## Figure 1.26. Foreign Exchange Swap and Short-Term Bank Funding Markets

## Source details

**Canonical URL:** [Figure 1.26. Foreign Exchange Swap and Short-Term Bank Funding Markets](https://www.imf.org/-/media/files/publications/gfsr/2018/april/ch1/pdf/figure1-26.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/gfsr/2018/april/ch1/pdf/figure1-26.pdf.md)
- [Structured JSON version](/-/media/files/publications/gfsr/2018/april/ch1/pdf/figure1-26.pdf.json)

---

### Overview
- Key message highlights from the figure:
  - Some non-US banks are reliant on cross-currency funding via swaps.
  - Cross-currency basis swap spreads have widened sharply in the past (panel 2).
  - Foreign exchange swaps are more volatile than other short-term funding sources (panel 3).
  - Demand to hedge foreign currencies by Asian financial institutions is increasing (panel 4).
  - Supply of foreign exchange derivatives to Japanese financial institutions is shifting from banks to nontraditional financial institutions (panel 5).
  - US dollar LIBOR-OIS spreads have widened recently (panel 6).

### 1. US Dollar Cross-Currency Funding Ratio
(Net cross-currency derivatives as percent of total assets)
- Data labels use International Organization for Standardization (ISO) country codes.
- Reported percentages (preserved exactly as shown):
  - 49%
  - 41%
  - 39%
  - 25%
  - 30%
  - 35%
  - 32%
  - 29%
  - 51%
  - 59%
  - 61%
  - 75%
  - 70%
  - 65%
  - 68%
  - 71%

### 2. Three-Month Cross-Currency Basis Swaps
(Basis points)
- Time series axis marked: 2000 02 04 06 08 10 12 14 16
- Chart shows widening of basis swap spreads (values shown in basis points on vertical axis range from –20 to 50).

### 3. Sixty-Day Realized Volatility of Three-Month US Dollar Funding Rates
(Basis points a day)
- Time series axis marked: 2011 12 13 14 15 16 17 18
- Vertical axis range annotations include: –1 60, –1 40, –1 20, –1 00, –8 0, –6 0, –4 0, –2 0, 0 (preserved exactly as printed).

### 4. Demand for Foreign Exchange Derivatives by Asian Financial Institutions
(Billions of US dollars)
- Time series axis marked: 2010 11 12 13 14 15 16 17
- Latest data are as of September 2017.
- Assumptions for estimates (preserved exactly):
  - For Korea life insurers and the National Pension Service: assuming 100 percent hedging of their foreign investments.
  - For Taiwan Province of China life insurers: assuming 50 percent hedging of their foreign investments.
- Vertical axis shows values with ticks: 0, 500, 1,000, 1,500, 2,000 (billions of US dollars).

### 5. Supply of Foreign Exchange Derivatives to Japanese Financial Institutions
(Billions of US dollars)
- Time series axis marked: 2010 11 12 13 14 15 16 17 12 13 14 15 16 17 18 (as printed).
- Market participants listed: Japanese institutional investors; Japanese banks; Non-Japanese banks; Non-Japanese, nontraditional lenders.
- Vertical axis shows values with ticks: 0, 200, 400, 600, 800, 1,000, 1,200, 1,400 (billions of US dollars).

### 6. Three-Month LIBOR-OIS Spreads
(Basis points)
- Time series axis marked: 2011 12 13 14 15 16 17 18
- Vertical axis range shown from 0 to 100 with ticks at 10, 20, 30, 40, 50, 60, 70, 80, 90, 100.
- Chart includes comparisons across currencies: Sterling, Yen, Euro.

Notes and definitions (preserved exactly)
- Sources: Annual reports; Bank for International Settlements; Bank of Japan; Bloomberg Finance L.P.; Financial Supervisory Commission (Taiwan Province of China); the Korean Life Insurance Association; and IMF staff estimates.
- Note: In panels 4 and 5, the latest data are as of September 2017. In panel 4, data for Korea life insurers and the National Pension Service are estimated assuming 100 percent hedging of their foreign investments. For Taiwan Province of China life insurers, the assumption is a 50 percent hedging of their foreign investments. Data labels in panel 1 use International Organization for Standardization (ISO) country codes. FX swap = foreign exchange swap (average of euro-dollar and yen-dollar); GC repo = general collateral repurchase agreement; LIBOR = London interbank offered rate; OIS = overnight indexed swaps.

*Source: Annual reports; Bank for International Settlements; Bank of Japan; Bloomberg Finance L.P.; Financial Supervisory Commission (Taiwan Province of China); the Korean Life Insurance Association; and IMF staff estimates.*

---


_Source: https://www.imf.org/-/media/files/publications/gfsr/2018/april/ch1/pdf/figure1-26.pdf_