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Research at the IMF

Transcript of a Press Conference on the International Capital Markets Report
September 11, 2000



World Economic
and Financial Surveys
WORLD ECONOMIC AND FINANCIAL SURVEYS
International Capital Markets
Developments, Prospects, and Key Policy Issues
September 2000

By a Staff Team led by Donald J. Mathieson and Garry J. Schinasi

2000 International Monetary Fund
Ordering Information

The International Capital Markets Report ceased publication in August 2001. Both the Report and the Emerging Market Financing quarterly (published 2000-2001) have been replaced by a new quarterly, The Global Financial Stability Report. The new report was created to provide timely and comprehensive coverage of both mature and emerging financial markets as part of the IMF's stepped up tracking of financial markets.

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Preface

List of Abbreviations


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I.   Introduction

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II.   Developments and Trends in Mature Capital Markets

Foreign Exchange Markets
Credit Markets
Equity Markets
Major Banking Systems
Developments in Derivatives Markets
International Regulatory and Supervisory Developments
Risks and Vulnerabilities
References

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III.   Emerging Market Financing

Developments in Aggregate Private Capital Flows to
   Emerging Markets
Developments in the Bond, Equity, and Loan Markets
Conclusion
References

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IV.   Over-the-Counter Derivatives Markets

Modern Banking and OTC Derivatives Markets
Exchange Versus OTC Derivatives Markets
Sources of Instability in OTC Derivatives Activities
   and Markets
Weaknesses in the Infrastructure
Strengthening the Stability of Modern Banking and OTC
   Derivatives Markets
Glossary List
References

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V.   Private Sector Involvement in Crisis Prevention and Resolution: Market Views and Recent Experience

Private Sector Involvement in Crisis Prevention
Background on Private Sector Involvement in
   Crisis Resolution
Market Views on Private Sector Involvement in
   Crisis Resolution
Interbank Rollovers
International Bond Restructuring
Conclusions
References

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VI.   The Role of Foreign Banks in Emerging Markets

Increase in Foreign Bank Entry to Emerging Markets
Factors Increasing the Role of Foreign Banks in
   Emerging Markets
Effects of Foreign Bank Entry
Policy Issues
References

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VII.   Staff Appraisal

Mature Markets
Emerging Markets
OTC Derivatives
Private Sector Involvement
Role of Foreign Banks in Emerging Markets

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Annex I. Progress in Financial and Corporate Restructuring in Japan

Restructuring and Revitalizing Japan's Financial System:
   Progress and Challenges
Progress in Corporate Restructuring
References

  Annex II. Trends in Foreign Ownership in Emerging Market Banking Systems

Central Europe
Latin America
Asia
References

  Annex III. Concluding Remarks by the Chairman

Developments and Risks
OTC Derivatives Markets
Private Sector Involvement in Crisis Resolution

Boxes
  2.1.   Foreign Capital and the U.S. Boom
  2.2.   Financial Sector Reform in the United States: The Gramm-Leach-Bliley Act
  2.3.   Financial Stability Challenges Arising from the Introduction of the Euro
  2.4.   Reports on Highly Leveraged Institutions (HLIs)
  3.1.   Emerging Market Bonds Going Local
  3.2.   Rating Upgrades May Be Helpful for Your Finances
  3.3.   Do U.S. Markets Drive Emerging Market Assets?
  3.4.   Emerging Market Assets: For the Brave?
  3.5.   Technology, Media, and Telecommunications in the Emerging Markets
  3.6.   Emerging Market Equity Going Global
  4.1.   The Role of OTC Currency Options in the Dollar-Yen Market
  4.2.   LTCM and Turbulence in Global Financial Markets
  4.3.   Motives for OTC Derivatives Transactions
  4.4.   Exotic Options
  4.5.   The Life of a Two-Year Interest Rate Swap
  4.6.   Measuring Potential Future Exposure in a Swap Contract
  4.7.   Sources of Legal Uncertainty in the U.S. Regulatory Environment
  5.1.   The 1980s Debt Crisis and Private Sector Involvement
  5.2.   Major Interbank Rollovers to Date
  5.3.   Recent Bond Restructurings
  5.4.   Determining Market Access: The Case of Romania
  5.5.   The Workings of the Paris Club
  5.6.   Ecuador and Nigeria: The Next Test for Private Sector Involvement
  6.1.   The Internet and Cross-Border Banking
  6.2.   Modalities of Foreign Bank Entry
  6.3.   BBVA and BSCH: The Expansion of Spanish Banks to Latin America
  6.4.   Argentina: Foreign Banks and the Resilience of the Deposit Base
  6.5.   Cross-Border Supervision: Principles and Current Practices
  6.6.   Bank of Credit and Commerce International

Tables.
  2.1.   Net Foreign Purchases of U.S. Long-Term Securities, 1995–99
  2.2.   Outstanding Amounts and Net Issues of International Debt Securities by Currency of Issue, 1993–First Quarter 2000
  2.3.   Announced International Syndicated Credit Facilities by Nationality of Borrowers, 1992–First Quarter 2000
  2.4.   Claims of Banks in BIS-Reporting Countries on Selected Emerging Markets as of December 1999
  2.5.   Exchange-Traded Derivative Financial Instruments: Notional Principal Amounts Outstanding, 1986–First Quarter 2000
  2.6.   Annual Turnover in Derivative Financial Instruments Traded on Organized Exchanges Worldwide, 1986–First Quarter 2000
  2.7.   Global Over-the-Counter (OTC) Derivatives Markets: Notional Amounts and Gross Market Values of Outstanding Contracts, 1998–99
  2.8.   Global Over-the-Counter (OTC) Derivatives Markets: Notional Amounts and Gross Market Values of Outstanding Contracts by Counterparty, Remaining Maturity and Currency Composition, 1998–99
  3.1.   Returns on Different Asset Classes in 1998–2000
  3.2.   Net Private Capital Flows to Emerging Markets, 1992–99
  3.3.   Changes in Bank Exposures to Emerging Markets
  3.4.   Gross Private Market Financing to Emerging Markets, by Region, Financing Type, and Borrower Type
  3.5.   Significant Ratings Changes for Emerging Market Countries, July 1999–June 2000
  3.6.   Earnings Growth and Valuations Indicators in Emerging Markets
  3.7.   Net Flows into Selected Emerging Equity Markets
  4.1.   Top 20 Derivatives Dealers in 2000 and Their Corresponding Ranks in 1999
  5.1.   Private Sector Involvement in Crisis Resolution: Summary of Positions of G-7/IMF, IIF, and EMTA
  5.2.   Estimated Haircuts for Different Emerging Market Bond Restructurings
  6.1.   Foreign Bank Ownership in Selected Emerging Markets
  6.2.   Bank Performance Indicators in Selected Emerging Markets (1996–98)
  6.3.   Cross-Border and Foreign Bank Lending in Selected Emerging Markets
  6.4.   Assets of Largest Foreign Banks in Central Europe and Latin America
  A1.1.   Japan: Reallocation of Financial Regulatory Functions
  A1.2.   Japan: Estimated Uncovered Losses of Major Banks, March 2000
  A1.3.   Japan: Changing Banking Landscape Among Major Banks Since September 1997
  A1.4.   Status of Industrial Revitalization Proposals Targeted to Corporate Restructuring

Figures
  2.1.   Selected Major Industrial Countries: Exchange Rates, January 1, 1998–June 30, 2000
  2.2.   Implied Volatility: Japanese Yen, Deutsche Mark, and Pound Sterling, January 3, 1997–June 30, 2000
  2.3.   Short- and Long-Term Interest Rates, January 1, 1994–June 30, 2000
  2.4.   Selected Spreads, January 5, 1990–June 30, 2000
  2.5.   International Bond Issuance by Currency, First Quarter 1996–Second Quarter 2000
  2.6.   Major Industrial Countries: Stock Market Price Indices, December 31, 1998–June 30, 2000
  2.7.   Sectoral Stock Market Indices and Price-Earnings Ratios, December 31, 1998–June 30, 2000
  3.1.   Changes in FDI and in Other Private Capital Flows
  3.2.   Consensus GDP Forecasts for Major Emerging Countries
  3.3.   Average Credit Ratings in Emerging Markets
  3.4.   Ratings of Emerging Market Bond Issues
  3.5.   Yield Spreads on Emerging Market and U.S. High-Yield Bonds
  3.6.   Yield Spreads for Selected Emerging Market Eurobonds
  3.7.   Average Yield Spreads by Credit Ratings
  3.8.   Bond Market Developments
  3.9.   Total Returns on Equity
  3.10.   Maturity Distribution of Bond and Syndicated Loan Financing
  4.1.   Structure of the Over-the-Counter (OTC) Derivatives Markets, End-December 1999
  A1.1.   Japan: Banking System Strains