Offshore Banking: An Analysis of Micro- and Macro-Prudential Issues

January 1, 1999

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Luca Errico, and Alberto Musalem Borrero. Offshore Banking: An Analysis of Micro- and Macro-Prudential Issues, (USA: International Monetary Fund, 1999) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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. From a microeconomic vantage point, offshore banks seem 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.

Subject: Banking, Consolidated banking supervision, Deposit insurance, Financial crises, Financial institutions, Financial regulation and supervision, Financial services, Foreign banks, International banking, Offshore financial centers

Keywords: Asia and Pacific, Banking Problems, Banking Supervision, Caribbean, Consolidated banking supervision, Cross-border asset, Cross-border assets, Cross-Border Capital Flows, Deposit insurance, Europe, Financial Crises, Foreign banks, International banking, Middle East, Offshore bank, Offshore Banking, Offshore establishment, Offshore financial centers, Onshore bank, Parent bank, Prudential Regulations, WP

Publication Details

Pages:

56
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1999/005
Stock No:

WPIEA0051999
ISBN:

9781451842166
ISSN:

1018-5941

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