BASEL, July 26: Argentina’s financial crisis appeared to have few knock-on effects on banking elsewhere in the first quarter of 2002, the Bank for International Settlements (BIS) said on Friday.

But while banks’ foreign claims on Argentina contracted by about one-third and dragged down overall figures for emerging markets, the country’s crisis “appeared to have few consequences for banking activity in other emerging markets,” BIS noted in its latest snapshot of global banking activity.

BIS’s consolidated global banking statistics for the first quarter of 2002 showed foreign claims on Argentina declined by $24 billion to $50 billion.

Some banks wrote off “a significant proportion” of their exposure to Argentina following the government’s default, and continued to cut back their assets there afterwards, according to BIS.

About one-quarter of foreign claims were affected by the January decision to scrap the parity between the Argentine peso and the dollar and float the currency, with the subsequent depreciation of the peso reducing the value of foreign bank claims “to a fraction of their pre-decree value”.

After Argentina, Brazil suffered an $8 billion contraction of foreign bank claims, but BIS said the banks’ experience in Argentina “did not appear to lead to a significant re-evaluation of their current business activities in Brazil”.

BIS also reported that Japanese banks sharply reduced their international exposure during the period from the end of December 2001 to the end of March 2002, bringing their foreign assets down to 1999 levels.

Japanese banks’ foreign claims declined by $150 billion to $1 trillion in the firts three months of 2002.

“Japanese banks had gradually increased their foreign assets following the recapitalization of the banking system in early 1999, but by end March 2002 their foreign claims had fallen back to 1998 levels,” BIS said in its statement.

But it said the rentrenchment of Japanese banks was offset by the continued expansion of European banks, particularly Belgian, British, Dutch, French, German and Swiss banks, which helped maintain total foreign claims around 11.5 trillion dollars.—AFP