The world’s biggest central banks are bulking up their balance sheets this year at the fastest pace since 2011’s European debt crisis to boost lackluster economic recoveries with asset purchases that are supporting stock and bond prices.
The 10 largest lenders now own assets totaling $21.4 trillion, a 10 percent increase from the end of last year, data collected by Bloomberg show. Their combined holdings grew by 3 percent or less in both 2015 and 2014.
The accelerating expansion of central banks’ balance sheets comes as debate rages over whether their asset purchases and continued low interest rates are creating bubbles, especially in the bond market. Such quantitative-easing programs are aimed at driving up the prices of the securities they purchase to lower bond yields, encourage investment and boost economic growth.
To read up on so-called QE programs, click here.
The growth of central-bank holdings has coincided with the mostly upward trend of stock and bond prices. As the top 10 expanded their balance sheets by 265 percent since mid-October 2006, the MSCI All Country World Index of equities gained 19 percent and the Bloomberg Barclays Global Aggregate Index of bonds advanced 50 percent.
Over the past decade, the Swiss National Bank expanded its holdings the most among those with the largest portfolios, almost eight-fold in U.S. dollar terms. The Bank of Russia was the least aggressive with a 68 percent increase.
As the biggest banks’ holdings grew 10.4 percent this year, the stock gauge gained 3 percent and the bond benchmark jumped 7.4 percent.
The Bank of Japan and the European Central Bank together have expanded their assets by $2.1 trillion since Dec. 31, more than accounting for all of the top 10’s combined increase. The balance sheets of the People’s Bank of China and the U.S. Federal Reserve fell 2 percent or less as the Swiss and the Central Bank of Brazil boosted their holdings 15 percent or more.
How much is $21.4 trillion?
It’s 29 percent of the size of the world economy as of the end of 2015, double what it was in mid-September 2008, when Lehman Brothers Holdings Inc.’s collapse sparked the global financial crisis. It’s a third of the combined market capitalization of every stock in the world and almost half the value of all debt in Bloomberg’s global bond index.
Almost 75 percent percent of the world’s central-bank assets are controlled by policy makers in four places: China, the U.S., Japan and the euro zone. The next six — the central banks of Brazil, Switzerland, Saudi Arabia, the U.K., India and Russia — each account for an average of 2.5 percent. The remaining 107 central banks tracked by Bloomberg, mostly with International Monetary Fund data, hold less than 13 percent.