Other Titles in this Series

World Economic
and Financial Surveys

International Capital Markets
Developments, Prospects, and Key Policy Issues
September 1999

By a Staff Team led by Charles Adams, Donald J. Mathieson, and Garry Schinasi

1999 International Monetary Fund
Ordering Information

The International Capital Markets Report ceased publication in August 2001. Both the Report and the Emerging Market Financing quarterly (published 2000-2001) have been replaced by a new quarterly, The Global Financial Stability Report. The new report was created to provide timely and comprehensive coverage of both mature and emerging financial markets as part of the IMF's stepped up tracking of financial markets.

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List of Abbreviations

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I.   Introduction and Overview

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II.   Developments, Trends, and Issues in the Mature Financial Markets
The Mature Market Turbulence and Its Aftermath
Developments in Money and Credit Markets Since
   the Turbulence
Developments in the Major Foreign Exchange Markets
   Since the Turbulence
Developments in the Major Equity Markets Since
   November 1998
Developments in Derivatives Markets
Developments in the Major Banking Systems
Risks and Vulnerabilities

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III.   Emerging Markets: The Contraction in External Financing and Its Impact on Financial Systems
Financial Market Developments
Private Capital Flows to Emerging Markets and
   Developments in the Bond, Equity, and Syndicated Loan
Developments in Emerging Market Banking Systems
Asian Banking Systems

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IV.   Managing Global Finance: Private and Public Policy Challenges Raised by Last Fall's Mature Market Turbulence
Recurring Features of Turbulence and Crisis: Importance
   of Lines of Defense Against Systemic Problems
Environment in Which Financial Excesses Accumulated
   and Created the Potential for Systemic Problems
Private and Public Policy Issues and Challenges
Proposals for Reform
Remaining Challenges
Overall Assessment and Conclusion
Appendix 1. Off-Balance-Sheet Leverage
Appendix 2. Impact of HLIs on Small and Medium-Sized

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V.   Emerging Markets in the New Financial System: Nonstandard Responses to External Pressure and the Role of the Major Credit Rating Agencies in Global Financial Markets
Nonstandard Policy Interventions in Emerging Markets
The Role of the Major Credit Rating Agencies in Global
   Financial Markets

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VI.   Summary and Conclusions
Mature Markets
Emerging Markets
Private and Public Policy Challenges Raised by Highly
   Leveraged Institutions and Activities
Emerging Markets and the International Financial System

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Annex I: Progress with European Monetary Integration
Money Market Integration and EMU Financial Infrastructure
Outlook for Pan-European Capital Markets
Banking System Consolidation and Restructuring
Financial Supervision, Regulation, and Crisis Management

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Annex II: Banking System Developments and Corporate Sector Restructuring in Japan
Overview of Banking System Issues
Main Policy Developments in Banking
Remaining Challenges
Financial Reorganization and Corporate Restructuring
Approaching a Crossroad
Directions for Change
Prospects and Risks

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Annex III: Developments in Emerging Market Banking Systems
Latin America
Central Europe

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Annex IV: Proposals for Improved Risk Management, Transparency, and Regulatory and Supervisory Reforms
Proposals to Strengthen Risk Management and Internal Control
Disclosure and Market Discipline
Highly Leveraged Institutions
Supervision of Financial Conglomerates and International
   Accounting Standards

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Annex V: Credit Ratings and the Recent Crises
Factors in Sovereign Ratings and Empirical Studies of
Review of Ratings During the Crises
Evaluating Rating Agencies: By What Criteria?
Survey of Credit Rating Agencies

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Annex VI: Use of Ratings in the Regulatory Process



  2.1.  The April 1998 BIS Survey of Foreign Exchange and OTC Derivatives Markets
 2.2.  Interest Rates and Implied Dividend Growth in G-7 Stock Markets
  2.3.  Ongoing Reforms in the U.S. Equity Market Infrastructure
 2.4.  Implications of the Y2K Problem for the Major Financial Systems
 3.1.  Russia: The Feeding Frenzy
 3.2.  The Activity of HLIs in Pacific Rim Currencies in 1998
 3.3.  The Decline in Liquidity in Emerging Market Bonds and Foreign Exchange
 3.4.  The Collapse of GITIC
 3.5.  The Nondeliverable Forward Market
 3.6.  Issues Involving the Possible Restructuring of Eurobonds
 3.7.  Is the Bond Market Becoming More Discriminating?
 3.8.  Private Contingent Credit Lines
 4.1.  Proposed Revisions to the Basel Accord on Capital Adequacy
 5.1.  The Mechanics of a "Double Play"
 A2.1.  Stock Market Reaction to Recent Restructuring Announcements in Japan
 A3.1.  Corporate Debt Restructuring in Asia
 A3.2.  Hybrid Instruments in Asian Bank Recapitalization
 A3.3.  Deposit Insurance: Issues for Emerging Markets
 A5.1.  Standard & Poor's Issuer Ratings
 A5.2.  Moody's Issuer Ratings
 A5.3.  Criteria for Eligible External Credit Assessment Institutions



 2.1.  Major Industrial Countries: Outstanding Amounts of Private Sector Domestic Debt Securities
 2.2.  Announced International Syndicated Credit Facilities by Nationality of Borrowers
 2.3.  Outstanding Amounts of International Debt Securities
 2.4.  Outstanding Amounts and Net Issues of International Debt Securities by Currency of Issue
 2.5.  Currency Composition of Notional Principal Value of Outstanding Interest Rate and Currency Swaps
 2.6.  Markets for Selected Derivative Financial Instruments: Notional Principal Amounts Outstanding
 2.7.  Notional Value of Outstanding Interest Rate and Currency Swaps of ISDA Members
 2.8.  New Interest Rate and Currency Swaps
 2.9.  Annual Turnover in Derivative Financial Instruments Traded on Organized Exchanges Worldwide
 2.10.  Claims of Banks in BIS-Reporting Countries on Selected Emerging Markets as of December 1998
 3.1.  Net Private Capital Flows to Emerging Markets, 1990-98
 3.2.  Changes in Bank Exposures to Emerging Markets
 3.3.  Gross Private Market Financing to Emerging Markets, by Region, Financing Type, and Borrower Type
 3.4.  Selected Emerging Markets: Banking System External and Domestic Liquidity Conditions
 4.1.  Leverage Ratios in Basic Derivative Instruments
 4.2.  Global Positions and Approximate Gross Leverage Ratios in OTC Derivatives Markets by Type of Risk Instrument
 5.1.  Local Credit Rating Agencies
 5.2.  Rating Categories
 5.3.  Sovereign Foreign Currency Ratings: Average One-Year Transition Rates by Rating Category
 A1.1.  Distribution of Interbank Loans and Deposits Across EMU Countries Before and After EMU
 A1.2.  Bid-Ask Spreads of Overnight Interbank Rates for Selected Countries, 1998-99
 A2.1.  Japan: Estimates of Problem Loans for the Major Banks
 A2.2.  Japan: Estimated Uncovered Loan Losses, September 1998
 A2.3.  Japan: Financial Supervisory Agency's Special Inspections of Major Banks, December 1998
 A2.5.  Japan: Public Capital Injections, March 1999
 A2.6.  Japan: Legal Procedures for Insolvent Companies
 A2.7.  Japan: Features of Reorganization Procedures in the United States and Germany and the Prospective Financial Rehabilitation Law in Japan
 A4.1.  Key International Supervisory and Regulatory Reports and Guidance Notes
 A5.1.  Variables Used in Sovereign Rating Analysis by Standard & Poor's
 A5.2.  Rating and Spread Trends
 A5.3.  Market Ratings of Crisis Countries
 A5.4.  Survey of Credit Rating Agencies
 A6.1.  U.S. Regulations Making Use of Credit Ratings
 A6.2.  Regulatory Use of Credit Ratings in Selected Countries



 2.1.  Major Industrial Countries: Stock Market Price Indices,
January 1, 1997-June 25, 1999
 2.2.  Major Industrial Countries: Nominal Interest Rates,
January 1, 1997-June 30, 1999
 2.3.  United States: Corporate Bond Market, January 1998-May 1999
 2.4.  United States: Yields on Corporate and Treasury Bonds,
January 5, 1962-June 25, 1999
 2.5.  United States: Developments in Fixed-Income Securities Markets,
January 1, 1998-June 30, 1999
 2.6.  Major Industrial Countries: Effective Exchange Rates,
January 1991-May 1999
 2.7.  Selected Countries: Bilateral U.S. Dollar Exchange Rates,
January 1, 1998-June 30 1999
 2.8.  Weighted Average Spreads for Announced Facilities in the International Syndicated Credit Market, First Quarter 1992-First Quarter 1999
 2.9.  United States: Equity Market Performance, 1926-March 1999
 3.1.  Yield Spreads on Emerging Market and U.S. High Yield Bonds
 3.2.  Secondary Market Yield Spreads on U.S. Dollar-Denominated Eurobonds by Selected Emerging Markets
 3.3.  Total Return Equity Indices: IFC Global and S&P 500
 3.5.  Emerging Markets Sovereign Ratings Changes, May 1997-May 1999
 3.6.  Brazil: Financial Market Indicators
 3.7.  Emerging Market Bond Market Issuance Around Crises
 3.8.  Volatility of Weekly Returns in Emerging Equity Markets
 3.9.  Emerging Market Equity Mutual Funds: Estimated Net Flows
 3.10.  Real Estate and Stock Prices-Selected Asian Countries
 4.1.  United States: Top 25 Commercial Banks-Notional Amount of Derivatives, Equity Capital, and the Gross Off-Balance-Sheet Leverage Ratio, Fourth Quarter 1995 - Fourth Quarter 1998
 5.1.  Stock Market Indices: Hong Kong Hang Seng and Dow Jones Industrial Average
 5.2.  Selected Stock Market Indices
 5.3.  Malaysia: Portfolio Investment Flows
 5.4.  Overnight Interest Rates, Foreign Exchange Rates, and Stock Market Indices
 5.5.  Emerging Markets: Number of Sovereign Ratings by Category
 5.6.  Moody's-Rated Default Count by Industry and Trend
 5.7.  5-, 10-, and 15-, and 20-Year Average Cumulative Default Rates, 1970-
 5.8.  Ten-Year Cumulative Default Rates and Volatilities, 1920-98
 5.9.  Average Credit Ratings in Emerging Market Countries
 A1.1.  ECB: Interest Rates and Standing Facilities, January 4-June 11, 1999
 A1.2.  Distribution of Cross-Border Payments in EMU Between EBA and TARGET, January-May 1999
 A1.3.  Overnight Rates on Unsecured Interbank Funds in the Euro Area, January 4-June 10, 1999
 A1.4.  France and Spain: Overnight Repo Rates, January 4, 1999-June 11, 1999
 A2.1.  Japan: Banking System Strains, 1997-99
 A2.2.  Japan: Major Banks' Profits, 1988-99
 A2.3.  Japan: Postal Saving Deposits, 1987-98
 A5.1.  Emerging Markets: Sovereign Ratings and Fundamentals
 A5.2.  Argentina
 A5.3.  Brazil
 A5.4.  Hungary
 A5.5.  Indonesia
 A5.6.  Korea
 A5.7.  Malaysia
 A5.8.  Mexico
 A5.9.  Poland
 A5.10.  Russia
 A5.11.  Thailand
 A5.12.  Turkey
 A5.13.  Average Cumulative 15-Year Default Rates for Corporate Issuers
 A5.14.  Rating Stability