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Prudential Issues in Less Diversified Economies

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Author Info

  • Aditya Narain
  • Pau Rabanal
  • Steen Byskov

Abstract

This paper examines the prudential issues associated with credit concentration in less diversified economies (LDEs), which are identified as countries where one or two sectors represent a large share of exports. In preparing this analysis, the characteristics of their financial and banking systems and their interactions with the real sector are studied. The paper also examines the limitations on portfolio diversification confronting banks in these countries, both from the viewpoint of the real sector and of the financial system. The paper finds that banks in LDEs, particularly in low-income countries, appear to face higher risk than their peers in more diversified economies and makes suggestions for policy options and regulatory practices which could be encouraged in such systems.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/198.

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Length: 32
Date of creation: 01 Oct 2003
Date of revision:
Handle: RePEc:imf:imfwpa:03/198

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Related research

Keywords: Economic conditions; Banking systems; banking; credit risk; banking system; banking crises; banking sector; bank capital; deposit insurance; capital requirements; bank for international settlements; financial systems; capital adequacy; loan concentration; risk diversification; pension funds; bank failures; insurance companies; connected lending; prudential regulation; basel accord; risk profile; banking crisis; banking supervision; banks assets; bank supervisors; banking industry; bank loans; banking concentration; risk transfer; net interest margin; credit risks; risk-weighted assets; banking markets; risk sharing; bank exposures; return on equity; risk mitigation; banking supervisors; federal deposit insurance; risk of default; bank loan; bank customers; bank balance sheet; bank exposure; banking system development; foreign exchange; bank portfolios; bank guarantees; internal controls; capital adequacy ratio; return on assets; unemployment insurance; supervisory infrastructure; banking system assets; bank insolvencies; credit insurance; bank intermediation; loan portfolio diversification; bank accounts; loan classification; bank performance; risk portfolio; bank assets; bank deposits; risk profiles;

References

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  1. Caprio, Gerard Jr. & Klingebiel, Daniela, 1996. "Bank insolvencies : cross-country experience," Policy Research Working Paper Series 1620, The World Bank.
  2. Barth, James R. & Caprio Jr, Gerard & Levine, Ross, 2001. "The regulation and supervision of banks around the world - a new database," Policy Research Working Paper Series 2588, The World Bank.
  3. Kaminsky, Graciela L. & Reinhart, Carmen M., 2000. "On crises, contagion, and confusion," Journal of International Economics, Elsevier, vol. 51(1), pages 145-168, June.
  4. Iftekhar Hasan & Anthony Saunders & Viral V. Acharya, 2002. "Should banks be diversified? Evidence from individual bank loan portfolios," BIS Working Papers 118, Bank for International Settlements.
  5. JoAnne Morris, 2001. "Risk Diversification in the Credit Portfolio," IMF Working Papers 01/200, International Monetary Fund.
  6. Stephany Griffith-Jones & Miguel Angel Segoviano & Stephen Spratt, 2003. "Basel II and developing countries: diversification and portfolio effects," LSE Research Online Documents on Economics 24824, London School of Economics and Political Science, LSE Library.
  7. Graham L. Slack, 2003. "Availability of Financial Soundness Indicators," IMF Working Papers 03/58, International Monetary Fund.
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Citations

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Cited by:
  1. Havrylchyk, Olena, 2004. "Rapid loan growth in Russia : A lending boom or a permanent financial deepening?," MPRA Paper 20997, University Library of Munich, Germany.
  2. Bank for International Settlements, 2007. "Evolving banking systems in Latin America and the Caribbean: challenges and implications for monetary policy and financial stability," BIS Papers, Bank for International Settlements, number 33, May.
  3. Giovanni Caggiano & Pietro Calice & Leone Leonida, 2013. "Working Paper 190 - Early Warning Systems and Systemic Banking Crises in Low Income Countries: A Multinomial Logit Approach," Working Paper Series 993, African Development Bank.
  4. William Tompson, 2004. "What kind of 'financial safety net' for Russia? Russian Banking reform in comparative context," Post-Communist Economies, Taylor & Francis Journals, vol. 16(2), pages 115-135.

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