Financial System Standards and Financial Stability: The Case of the Basel Core Principles

Author/Editor:

Dewitt D Marston

Publication Date:

May 1, 2001

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:

The relationship between the observance of financial system standards and financial stability is complex owing to the multitude of macroeconomic and structural factors affecting stability. Therefore, assessments of standards in terms of technical criteria for compliance needs to be reinforced with additional information on other factors affecting risks in order to assess financial stability. Preliminary evidence from country data on observance of Basel Core Principles (BCPs) suggests that indicators of credit risk and bank soundness are primarily influenced by macroeconomic and macroprudential factors and that the direct influence of compliance with Basel Core Principles on credit risk and soundness is insignificant. BCP compliance could, however, influence risk and soundness indirectly through its influence on the impact of other macro variables.

Series:

Working Paper No. 2001/062

Subject:

Bank soundness Basel Core Principles Credit risk Financial regulation and supervision Financial sector policy and analysis Financial sector stability Financial standards

English

Publication Date:

May 1, 2001

ISBN/ISSN:

9781451964745/1018-5941

Stock No:

WPIEA0622001

Pages:

33

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