Shrinking of portfolios of US securitisations owned
by Europeans
short-term liquidity norm (LCR, liquidity coverage
ratio) . This requires banks to hold enough liquid,
unencumbered, high-quality assets to cover the net
cash outflows triggered by a serious 30-day crisis. The
assets considered to be the most liquid (those that can
be converted into cash in private markets without losing
USD bn, portfolios of US long-term debt securities
1
000
(excl. Treasuries) owned by Europeans
9
8
7
6
5
4
3
2
1
00
00
00
00
00
00
00
00
00
0
ABS (excl. MBS) from private issuers
MBS from private issuers
MBS from Agencies
Agency debt
–
or losing very little of – their value) include reserves at
the central bank and debt instruments issued – or
guaranteed – by sovereigns, such as Treasuries and
0
6/07 06/08 06/09 06/10 06/11 06/12 06/13 06/14
Agencies . The US-chartered banks expanded their
portfolios of Treasuries and Agencies by nearly 320
billion dollars between the end of 2012 and March 2015
ABS: Asset-backed securities; MBS: Mortgage-backed securities;
Mortgage agencies: Federal agencies (Ginnie Mae)
&
GSEs (Fannie Mae, Freddie Mac, FHLB)
Chart 21 Sources: US Treasury,Federal Reserve of New York,Fed
(chart 8), purchases that they financed by borrowing
from their foreign branches or subsidiaries (+260 billion)
and the Federal Home Loan Banks (+90 billion)
Net inflow of funds via crossborder (chart 9).
All in all, the net debt of all commercial banks
resident in the US to their parent companies,
subsidiaries and branches abroad amounted to around
intragroup debt
Apart from their primary purpose (providing access
to funding in foreign currencies, ensuring geographical
diversification for commercial activities and investments,
etc.), foreign branches are also factors that allow for the
absorption or amplification of shocks. Thus, while an
analysis of the aggregated balance sheets of resident
banks allows us to assess the effects of quantitative
easing on banks’ reserves and deposits (see first part of
this article), it ignores the massive shift in net intra-group
positions that QE has triggered.
As the net debt of some (the US banks) offsets the
net credits of others (the branches of foreign banks), the
net position of US domestic commercial banks to their
foreign parent companies, subsidiaries and branches
remained close to zero until the end of 2010 (see area
shown in chart 22).
4
00 billion dollars at the start of 2015 (see area shown
in chart 22) . Based on the consolidated balance
sheets of foreign banks with activities in the US (FFIEC
Call Reports) and statistics from the BIS, McCauley and
McGuire (2014) observed that in 2011 the increase in
net lending in dollars by foreign parent companies to
their US branches had not been offset by a contraction
of the same order in their net loans to any other
counterparty (in the US or elsewhere). They deduced
from this that this lending had been financed by
converting foreign currency-denominated resources into
dollars. This interpretation was confirmed by the
increase in yen, euro and sterling swaps into dollars
during 2011. They thus concluded that, counter-
intuitively, the Fed’s QE had been accompanied by an
inflow of funds via the Eurodollar market.
Under the combined effect of quantitative easing
and the change to the FDIC premium calculation, the
flow of parent companies’ repayments of crossborder
intra-group loans, which was more rapid at the
foreign banks than at the US-chartered banks (see
area shown in chart 6 and histogram in chart 12),
helped to increase the net debt of all the resident
commercial banks. This trend was prolonged by the
net inflow of intragroup funds via the balance sheets
of US branches of foreign banks as from 2011, and
via those of US-chartered commercial banks as from
Net debt of some offset by net credits of others
over the long term
USD
bn
Net debt of US resident commercial
banks to foreign affiliated entities
Net inflow of
intra-group
finance
800
600
400
200
0
Net debt of US-chartered banks to
foreign subsidiaries and branches
Net debt of US branches of foreign
banks to foreign affiliates
-
200
2
013 (dotted curve and solid curve in chart 22).
-400
NB: figures greater than 0 indicate that
-
-
600 banks are net borrowers from foreign affiliates
parent companies, subsidiaries, branches, other)
80 85 90 95 00 05
Net outflow of
intra-group
finance
The trend observed since 2013 for US-chartered
(
800
banks (return to net debtor position) is probably not
unrelated to the Basel Committee’s finalisation of the
7
5
10
15
Chart 22
Source: Federal Reserve
July-August 2015
Conjoncture
12