Liquid Asset Ratios and Financial Sector Reform

Author/Editor:

Anne Marie Gulde

Publication Date:

October 1, 1997

Electronic Access:

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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:

As a monetary, selective credit, and government debt-management instrument, a liquid asset ratio is generally inefficient and may introduce serious distortions. However, it may play a limited role as a prudential instrument, particularly in less sophisticated banking systems or in the context of currency board arrangements. Recent trends in the use of this instrument have been to either abolish it altogether or to design it so as to minimize distortions. When necessary, these changes have been part of a broader effort to make financial intermediation more efficient by relying more on markets and less on regulations.

Series:

Working Paper No. 1997/144

Subject:

Asset and liability management Bank deposits Banking Commercial banks Financial institutions Government debt management Government securities Liquidity management Public financial management (PFM) Securities

English

Publication Date:

October 1, 1997

ISBN/ISSN:

9781451856408/1018-5941

Stock No:

WPIEA1441997

Pages:

62

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