Unlocking credit : the quest for deep and stable bank lending.

Format:

Book

Author/Creator:

Inter-American Development Bank Staff, Corporate Author.

Series:

Inter-American Development Bank. Economic and social progress in Latin America ; 2005 report.

Economic and social progress in Latin America, 0095-2850 ; 2005 report

Language:

English

Subjects (All):

Credit.

Banks and banking.

Physical Description:

vi, 281 p. : ill.

Other Title:

At head of title: Economic and social progress in Latin America : 2005 report

Place of Publication:

Washington, D.C. : Inter-American Development Bank ; Baltimore, MD : Distributed by the Johns Hopkins University Press, c2004.

Language Note:

English

Summary:

Bank loans are the main source of credit for businesses across Latin America, so understanding what determines the depth, cost, and volatility of bank credit is crucial to designing strategies that ensure financial stability and promote growth. This new edition of Economic and Social Progress in Latin America provides a comprehensive analysis of the region's all-important banking industry. The book examines two-way interactions between macroeconomic policies and financial intermediation -- not only how these policies affect banking but how banks weather intermediate shocks, and how industry incentives can prompt bank portfolio choices that influence economic policy. The report also discusses how elements of a financial safety net -- including deposit insurance, prudential regulation, protection of creditor rights, and legal and judicial enforcement -- can mitigate factors that make credit more volatile and constrain its expansion. Finally, the report studies how the banking industry's market structure affects its performance. Particular attention is given to the role of government- versus foreign-owned banks, access to credit by small and medium-sized enterprises,and the development of mortgage credit markets.

Contents:

Title Page

Acknowledgements

Preface

Contents

CHAPTER ONE: Introduction

Why Care about Bank Credit?

Bank Credit in Latin America and the Caribbean: Stylized Facts

What Makes Bank Credit Special?

Final Remarks and Structure of the Report

CHAPTER TWO: Overview

A Volatile World

Key Vulnerabilities of Banking Systems in Latin America and the Caribbean

Avoiding Crises: A Financial Safety Net

The Changing Nature of Banking Systems: Does Structure Matter?

Rules and Institutions beyond the Financial Safety Net

Current and Future Challenges: The Road Ahead

CHAPTER THREE: Determinants and characteristics of Banking Crises

Banking Crises in Latin America: Why Should We Care?

Determinants of Banking Crises

Adverse Selection and Moral Hazard Factors

Liquidity Factors

Other Factors

How Does Latin America Fare?

The Standard Approach to Banking Crises

Liquidity, Crisis Bunching, and Coordination

Sudden Stops and Banking Crises: Another Set of Twin Crises?

Banks and the Likelihood of Sudden Stops

Policy Recommendations and Open Questions

CHAPTER FOUR: Financial Dollarization

Dollarization and Mismatches

Macroeconomic Determinants

A History of High Inflation

A Framework for Understanding Financial Dollarization

Does the Portfolio View Explain Dollarization in Latin America and the Caribbean?

Dollarization and Financial Development

Market Failures and Excessive Financial Dollarization

Macroeconomic Policy and Financial Dollarization: Two-way Interactions

Summary and Policy Recommendations

Developing Indexed Debt Markets

Matching and the Distribution of Dollar Debt

Restricting Dollarized Debt

CHAPTER FIVE: Banking Crisis Resolution

Main Objectives

Principles and Constraints

Basic Principles.

Differences in Constraints between Developed and Emerging Market Economies

Crisis of Confidence

Failures and Successes

Argentina and Mexico in the Mid-1990s

Constraints

Restructuring Programs

Argentina and Uruguay in the Early 2000s

Origins and Constraints

Initial Responses

A Restructuring Program for Uruguay, but Not for Argentina

Lessons from Experience

CHAPTER SIX: Bank Regulation and Supervision

Best-Practice Banking Regulation and Supervision

Banking Regulation and Supervision in Latin America

Key Vulnerabilities in Banking Sectors in Latin America

Lending to the Sovereign

Currency Mismatches

Conclusions

CHAPTER SEVEN: Designing Deposit Insurance

Financial Safety Nets

Objectives and Design of Deposit Insurance

Deposit Insurance in Latin America

System Formalization

Membership

Coverage

Premiums

Co-insurance

Institutionality and Administration

Funding

Crises

CHAPTER EIGHT: Private Oversight of the Banking Sector: The Role of Market Discipline

Costs and Benefits of Market Discipline

Do Depositors Act on Bank Risk?

Do Depositors Discipline Banks?

Exploiting Market Discipline in Latin America-Policy Implications

Appendix 8.1. What Are Bank Fundamentals?

Appendix 8.2. Empirical Evidence of Market Discipline in Latin America

CHAPTER NINE: Concentration and Competition

Concentration and Competition

Concentration and Efficiency

Concentration, Competition, and Bank Stability

Concentration, Competition, and Cyclicality of Credit

Concentration, Competition, and Access

Appendix 9.1. Bank Size and Concentration

CHAPTER TEN: Foreign Banks

Do Foreign Banks Play a Useful Role?

Foreign Banks and Efficiency

Foreign Banks and Volatility

Foreign Banks and Market Segmentation

Conclusions.

Appendix 10.1 Bank Ownership, Performance, and Risk

CHAPTER ELEVEN: Should the Government Be in the Banking Business?

Appendix 11.1. Determinants and Implications of State Ownership of Banks

The Rationale for State Intervention

Safety and Soundness

Market Failures

Social Value

Isolated Areas

How Should the State Intervene?

What Should State-Owned Banks Do?

Public Banks in Latin America

Development Banks

Do Public Banks Play a Useful Role in Economic Development?

What Is a Good Public Bank?

CHAPTER TWELVE: Economywide Institutions and Banking Credit: Protecting Creditor Rights

Creditor Rights in Latin America: An Overview

Deepening Credit Markets

Creditor Protection and Access to Credit

Creditor Protection and Financial Stability

What to Do about Bad Institutions?

Policy Implications

CHAPTER THIRTEEN: Information Sharing in Financial Markets

What Do Credit Registries Do?

Credit Reporting in Latin America and the Caribbean

Information Quality

How Do Latin American Banks Use Credit Information?

Appendix 13.1. Credit Registries and Financial Development

CHAPTER FOURTEEN: Access to Financing for Small and Medium Enterprises

Stylized Facts

Financing Constraints: A Major Obstacle to Development

Financing Constraints for Small and Medium Enterprises

Accounting for Other Country and Firm Characteristics

Small and Medium Enterprises in Latin America and the Caribbean

Country Experiences in Latin America

Reasons for Financing Constraints

Fixed Lending Costs

Imperfect Enforcement and Bankruptcy Costs

Imperfect Enforcement

Bankruptcy Costs

Asymmetric Information

Moral Hazard

Adverse Selection

Summary

Determinants of Financing Constraints: Empirical Findings

Policy Issues

Creditor Rights.

Collateral

Invoice Discounting or Factoring

Credit Information and Credit Scoring

Reciprocal Loan Guarantee Schemes

Other Loan Guarantee Schemes

Credit Subsidies and Onlending Programs

Generating Expertise

CHAPTER FIFTEEN: Foundations of Housing Finance

Why There Is So Little Housing Finance

Inability to Pay

Obstacles to Recovering Collateral

Real Interest Rate Fluctuations

Maturity Mismatch

Attempts to Resolve Mortgage Lending Problems

State-Run Mortgage Banks

Subsidy Systems

Private Mortgage Lending Systems

Foundations of a Housing Finance System

Explicit and Focused Subsidies

Property Rights and Creditor Rights

Protection from Interest Rate Instability

Long-Term Financing and Capital Markets

Conclusion

CHAPTER SIXTEEN: The Challenges of Basel II

Relevant Aspects for Latin America and the Caribbean

Is Basel II Good for Latin America and the Caribbean?

Compliance with the Basel Core Principles

The Credit Rating Industry

The Feasibility of Increasing Capital Requirements

Depth of Capital Markets

Assessing and Monitoring Loan Loss Provisioning

Summing Up

The Centralized Rating-Based (CRB) Approach as a Transition to Basel II IRB

Regulation of Foreign Banks in Latin America and the Caribbean

Foreign Bank Authorization and Mode of Entry

Cross-Border Issues and Basel II

CHAPTER SEVENTEEN: Money Laundering: What Do We Know?

How Does Money Laundering Work?

What Are the Economic Implications?

How Bad Is the Problem in Latin America?

What Are the Determinants of Money Laundering?

Soundness of the Banking System

Development of Capital Markets

Size of the Underground Economy

Quality of Government Institutions

Quality of Corporate Governance

Summary.

What Are the Efforts Against Money Laundering?

What Are Some Advances in the Region?

What Are the Challenges for Latin America?

Appendix 17.1. Econometric Evidence of the Determinants of Money Laundering

Index

A

B

C

D

E

F

G

H

I

J

L

M

N

O

P

Q

R

S

T

U

V

W.

Notes:

Bibliographic Level Mode of Issuance: Monograph

Includes bibliographical references (p. 257-272) and index.

OCLC:

84691734