Bank lending in the second quarter saw its sharpest fall since 2001

International lending by banks fell by $1.1 trillion (£613bn; 780bn euros), or 3%, in the second quarter of 2008, an international banking body has said.

It marks the sharpest quarterly drop since records began in 1977, the provisional Bank for International Settlements (BIS) data showed.

Lending to the US and the UK slowed markedly during the three months.

The figures covers all lending, including money lent between banks, as well as for individuals.

Banks have been increasingly reluctant about lending to each other, after reporting rising levels of bad debt.

With finance firms nervous about lending to each other, it has caused credit markets to seize up, making it far harder for both businesses and individuals to gain access to loans.

In the first quarter of the year, lending between banks' offices in different countries had "sustained" international banking activity, BIS said.

While banks reduced how they much they lent in the second quarter, the amount withdrawn by customers increased.

Banks' cross-border liabilities fell by $1 trillion, largely because of withdrawals made mostly by residents based in the US, UK and Switzerland.

Final figures for the quarter are set to be published on 8 December.





