Supplementary memorandum from the Bank
of England
LENDING BY FOREIGN BANKS
1. When he last appeared before the Treasury
Committee, the Governor was asked to provide figures on the slowdown
in lending by foreign banks.[6]
This note uses official Bank of England statistics to gauge the
extent of the changes in lending capacity, where lending is classified
according to whether the lender is domestic or foreign.[7]
LENDING TO
BUSINESSES[8]
2. The growth rate of lending to businesses
peaked at over 30% on a three-month annualized basis in October
2007. At that time foreign banks were contributing around 13 percentage
points to growth in lending to businesses (Chart 1).
3. Since then, lending to businesses by
both domestic and foreign lenders has eased markedly. In the six
months to February 2009, net lending to businesses by foreign
banks fell to £1.4 billion from £21.1 billion in the
same period a year earlier, whereas net lending by domestic lenders
fell to £7.2 billion from £32.4 billion in the same
period a year earlier.
Chart 1: Contributions to growth in lending to private non-financial businesses
4. The amount of loans outstanding to private
non-financial corporations in February 2009 was £590.3 billion.
Of this total, £188.2 billion had been lent by foreign banks,
giving them a 31.9% share of the market. This share was broadly
in line with what it had been in October 2007 (30.9%).
MORTGAGE LENDING
5. Mortgage lending has also slowed significantly
over the past 18 months. On a three-month annualised basis, lending
growth slowed from an average of over 10% in 2007 to 0.3% in February
2009. The contribution of foreign lenders to the growth in mortgage
lending has always been relatively modest (Chart 2).
6. In the six months to February 2009, net
secured lending to individuals by foreign banks fell to -£3.7
billion from £5.7 billion in the same period a year earlier,
whereas net lending by domestic lenders fell to £8.2 billion
from £38.1 billion in the same period a year earlier.
7. The amount of secured loans outstanding
to individuals in February 2009 was £1,225.8 billion. Of
this total, £99.3 billion had been lent by foreign banks,
giving them a 8.1% share of the market. This share was little
changed from October 2007 (8.2%).
6 This was in response to Mr Mudie who had asked "when
the overseas banks disappeared what percentage of the lending
market did we lose?" (Q77). Back
7
Foreign banks are defined as banks whose parent bank or holding
company is incorporated outside the UK. The only exception is
Abbey, which as a traditional major High Street lender is treated
here as a domestic bank, despite its parent Santander being incorporated
in Spain. Back
8
The data presented in this note include both sterling and foreign
currency loans. The sterling value of the latter has been adjusted
for the impact of the recent movement in the exchange rate. However,
the general results of the analysis remain unchanged even if foreign
currency lending is excluded from the data. Back
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