International Banking:

Exposure to Less Developed Countries

NSIAD-90-34FS: Published: Oct 16, 1989. Publicly Released: Oct 16, 1989.

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Pursuant to a congressional request, GAO presented historical data from the Bank for International Settlements' (BIS) quarterly and semiannual series on the debt that less-developed countries (LDC) and Baker 15 countries owed to the United States, Canada, United Kingdom (UK), West Germany, France, Italy, and Japan.

GAO found that, according to the territorially based BIS quarterly series: (1) LDC debt to all reporting banks, U.S. banks, and UK banks increased 173 percent, 123 percent, and 55 percent, respectively, between June 1981 and December 1988; and (2) Baker 15 debt to U.S. banks generally increased between June 1981 and June 1984 and then gradually declined, UK bank exposure to Baker 15 debt fluctuated, and Baker 15 debt to all reporting banks increased between June 1981 and June 1987, and then slowly declined. GAO also found that, according to the nationally based BIS semiannual series: (1) reporting banks' exposure to LDC increased 63 percent between June 1981 and December 1987, and then declined, with U.S. bank exposure to LDC increasing between June 1981 and June 1984, and then steadily declining; and (2) U.S. and UK bank exposure to Baker 15 increased at the beginning of the June 1981-December 1988 reporting period, and gradually declined toward the end. In addition, GAO found that: (1) West German statistics indicated increased LDC and Baker 15 exposure from December 1981 through December 1986 or December 1987, respectively, and a decline through September 1988; (2) Japanese statistics showed steadily increasing LDC debt from December 1983 to September 1988; (3) Canada's 6 largest banks had $15.6 billion of exposure to 38 LDC that were having financial difficulties; and (4) U.S. government exposure to LDC increased between December 1980 and December 1986, then declined slightly, while U.S. exposure to Baker 15 countries increased between December 1980 and June 1988.

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