Assessing Banking Sector Soundness in a Long-Term Framework: The Case of Venezuela
October 18, 2006
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Summary
This paper combines financial soundness indicators (FSIs) and stress-testing methodologies to provide a broad assessment of the soundness of Venezuela's banking sector, based on a diagnosis of its structural and transient shortcomings. While the Venezuelan banking sector appears sound under current favorable economic conditions, it remains significantly vulnerable to cyclical downturns-which have been severe in the past. Banks are particularly exposed to interest rate and credit risks. This suggests that the strong FSIs may be partly the result of a conjunctural credit boom in the context of capital controls and very low real interest rates.
Subject: Banking, Capital adequacy requirements, Commercial banks, Credit, Nonperforming loans
Keywords: a number of bank, bank behavior, bank legislation, bank regulation, banking sector indicator, central bank, WP
Pages:
31
Volume:
2006
DOI:
Issue:
225
Series:
Working Paper No. 2006/225
Stock No:
WPIEA2006225
ISBN:
9781451864854
ISSN:
1018-5941
