Toward An Effective Supervision of Partially Dollarized Banking Systems

Author/Editor:

Antonio Garcia Pascual ; Jorge Cayazzo ; Socorro Heysen ; Eva Gutierrez

Publication Date:

January 1, 2006

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:

The paper presents a supervisory framework that addresses the vulnerabilities of partially dollarized banking systems. The tendency to underprice systemic liquidity risk and currency-induced credit risk creates vulnerabilities that need supervisory responses. The framework seeks to induce agents to better internalize risks by implementing a risk based approach to supervision, following the risk management guidelines of the Basel Committee, and by establishing buffers to cover higher liquidity and solvency risks. The paper also shows that most dollarized countries have addressed their liquidity vulnerabilities, but few have addressed those arising from currency-induced credit risks.

Series:

Working Paper No. 06/32

Subject:

English

Publication Date:

January 1, 2006

ISBN/ISSN:

9781451862928/1018-5941

Stock No:

WPIEA2006032

Format:

Paper

Pages:

50

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