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Toward an Effective Supervision of Partially Dollarized Banking Systems

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Author Info
Antonio Garcia Pascual
Jorge Cayazzo
Socorro Heysen
Eva Gutierrez

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Abstract

The paper presents a supervisory framework that addresses the vulnerabilities of partially dollarized banking systems. The tendency to underprice systemic liquidity risk and currency-induced credit risk creates vulnerabilities that need supervisory responses. The framework seeks to induce agents to better internalize risks by implementing a risk based approach to supervision, following the risk management guidelines of the Basel Committee, and by establishing buffers to cover higher liquidity and solvency risks. The paper also shows that most dollarized countries have addressed their liquidity vulnerabilities, but few have addressed those arising from currency-induced credit risks.

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Publisher Info
Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/32.

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Length: 50 pages
Date of creation: 08 Feb 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/32

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Related research
Keywords: Bank supervision ; Financial stability ; Exchange risk ; Risk premium ; Dollarization ; Banking systems ; Credit ; Liquidity ;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Paul J. Heytens & Cem Karacadag, 2001. "An Attempt to Profile the Finances of China's Enterprise Sector," IMF Working Papers 01/182, International Monetary Fund. [Downloadable!]
  2. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear Of Floating," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 379-408, May. [Downloadable!] (restricted)
    Other versions:
  3. Gianni De Nicoló & Alain Ize & Patrick Honohan, 2003. "Dollarization of the Banking System: Good or Bad?," IMF Working Papers 03/146, International Monetary Fund. [Downloadable!]
    Other versions:
  4. Aaron Tornell & Frank Westermann, 2005. "Boom-Bust Cycles and Financial Liberalization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262201593.
    Other versions:
  5. Alain Ize & Miguel Kiguel & Eduardo Levy Yeyati, 2005. "Managing Systemic Liquidity Risk in Financially Dollarized Economy," Business School Working Papers managsystrisk, Universidad Torcuato Di Tella. [Downloadable!]
  6. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Addicted to Dollars," NBER Working Papers 10015, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Andrew Powell & Alain Ize, 2004. "Prudential Responses to De Facto Dollarization," IMF Working Papers 04/66, International Monetary Fund. [Downloadable!]
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  8. Gianni De Nicoló & Anne Marie Gulde & David S. Hoelscher & Alain Ize & David Marston, 2004. "Financial Stability in Dollarized Economies," IMF Occasional Papers 230, International Monetary Fund.
  9. repec:rus:hseeco:123906 is not listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Carlos E. León Rincón & Alejandro Revéiz Herault, 2008. "La dolarización financiera: experiencia internacional y perspectivas para Colombia," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 10(18), pages 313-341, January-J. [Downloadable!]
    Other versions:
  2. Mario Mansilla & Gustavo Adler & Torsten Wezel, 2009. "Modernizing Bank Regulation in Support of Financial Deepening: The Case of Uruguay," IMF Working Papers 09/199, International Monetary Fund. [Downloadable!]
  3. Yilmaz Akyuz, 2008. "Managing Financial Instability in Emerging Markets: A Keynesian Perspective," Working Papers 2008/4, Turkish Economic Association. [Downloadable!]
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