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Limits to Foreign Exchange Net Open Positions and Capital Requirements in Emerging Economies


  • Marc Hofstetter
  • Jose Ignacio Lopez
  • Miguel Urrutia


Many emerging economies have regulatory limits on foreign exchange rates net open positions of banks. We show that such limits leave the capital adequacy ratios of banks with investments in foreign subsidiaries more exposed to exchange rate fluctuations. We discuss alternative policies for overcoming this trade-off.

Suggested Citation

  • Marc Hofstetter & Jose Ignacio Lopez & Miguel Urrutia, 2018. "Limits to Foreign Exchange Net Open Positions and Capital Requirements in Emerging Economies," Documentos CEDE 015995, Universidad de los Andes – Facultad de Economía – CEDE.
  • Handle: RePEc:col:000089:015995

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    References listed on IDEAS

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    2. Martín Tobal, 2014. "Prudential Regulation, Currency Mismatches and Exchange Rate Regimes in Latin America and the Caribbean," Documentos de Investigación - Research Papers 17, Centro de Estudios Monetarios Latinoamericanos, CEMLA.
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    Cited by:

    1. Nizam, Ahmed Mehedi, 2021. "Redistribution of wealth through cross border financial transactions: A closer look," MPRA Paper 109374, University Library of Munich, Germany.
    2. Ledhem, Mohammed Ayoub & Mekidiche, Mohammed, 2020. "Economic growth and financial performance of Islamic banks: a CAMELS approach," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 28, pages 47-62.
    3. Cesa-Bianchi, Ambrogio & Kumhof, Michael & Sokol, Andrej & Thwaites, Gregory, 2019. "Towards a new monetary theory of exchange rate determination," Bank of England working papers 817, Bank of England.

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    More about this item


    Foreign Exchange Open Positions; Capital Requirements;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business


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