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Safe and sound banking in developing countries : we're not in Kansas anymore

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  • Caprio Jr., Gerard

Abstract

Drawing on earlier work, the author reviews some of the salient facts about the boom in banking busts in developing countries. He then reviews policy responses taken by authorities in some of the"early"crisis countries, and considers a wider menu of responses -in particular the currently popular suggestion that promulgating an International Banking Standard would significantly improve the safety and soundness of banking systems in developing countries. Such a standard is not without appeal, but other approaches are probably necessary in developing countries where risks are usually greater, financial institutions are less diversified, markets are less transparent, supervision is weak, and other ingredients critical to sound banking are either missing or scarcer than in industrial countries. The author calls for a multi-pillar approach to safe and sound banking, one that would: (1) focus attention on factors that restrict banks'ability and willingness to diversify risk; and (2) Give three key groups -owners (and managers), the market (including uninsured debtholders and other possible co-owners), and supervisors- more incentive and ability to monitor banks and ensure their prudent corporate governance.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1739.

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Date of creation: 31 Mar 1997
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Handle: RePEc:wbk:wbrwps:1739

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Keywords: Banks&Banking Reform; Labor Policies; Payment Systems&Infrastructure; Financial Crisis Management&Restructuring; Financial Intermediation; Banks&Banking Reform; Financial Crisis Management&Restructuring; Financial Intermediation; Economic Theory&Research; Settlement of Investment Disputes;

References

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  1. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
  2. Gerald Caprio & Michael Dooley & Danny Leipziger & Carl Walsh, 1996. "The lender of last resort function under a currency board: The case of Argentina," Open Economies Review, Springer, vol. 7(1), pages 625-650, March.
  3. Hongyi Li & Lyn Squire & Tao Zhang & Heng-fu Zou, 1999. "A Data Set on Income Distribution," CEMA Working Papers 575, China Economics and Management Academy, Central University of Finance and Economics.
  4. Klaus Deininger & Lyn Squire, 1996. "A New Data Set Measuring Income Inequality," CEMA Working Papers 512, China Economics and Management Academy, Central University of Finance and Economics.
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Citations

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Cited by:
  1. Kirkpatrick, Colin, 2001. "Regulatory Impact Assessment in Developing Countries: Research Issues," Centre on Regulation and Competition (CRC) Working papers 30640, University of Manchester, Institute for Development Policy and Management (IDPM).
  2. Caprio, Gerard, Jr. & Honohan, Patrick, 1999. "Beyond capital ideals : restoring banking stability," Policy Research Working Paper Series 2235, The World Bank.
  3. Llanto, Gilberto M. & Intal, Ponciano Jr. S., 1998. "Financial Reform and Development in the Philippines, 1980-1997: Imperatives, Performance and Challenges," Discussion Papers DP 1998-02, Philippine Institute for Development Studies.
  4. J. Caprio & P. Honohan, 2000. "Restoring Banking Stability: Beyond Supervised Capital Requirements," South African Journal of Economics, Economic Society of South Africa, vol. 68(1), pages 5-22, 03.
  5. David T. Llewellyn, 2001. "A regulatory regime for financial stability," Working Papers 48, Oesterreichische Nationalbank (Austrian Central Bank).
  6. Fofack, Hippolyte L., 2005. "Nonperforming loans in Sub-Saharan Africa : causal analysis and macroeconomic implications," Policy Research Working Paper Series 3769, The World Bank.
  7. David T. Llewellyn, 2002. "An analysis of the causes of recent banking crises," The European Journal of Finance, Taylor & Francis Journals, vol. 8(2), pages 152-175, June.
  8. Caprio Jr., Gerard, 1998. "Banking on crises : expensive lessons from recent financial crises," Policy Research Working Paper Series 1979, The World Bank.
  9. D.T. Llewellyn, 2000. "Some Lessons for Bank Regulation from Recent Crises," DNB Staff Reports (discontinued) 51, Netherlands Central Bank.
  10. Stiglitz, Joseph E., 2000. "Capital Market Liberalization, Economic Growth, and Instability," World Development, Elsevier, vol. 28(6), pages 1075-1086, June.
  11. repec:onb:oenbwp:y::i:48:b:1 is not listed on IDEAS

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