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Borrowing rebounds in third quarter: BIS

Borrowing rebounded in the third quarter of 2010, reversing a sharp drop during the previous three months due to the European sovereign debt crisis, the Bank for International Settlements said Sunday.

“The key factor behind the rebound in issuance was the return to the market of borrowers resident in the developed economies as confidence recovered from the lows reached in early May,” said the bank for central banks.

“European issuers, whose net redemptions had mainly driven the sharp drop in activity in the second quarter, began to tap the market again in August and September,” it added.

Overall, borrowing reached 1,934 billion dollars in the third quarter, 15 percent higher than in the previous three months.

The recovery in European developed economies was “largely driven by financial institutions.”

“UK, Dutch and Spanish financial institutions, which had seen net redemptions in the second quarter, raised 71 billion dollars, 62 billion dollars and 32 billion dollars, respectively.

“Financial institutions in France borrowed 31 billion dollars, 10 times more than between April and June,” said the bank.

However, the reverse was true in Greece and Ireland.

In Greece, inssuance by Greek banks fell 82 percent to 8 billion dollars, while in Ireland, net repaying reached 35 billion dollars for the Anglo-Irish Bank, Bank of Ireland and Allied Irish Bank.

This trend followed that seen in the second quarter in which foreign banks cut their exposure to the debt-laden economies of Greece, Ireland, Portugal and Spain.

At the end of the second quarter, total foreign exposures to the four economies reached 2,281 billion dollars.

France had the biggest exposure to Greece, with a total of 83.1 billion dollars, while Germany had 65.4 billion dollars worth.

For Ireland, it was Britain with the biggest exposure of 187.5 billion dollars, just above Germany, which recorded 186.4 billion dollars.

Spain had the biggest exposure to Portugal, with 98.3 billion dollars.

For Spain, it was Germany with the biggest exposure of 216.6 billion dollars, and France with 201.3 billion dollars.