World Bank Document

Debt rescheduling and the banks
Banks have had to temper their desire to contain
rowers the syndicated loan is now a relatively expensive the growth of exposure to some developing counborrowing
option. Indeed, some banks have reportedly tries with their need to safeguard existing loans.
disbanded their syndicated credit departments in favor Accordingly they have adopted a flexible approach
of a more broadly based lending operation.
to dealing with countries with debt-servicing difficulties.
Banks quickly realized that rescheduling
Box figure 8.6A Spreads and maturities on syndicated only principal payments due or in arrears was not
lending, 1972-84
adequate. Debtors needed more relief, and banks
rescheduled debt and provided new loans in the
Percent
context of IMF programs. Each bank's share of the
1.8 new loan was based on its share of all the bank
debt owed by the rescheduling country. While not
1e4 conrie without difficulties, this burden-sharing approach
has been generally successful.
/ \\ /\< In some of the early reschedulings, short-term
-_ *a\bank_ \7\t debt was included along with one or two
All countries
years of maturities of long-term bank debt. How-
0.6 _ ever, all the participants soon recognized the spe-
1972 1976 1980 1984
Average maturities
Figure 8.5 Net new bank deposits and
Years borrowing of selected country groups, 1979-83
Developing
g9 Xi4 countries
9 't/9\----> ______ ____Net new deposits Net new borrowing
7 i \ s _ B Other 1983
-- z + __ _ ~~~~~~~~ ~ ~~countries m
All countries Centrally _
5 Al_countries [Q planned 1982
1972 1976 1980 1984 economies
Note: Data are for new publicized syndicated loans. Oil-importing - -_
C developing
Source: Bond 1985. countries 198
Oil-exporting
O developing -_
countries' 1980
countries, even some that did not experience debt-
Industrial
countries ___
servicing difficulties, reduced their demand for 1979 t
bank lending.
As a result of these factors, banks' net lending to
developing countries fell significantly after 1981 1 1 I l
(see Figure 8.2). Spontaneous lending fell most 40 20 0 -20 -40
and concerted lending (in conjunction with IMF
Billions of dollars
programs) became an increasingly important Note: Data are for banks reporting to the Bank for International
source of funds for developing countries (see Box Settlements. Net deposits with the banks take place when new
8.6). Most of the spontaneous lending went to deposits by a country group exceed new borrowing; a repayment
8. 6) . Most of the spontaneous lendmg went to of past borrowing would also serve to increase net deposits. Net
developing countries in East Asia and Europe. Evi- borrowing takes place when new borrowing exceeds new
dence provided latest data deposits by a country group; it might also reflect a reduction in
dence by provied the ltest BIS daa for end- outstanding deposits with banks.
December 1984 suggests that banks' outstanding
claims on developing countries have remained vir- a. MainlyOPECmembers.
tually unchanged, at $433 billion, compared with a Source: IMF 1981, no. 7; watson, Keller, and Mathieson 1984; BIS
year earlier (see Figure 8.3).
data.
119