* Nearly half of EM corporate overseas debt issued offshore
* Accounting conventions do not capture associated risks, BIS says
By Sam Wilkin
LONDON, Dec 7 (Reuters) - Cross-border debt issued by emerging market companies may be less stable than it initially appears due to the increasing role of overseas subsidiaries, a central banking report shows.
Emerging economy firms excluding banks issued nearly half of their international debt between 2009 and 2013, or some $252 billion, through offshore affiliates, according to a quarterly report from the Bank for International Settlements on Sunday.
When the overseas subsidiary transfers the bond proceeds to a parent company in the form of an inter-company loan, this is treated as foreign direct investment (FDI) on the balance sheet of the main company, the BIS said, which could give a false impression of stability.
Hyun Song Shin, one of the report's authors, said that loans from offshore subsidiaries to parent companies should not be considered as stable as FDI in its more typical form of large equity investments.
"Far from being stable or 'good' flows, such loans have more in common with 'hot money' that could be withdrawn if creditors demand their money back," he said on a conference call on Friday.
Brazilian, Chinese and Russian firms alone created $35 billion of internal flows in the first quarter of 2013, the BIS showed.
Overseas bond issuance also exposes companies to currency risk - another factor which conventional accounting methods may not capture, the BIS said.
Claudio Borio, head of the bank's monetary and economic department, said EM companies had taken on large amounts of dollar-denominated external debt, which they might struggle to pay back as their domestic currencies weakened against the greenback.
The dollar has appreciated by 11 percent against a basket of currencies since the start of the year, while Russia's rouble has lost more than a third of its dollar value. (Reporting by Sam Wilkin; editing by Susan Thomas)