By Morris Goldstein
This research offers the case for a global banking general (IBS) to house the rash of banking crises in constructing nations. during the last 15 years, nearly three-fourths of the IMF's member nations have skilled a minimum of one critical bout of banking difficulties; there were no less than a dozen constructing state episodes the place the prices of those crises amounted to ten percentage or extra of the country's GDP; and the full public region answer expenses of developing-country banking crises were envisioned to be $250 billion. not just are those banking crises tremendous high priced to constructing nations, additionally they pose elevated hazard to commercial countries.
Morris Goldstein demonstrates that current foreign agreements don't handle the most resources of those crises, and the adoption of a voluntary IBS deals a extra appealing path to banking reform than the suitable possible choices. The research recommends minimal criteria in 8 key parts of banking supervision and addresses the operational matters linked to the layout and implementation of an IBS.
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Extra info for The Case for an International Banking Standard (Policy Analyses in International Economics)
Com 29 clearance and settlement. 3). 46 Appendix B summarizes the G-30 recommendation in this area. Approximately a year after launch, a follow-up survey suggested that from 20 to 50 percent of market participants implemented the various recommendations (G-30 1994; IMF 1995). Last but not least, the Basle Committee’s 1988 Capital Adequacy Accord was a direct response to a need for both a better safety cushion for internationally active banks and a more level playing field. Warts and all, the 1988 accord has probably induced internationally active banks to be better capitalized and has focused greater attention on the riskiness of bank assets.
Kane notes that evaluation of the creditworthiness of would-be borrowers is hampered by the fact that data on the traditional ‘‘five Cs’’ of creditworthiness—cash flow, capital, collateral, character, and conditional economic vulnerability—are often lacking. Computer software routinely used by banks in industrial countries for credit scoring and tracking the changing probability of default after making a loan is not yet in use in most developing countries. In addition, Kane points out that private credit bureaus and rating agencies—which could help fill these information gaps— are just beginning to set up or expand operations in many developing countries.
Fifth, like other international regulatory initiatives, an IBS needs to confront the test that there be market failures, externalities (spillovers), or public goods that extend beyond national borders, and that cannot be handled adequately by national regulation (Herring and Litan 1995; L. White 1996). As argued in chapter 2, I believe an IBS can pass that test: there are nontrivial cross-border spillover effects of developing-country banking crises; there are market failures associated with asymmetric information, with connected lending, and with heavy involvement of national governments in the banking industry; and accurate and timely public information on the financial condition of banks has attributes of a public good.
The Case for an International Banking Standard (Policy Analyses in International Economics) by Morris Goldstein