indicators.

Banks' overall foreign debt reached EUR22.9 billion at the end of March 2011, EUR1.3 billion more than in March 2010.