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Toward An Effective Supervision of Partially Dollarized Banking Systems

Listed author(s):
  • Antonio Garcia Pascual
  • Jorge Cayazzo
  • Socorro Heysen
  • Eva Gutierrez
Registered author(s):

    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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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=18780
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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/32.

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    Length: 50
    Date of creation: 01 Jan 2006
    Handle: RePEc:imf:imfwpa:06/32
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    1. Alain Ize & Andrew Powell, 2005. "Prudential Responses to de facto Dollarization," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 8(4), pages 241-262.
    2. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear of Floating," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 379-408.
    3. De Nicolo, Gianni & Honohan, Patrick & Ize, Alain, 2003. "Dollarization of the banking system : good or bad?," Policy Research Working Paper Series 3116, The World Bank.
    4. Morris Goldstein & Philip Turner, 2004. "Controlling Currency Mismatches in Emerging Markets," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 373, November.
    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.
    6. Aaron Tornell & Frank Westermann, 2005. "Boom-Bust Cycles and Financial Liberalization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262201593, July.
    7. repec:rus:hseeco:123906 is not listed on IDEAS
    8. Anne Marie Gulde & David S. Hoelscher & Alain Ize & Dewitt D Marston & Gianni De Nicolo, 2004. "Financial Stability in Dollarized Economies," IMF Occasional Papers 230, International Monetary Fund.
    9. Cem Karacadag & Paul J. Heytens, 2001. "An Attempt to Profile the Finances of China’s Enterprise Sector," IMF Working Papers 01/182, International Monetary Fund.
    10. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2014. "Addicted to Dollars," Annals of Economics and Finance, Society for AEF, vol. 15(1), pages 1-50, May.
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