Prudential Issues in Less Diversified Economies

IMF Working Papers, October 1, 2003

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Prudential Issues in Less Diversified Economies

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Bibliographic details

• Authors: Aditya Narain, Pau Rabanal, Steen Byskov
• Published: October 1, 2003
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451860085.001

Overview

• Title: Prudential Issues in Less Diversified Economies
• Authors: Aditya Narain, Pau Rabanal, Steen Byskov
• Date: October 1, 2003
• Type: IMF Working Paper
• Core focus: Examines the prudential issues associated with credit concentration in less diversified economies (LDEs), identified as countries where one or two sectors represent a large share of exports.
• Analytical scope:
  • Characteristics of financial and banking systems in LDEs and their interactions with the real sector.
  • Limitations on portfolio diversification confronting banks in LDEs from the viewpoint of the real sector and the financial system.

Key findings

• Banks in LDEs, particularly in low-income countries, appear to face higher risk than their peers in more diversified economies.
• The paper highlights credit concentration as a central prudential concern in LDEs, driven by limited sectoral diversification of exports.
• The analysis covers interactions between banking systems and real-sector concentration that constrain portfolio diversification.

Policy implications and recommended regulatory practices

• The paper makes suggestions for policy options and regulatory practices which could be encouraged in systems with high credit concentration (LDEs).
• Recommendations aim to address limitations on portfolio diversification and to mitigate higher risk faced by banks in LDEs, especially in low-income countries.

Subject classification and keywords

• Subject: Banking, Commercial banks, Credit, Credit risk, Financial institutions, Financial regulation and supervision, Loans, Money, Nonperforming loans
• Keywords: bank capital, bank concentration, bank customer, bank supervisor, banking industry, banks assets, Capital Adequacy, Commercial banks, Credit, Credit Concentration Risks, Credit risk, Less Diversified Economies, Loans, Nonperforming loans, originating bank, private sector, West Africa, WP

Content in this bundle

• Prudential Issues in Less Diversified Economies - WP/03/198
  • Prudential Issues in Less Diversified Economies - WP/03/198 (Markdown version)
  • Prudential Issues in Less Diversified Economies - WP/03/198 (PDF)