321 billion USD pullout from US. Not the end yet for assets write down.

Bank funds are still showing signs of moving out from US to Europe. This has been noticed since mid 2007 when the financial turmoil starts in US.

BIS (The Bank for International Settlements) on 1 September released its latest quarterly report conclusions for the global financial and banking activities. In it was mentioned that although various country's financial institutions have written down their assets by 503 billion USD since the beginning of the credit crisis, this crisis is still far from the end.

BIS points out that due to the worry for the worsening of the US financial industry, country's banks tends to allocate their funds towards safer assets and tighten their credit lines in order to avoid risks.

Data shows that from 2000 to 2007, country's banks have constantly invested about 1 trillion USD into US and last year's sub-prime crisis reversed this trend. In the report it was mentioned that up to 321 billion USD has pulled out from US and it thinks that this is mainly caused by interbank activities.

Europe banks have reduced their line of credit for their branches in US. This caused a net outflow of 259 billion USD from US market in the first quarter this year. In the second half of 2007, the net outflow was 238 billion USD. Risk worries influenced by the financial turmoil in US, global credit lines has shown weakening. Current quarter has shown increment to 365 billion USD, the lowest level since 2003. The credit lines to financial related areas were higher at 530 billion USD.

Although there is increment in credit lines to non banking related industries, bank holdings of non financial related industry's debt have reduced by 98 billion USD , a first quarterly decline since 2001. Because countries globally did not reduce their holdings in US government bonds, BIS analysts Ingo Fender and Jacob Gyntelberg believes that the major decline comes from company debts and reduction in holdings of structured securities or asset write downs.

BIS reports points out that the decline of holdings in non banking notes seems to have a relationship with banks search for areas in non-US private banks trend, at least it shows in certain banking system.

At the same time, country's banks increased near 400 billion USD worth of public notes, holdings of about 4.35 trillion USD. Compared to public and government lower risks notes hot trading is that with the help of the FED and the Europe central bank and other central banks efforts, there is still lack of confidence between banks lending.

In England, the Bank of England promised to provide untradeable mortgage securities for liquid Treasury bills swap for MBS. But data from the England central bank shows that July's figures has drop from 635 billion pounds to 205 billion pounds compared to same time last year.

Interest rate derivative products market also shows banks careful stance towards credit lines. Interest difference between London's Libor and OIS (Overnight Indexed Swap) has increased. It has increased from 31 July 2007 value of 12 basis points to the same time this year value of 78 basis points. The average interest difference for Libor-OIS in 2007 is about 11 basis points. BIS report says that the trend for the Libor-OIS interest rate difference shows that the pressure for bank lendings is stil strong and will go on for a certain period of time.

The report also says that since the start of the sub-prime crisis in 2007, asset write downs have reached 503 billion USD. In the coming months there may be still more asset write downs and asset write offs, increasing the strain on the credit tightening and fund shortage situation.

Resolution Investment Management Ltd's Stuart Thomson says beforehand that by the end of this year, banks may need to raise 88 billion USD and the credit environment will only get more tight.

Goldman Sach's analyst Binit Patel in his latest report says that countries which owns half of the world's economy is facing danger of a recession. Corporates reduction in profit margin and the tightening of the credit environment will pose more pressure on the corporates' credit ratings.

But BIS report shows that in the second quarter of this year, MBS issued by banks have reached values of 188 billion USD, a 52 billion USD increase from first quarter. The Wall Street Journal's quotes analyst worry that the cental bank may delay the sale of assets in its holdings.