Foreign Exchange Risk Regulation : Issues for Industrial and Developing Countries

Author/Editor:

Philipp Hartmann

Publication Date:

December 1, 1994

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Capital adequacy regulations or quantity restrictions on bank portfolios put forward by the Basle Committee on Banking Supervision have virtually become an international standard of prudential regulation. Recent proposals aim at extending this approach to market risks, in particular to foreign exchange risk. The present paper provides a critical analysis of proposals to introduce foreign exchange position limits on a uniform cross-country basis, focusing on their effectiveness and their possible impact on the functioning of both mature and developing foreign exchange markets. Theoretical considerations are underpinned in the paper with descriptions of existing or proposed regulations, in a broad range of both industrial and developing countries. Experiences with the use of foreign exchange position limits in developing countries provide insight into their widespread use for other than prudential purposes, in particular to support exchange rate and exchange control policies.

Series:

Working Paper No. 94/141

Subject:

English

Publication Date:

December 1, 1994

ISBN/ISSN:

9781451928129/1018-5941

Stock No:

WPIEA1411994

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

54

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