European Parliament Library

The Role of Supervisory tools in Addressing Bank Borrowers' Currency Mismatches, Armando Méndez Morales, Maria del Mar Cacha

Abstract
Bank borrowers' currency mismatches often result from unhedged foreign currency borrowing in economies where there is significant dollarization, exposing the financial sector to disguised credit risk. In the absence of standard tools or guidelines to counteract this risk, countries have resorted to outright regulatory limits in cases of moderate dollarization and to undesirable exchange controls in other cases. This paper proposes a "specific-to-group" provision rule based on the effective borrowing cost differential between domestic and foreign currency. Such a rule would help internalize the corresponding risks for banks and their borrowers in line with internationally accepted prudential and accounting standards
Table Of Contents
""Contents""; ""I. INTRODUCTION""; ""II. THE NATURE OF EXCHANGE-RATE-INDUCED CREDIT RISK IN PARTIALLY DOLLARIZED ECONOMIES""; ""III. COUNTRY PRACTICES IN EXCHANGE-RATE-INDUCED CREDIT RISK MANAGEMENT AND SOME ALTERNATIVES ""; ""IV. IMPACT OF PROVISIONING BASED ON BORROWING COST DIFFERENTIALS""; ""V. CONCLUSIONS""; ""References""
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (31 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9781452705637

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