{
  "title": "Offshore Banking: An Analysis of Micro- and Macro-Prudential Issues",
  "publication": "IMF Working Papers, January 1, 1999",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/30/offshore-banking-an-analysis-of-micro-and-macro-prudential-issues-2867",
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  "summary": "The paper takes a closer look at offshore banking—a pervasive practice that has played a role in recent crises. Offshore banking is an increasingly attractive alternative to the sometimes heavily regulated financial markets of emerging economies.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- The paper examines offshore banking as a pervasive practice that has played a role in recent crises.\n- Offshore banking is an increasingly attractive alternative to the sometimes heavily regulated financial markets of emerging economies.\n- From a microeconomic vantage point, offshore banks appear to exploit the risk-return tradeoff by being more profitable than onshore banks, and in many instances also more leveraged.\n- Risks stemming from offshore activities may be easily transmitted onshore with systemic consequences.\n- Current prudential and supervisory frameworks are broadly adequate for risk management if effectively and universally implemented."
    },
    {
      "heading": "Microeconomic findings",
      "content": "- Offshore banks seem to exploit the risk-return tradeoff by being more profitable than onshore banks.\n- In many instances offshore banks are also more leveraged.\n- The combination of higher profitability and higher leverage implies concentrated risk-taking incentives at the institution level."
    },
    {
      "heading": "Macroprudential findings",
      "content": "- Risks originating in offshore activities can be transmitted onshore with systemic consequences.\n- The cross-border nature of offshore banking complicates containment and crisis management at the national level.\n- Effective and universal implementation of prudential and supervisory frameworks is essential to manage aggregate risks."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Ensure effective implementation of existing prudential and supervisory frameworks across jurisdictions.\n- Promote universal application of supervisory standards to reduce risk transmission from offshore to onshore banking systems.\n- Focus on cross-border coordination to address systemic vulnerabilities arising from offshore banking activities.\n\n---\n\n Content in this bundle\n\n- Offshore Banking: An Analysis of Micro- and Prudential Issues - WP/99/05\n  - Offshore Banking: An Analysis of Micro- and Prudential Issues - WP/99/05 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Offshore Banking: An Analysis of Micro- and Prudential Issues - WP/99/05 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/offshore-banking-an-analysis-of-micro-and-macro-prudential-issues-2867"
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    "Authors: Luca Errico, Alberto Musalem Borrero",
    "Published: January 1, 1999",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451842166.001",
    "The paper examines offshore banking as a pervasive practice that has played a role in recent crises.",
    "Offshore banking is an increasingly attractive alternative to the sometimes heavily regulated financial markets of emerging economies.",
    "From a microeconomic vantage point, offshore banks appear to exploit the risk-return tradeoff by being more profitable than onshore banks, and in many instances also more leveraged.",
    "Risks stemming from offshore activities may be easily transmitted onshore with systemic consequences.",
    "Current prudential and supervisory frameworks are broadly adequate for risk management if effectively and universally implemented.",
    "Offshore banks seem to exploit the risk-return tradeoff by being more profitable than onshore banks.",
    "In many instances offshore banks are also more leveraged.",
    "The combination of higher profitability and higher leverage implies concentrated risk-taking incentives at the institution level.",
    "Risks originating in offshore activities can be transmitted onshore with systemic consequences.",
    "The cross-border nature of offshore banking complicates containment and crisis management at the national level.",
    "Effective and universal implementation of prudential and supervisory frameworks is essential to manage aggregate risks.",
    "Ensure effective implementation of existing prudential and supervisory frameworks across jurisdictions.",
    "Promote universal application of supervisory standards to reduce risk transmission from offshore to onshore banking systems.",
    "Focus on cross-border coordination to address systemic vulnerabilities arising from offshore banking activities.",
    "**Offshore Banking: An Analysis of Micro- and Prudential Issues - WP/99/05**"
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