A new report by the International Bank of Settlements suggests that an upsurge in cross-border lending in the first quarter of 2004 was driven by growth in the hedge fund industry.
According to the Basel-based institution’s quarterly report published on Tuesday, cross border lending reached a record breaking $17.2 trillion in the first three months of the year, an increase of $778 billion, much of this as a result of borrowing through offshore financial centres.
“The growth in credit to non-bank borrowers in the first quarter of 2004 seemed to reflect new lending to offshore centres and other financial centres, as well as investment in debt securities,” reported the Bank, adding:
“Nearly one quarter of the increase in US dollar-denominated loans to non-banks, and nearly two thirds of euro-denominated loans, flowed to non-bank borrowers in offshore centres, Luxembourg and the United Kingdom, areas with considerable non-bank financial activity.”
“This occurred in a quarter during which hedge funds enjoyed a record net inflow of funds,” the report observed.
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