31 The rise of government and central bank debt was partly offset by a fall in the average ratio of public enterprise credit to GDP, about 3 percentage points in the 17 countries. However, this fall was mostly in the Transition economies. Moreover, to the extent that the fall reflected privatizations, then the small growth in private credit had to accommodate both the old private firms and the newly privatized firms.

The rise in private sector credit and the banks’ intermediation performance during the 1990s is much more impressive if one excludes Brazil, Indonesia and Mexico with their major crises and restructurings. These three countries affect the 17 country average balance sheet substantially. Excluding these three countries, bank deposits go up by about 9 percentage points of GDP between 1993 and 2000, reflecting the removal of the Brazil data discussed above. Moreover, net bank credit to government in the 14 countries goes up much less than in the 17 country sample. As a result, private sector credits rise from 30 percent of GDP in 1993 to 39 percent 2000 in the 14 countries, about the same as the rise in deposits.

Significant regional differences exist, beginning with size of the banking systems. The average size of the banking systems in the seven Latin American countries (relative to GDP) in 2000 was about two-thirds of the average size in the Transition countries and less than half of the average size in the East Asian countries (See Figures 9 and 10). Latin America’s small systems probably reflect the regions long history of high inflation and financial repression before the 1990s. Deposit and capital growth was much less in absolute terms in Latin America and the Transition economies than in East Asia, where deposit growth in banks at the end of the decade may partly reflect a shift out of NBFIs.

The changes in banks assets also differed significantly across regions in the 1990s. In the Latin American countries between 1990 and 2000, the ratio of private sector credit to GDP rose by roughly the same amount as in the other regions despite the impact of the restructurings in Brazil and Mexico. (Starting the analysis of Latin America in 1990 removes the large fall in Brazilian deposits and private sector credit between 1993 and 2000 from the average.) The rise in private sector credit was limited however, by the large rise in holdings of central bank debt, reflecting the Latin American central banks increased use’ of their own debt to conduct monetary policy (Figure 9).

Another limiting factor was the decline in off-shore borrowing by the Latin American banks, from 2.2 percent of GDP in 1990 to only 0.5 percent of GDP in 2000, a figure that nonetheless left it as the only region with net off-shore borrowings by its banks, on average, in 2000. Finally, credit to government also rose over the decade, but the effect of the rise at the end of the decade in Brazil and Mexico on the average was partly offset by the fall in credit to the government in Peru, and to a lesser extent in Argentina, compared to 1990. Moreover, the rise in the average credit to government over the decade was also largely offset by the fall in credit to public enterprises, reflecting privatizations. As a result the rise in deposits and in private sector credit in Latin America were roughly similar, about five percent of GDP, between 1990 and 2000.