Prudential Issues in Less Diversified Economies

Author/Editor:

Aditya Narain ; Pau Rabanal ; Steen Byskov

Publication Date:

October 1, 2003

Electronic Access:

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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:

This paper examines the prudential issues associated with credit concentration in less diversified economies (LDEs), which are identified as countries where one or two sectors represent a large share of exports. In preparing this analysis, the characteristics of their financial and banking systems and their interactions with the real sector are studied. The paper also examines the limitations on portfolio diversification confronting banks in these countries, both from the viewpoint of the real sector and of the financial system. The paper finds that banks in LDEs, particularly in low-income countries, appear to face higher risk than their peers in more diversified economies and makes suggestions for policy options and regulatory practices which could be encouraged in such systems.

Series:

Working Paper No. 2003/198

Subject:

Banking Commercial banks Credit Credit risk Financial institutions Financial regulation and supervision Loans Money Nonperforming loans

English

Publication Date:

October 1, 2003

ISBN/ISSN:

9781451860085/1018-5941

Stock No:

WPIEA1982003

Pages:

32

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