Conference Agenda

IMF Seminars, Conferences and Workshops

High-Level Seminar:
Assessing Banking Fragility

Meeting Halls A & B

March 11–12, 2002

The objective of the seminar is to assess the main factors contributing to the fragility of banking systems in industrial as well as emerging economies. The seminar will provide a forum to analyze the causes of banking crises, official safety nets for banks, market discipline over banks, and early warnings from the financial system. Specific aspects of the fragility of banking systems will be analyzed through the discussion of two cases of recent systemic banking crises: Venezuela (1994-95) and Asia (1997). The transition of Japan's financial system from the "old" Japanese financial regulation and supervision regime to the "new" regime will also be examined.


Monday, March 11

8:30 a.m. – 9:30 a.m.

Registration of Country Officials

9:30 a.m. – 10:00 a.m.

Introductory Remarks
Eduardo Aninat (IMF, Deputy Managing Director), Mohsin S. Khan (IMF Institute), Morris Goldstein (Institute for International Economics)

10:00 a.m. – 10:45 a.m. Origins and Early Warning
Indicators of Banking Crises
Morris Goldstein (Institute for International Economics)
Dr. Goldstein will first focus on origins of banking crises in emerging economies, including the volatile nature of the macroeconomic environment facing banks; high levels of connected lending; weak accounting, disclosure, and legal frameworks; excessive government involvement/ownership of banks; inadequate levels of bank capital; poor preparation for financial liberalization; and problems of incentive incompatibilities in the official safety net. He will then go on to review efforts to identify reliable early warning indicators for banking crises, both for the banking system as a whole and for individual banks.
10:45 a.m. – 11:00 p.m. Coffee
11:00 a.m. – 12:00 noon Continuation
12:00 noon – 2:00 p.m.

Luncheon (by invitation only)
William Ryback—Speaker
(Federal Reserve Board)

2:00 p.m. – 3:30 p.m. Design and Consequences of an Incentive-Compatible Official
Safety Net for Banks

George Benston (Emory University)
Two aspects of the "official safety net" should be distinguished: help in the form of loans to banks that are experiencing severe liquidity problems (lender of last resort) and protection of depositors against full or partial loss of their funds (deposit insurance). "Incentive incompatibility" (also called moral hazard) can result when banks are not charged for the full cost of the risks they take, giving them an incentive to take excessive risks that could be costly to the economy. The session will consider the nature of this problem, how it has been dealt with, and how it can be dealt with more effectively.
3:30 p.m. – 3:45 p.m. Coffee
3:45 p.m. – 5:15 p.m. Enhancing Market Discipline Over Banks
Charles Calomiris (Columbia University)
Banks serve unique economic functions, and those functions are directly related to their inherent vulnerability. But banks today are much more vulnerable than they were in the past, or than they need to be. This presentation begins with a theoretical analysis of the economic role of banks in the economy, and empirical evidence of the relevance of theories that explain the functions, structure, and fragility of banks. The fragility of banks, and the relationship between fragility and bank structure is explored, using both historical and current evidence from a variety of countries' experiences. Bank safety net policies are considered—both from an economic and political perspective—and various approaches to limiting the costs of providing safety net protection are compared, including Basle risk-based capital standards, narrow banking, and proposals that incorporate market opinions and market discipline into the regulatory process. Bank recapitalization schemes are also considered.
Tuesday, March 12
  9:00 a.m. – 10:30 a.m. Case Study: Japan
Thomas Cargill (University of Nevada)
The presentation will review financial and economic developments in Japan during the 1990s and at the start of the new century. The economic and financial distress in the past decade will be considered in the context of Japan's liberalization process, the Asian Financial Crisis, Bank of Japan policy, and liberalization in the United States. Problems will be identified, solutions outlined, and the likelihood of a second "lost decade" in Japan considered.
10:30 a.m. – 11:00 p.m.


11:00 a.m. – 12:30 p.m. Case Study: Venezuela
Ruth de Krivoy (President, Sintesis Financiera and former Governor, Central Bank of Venezuela)
The Venezuelan banking crisis (1994-1995) was largely rooted in bad regulation and supervision, and bad banking. Macroeconomic shocks, pro-cyclical fiscal and monetary policies, and a poorly sequenced economic reform program contributed to the crisis. The timing is largely explained by political events. The cost of the crisis swelled due to poor crisis management. This presentation will review the lessons that can be drawn with respect to macroeconomic policy, banking regulation and supervision, and crisis management.
12:30 p.m. – 2:00 p.m. Luncheon (by invitation only)
2:00 p.m. – 3:30 p.m. Case Study: Three Asian Crisis Countries
Stefan Ingves (IMF, Monetary and Exchange Affairs Department)
The "Asian Crisis" has dramatically changed the way markets, regulators and supervisors, as well as international financial organizations look at crisis management and crisis prevention. This lecture analyzes the measures taken during the unfolding and resolution of the crisis and identifies some key lessons in crisis management and prevention.

3:30 p.m. – 3:45 p.m.

3:45 p.m. – 5:15 p.m.

Early Warnings from the
Financial System
John Heimann, Patricia Armendariz (Financial Stability Institute, B.I.S.)
Country officers many times need ways to evaluate the risks of domestic financial systems without being able to analyze data from the supervisory agencies, due to confidentiality provisions. The presentation by FSI is aimed at identifying qualitative and quantitative indicators that can be accessed by IMF officers and can give them elements to assess the fragility of financial systems.