This article continues the annual series on international banking developments. It concentrates on wider market developments to reflect the recent blurring of boundaries between capital markets and more traditional banking markets.
The article is in three parts: an overview, followed by an analysis of individual market sectors (based on data compiled by the Bank of England), and of developments in banks' international lending (based mainly on figures published by the Bank for International Settlements).
- The form and direction of international capital flows in 1984 were strongly influenced by developments in the US economy.
- The debt problems of major borrowing countries had a somewhat less severe impact on markets than in 1983 as the current account position of developing countries continued to improve.
- There was a modest recovery in banks' international lending in 1984. The trend continued towards intermediation of international flows through marketable instruments rather than traditional bank lending. Greater competition and innovation also contributed to even more favourable market conditions for creditworthy borrowers than in 1983.
- As in 1982, a number of banking problems emerged during the year and unsettled international markets for a time. Banks, encouraged by supervisory authorities, continued their efforts to improve capital ratios and build up provisions.