If China opens the capital account before it reforms its SOEs, foreign lending may help feed their investment hunger.
They have already done the first: easing the rules on foreign lending to India, to try to attract short-term funds.
In addition, even some countries with surpluses, such as Russia, have banks that have grown accustomed to easy foreign lending because of the integration of global finance.
Elsewhere, the sudden dearth of foreign-bank lending and the flight of hedge funds and other investors from bond markets has slammed the brakes on credit growth.
Mr Krugman's model does not distinguish between domestic and foreign creditors a significant omission, given that East Asia's problems grew because foreign banks kept lending even after signs of crisis became apparent (see charts).
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Soft dollar and proprietary trading, securities lending, foreign exchange and custody arrangements are additional issues in need of review.
Among potential problems with shorter settlement cycles were issues around securities lending, foreign exchange transaction and delivery of physical securities.
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It is top of the class in some of the wholesale businesses, such as foreign exchange, securities lending and global custody.
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The government and foreign donors have been lending at a concessional rate of just 3% a year to banks and microfinance institutions, which have been lending on at 6%.
Those concerns are growing amid mounting accusations that the banks and brokerages which handle their securities transactions have been over-charging corporations and public entities for various services, including securities lending and foreign exchange conversions.
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While CDB's primary mandate is to support China's domestic development, with foreign currency-denominated lending accounting for only 21% of outstanding loans at the end of 2011, it is also tasked with supporting the development of China's interests overseas.
And besides, foreign direct investment, bank lending and the value of the rupiah have all been abysmally low.
This was novel stuff: it implied that the government would allow foreign takeovers and would countenance lending based on borrowers' commercial rather than political credentials.
Furthermore, our data show that in all the other European markets, where such measures had not been implemented, foreign banks did not reduce lending nor behave differently from domestic banks.
To many bankers, particularly foreigners who have been keeping an eye out for opportunities in Japan, the government's inclination to obstruct reform has been sharply illustrated by last week's order by the Financial Services Agency, a regulator, to Shinsei, a bank now owned by foreign investors, to increase lending to small and medium-sized companies.
The first was driven by the opening of the economy to foreign capital, the second by lending to the rising black elite over the past decade.
Tight spreads reflect bankers' enthusiasm: syndicated-lending, often by foreign banks (including one that swore not to invest another dollar in Russia after the previous meltdown), has more than doubled since 1998.
Critics also charged that the Bank was lending money to drill off a foreign shore while banning drilling in the Gulf of Mexico.
There is money to be made in foreign exchange, deposit-taking, and careful corporate lending (to oil exporters, for example).
Also, some foreign direct investment, particularly from Hong Kong, is actually lending in disguise.
Reducing the amount of foreign assets that Swiss banks hold is sensible but privileging domestic lending so flagrantly is alarming.
In its absence, to comply with U.S. copyright law you would have to keep track, in perpetuity, of all foreign-sourced works in order to avoid inadvertently selling, lending, gifting, donating, or otherwise distributing them without permission from the copyright holder.
Rising foreign-exchange reserves boost the money supply, causing higher inflation and excessive bank lending.
The flood of foreign-currency borrowing destabilised their economies and left them vulnerable when Western banks reduced lending.
Although foreign banks must also hold big slugs of bonds, they had more lenient priority-lending rules until now.
In the 10 years ending Dec. 2009, securitizing bank loans, parceling them up and then selling the debt to investors both foreign and domestic added 325 billion pounds to the growth in U.K. bank lending, expanding new credit by more than 20%.
Rabobank plans to expand lending to China's food producers and processors, both in yuan and in foreign currencies.
Housing prices in the big eastern seaboard cities like Beijing and Shanghai remain high compared to where they were five years ago, but have been coming down month over month due to the current policies that curb lending to the sector and restrict home purchases, especially for non-resident home buyers, foreign investors, and second or third home buyers.
Also lending a diplomatic hand: nonprofit organization, Independent Diplomat, which has corralled former ambassadors and foreign service types to work with the nascient government as it seeks to work with other governments.
Other financial firms with banking licences, such as Kotak Mahindra, have been shifting towards the lending business and away from capital markets where profitability has fallen, partly thanks to a rush of foreign investment banks into India.
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