Other Titles in this Series

World Economic
and Financial Surveys

  International Capital Markets
   Developments, Prospects, and Key Policy Issues
                   September 1998

By a Staff Team led by Charles Adams, Donald J. Mathieson, Garry Schinasi, and Bankim Chadha

©1998 International Monetary Fund
Ordering Information

The International Capital Markets Report ceased publication in August 2001. Both the Report and the Emerging Market Financing quarterly (published 2000-2001) have been replaced by a new quarterly, The Global Financial Stability Report. The new report was created to provide timely and comprehensive coverage of both mature and emerging financial markets as part of the IMF's stepped up tracking of financial markets.

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List of Abbreviations

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I.   Overview
The Asian Crisis: Capital Market Dynamics and Spillover
Emerging Markets in the New International Financial
   System: Implications of the Asian Crisis
Developments and Trends in the Mature Financial Markets
Selected Issues in the Mature Financial Systems: EMU,
   Banking System and Performance, and Supervision
   and Regulation

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II.   The Asian Crisis: Capital Markets Dynamics and Spillover
Part One: Emerging Markets Financing
   Capital Flows, Reserves, and Foreign Exchange Markets
   Bond Markets
   International Bank Lending
   Equity Markets
Part Two: Emerging Market Banking Systems
Part Three: Market Dynamics, Linkages, and Transmission
   The Boom in Capital Inflows
   The Dynamic of the Southeast Asian Currency Crisis
   The Illiquidity of Foreign Exchange Markets
   The Intensification of Exchange Rate Declines
   The October Turbulence in Hong Kong SAR
   Spillover in the Wake from Hong Kong SAR
   The Winter Recovery

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III.   Emerging Markets in the New International Financial System--Implications of the Asian Crisis
Is the Asian Crisis a New Type of Systemic Crisis?
    The Similarities
    Some Differences
Capital Flows and Market Dynamics
   Terms and Conditions for Market Access
   Market Dynamics
   Abrupt Loss of Market Access
Coping with Surges in Capital Inflows
   Macroeconomic Policy Responses
   Dealing with Banking Sector Problems
   The Role of the Corporate Sector and the Bankruptcy

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IV.   Developments and Trends in Mature Financial Markets
Foreign Exchange Markets
Credit Markets
   Money and Repo Markets
   Bond Markets
   International Credit Markets
Equity Markets
   United States
Derivatives Markets
Risks to Global Financial Markets

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V.   Selected Issues in Mature Financial Systems: EMU, Banking System Performance, and Supervision and Regulation
European Monetary Union
   Implementation of TARGET
   Financial Stability and Crisis Management
Developments in Group of Seven Country Banking
   Resolving Japan's Financial System Problems
   Banking System Developments in North America and the
      United Kingdom
   Banking System Developments in Continental Europe
Developments in Financial Supervision and Regulation
   Supervisory Reforms Relating to Risk Management
   Consolidated Supervision--Regulation by Entity Versus
   Developments in International Coordination
   Reforms to Enhance Market Incentives

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VI.   Conclusions
Mature Market Risks
Emerging Market Risks
European Monetary Union
Asian Crisis

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Annex I: Developments in Selected Emerging Markets Banking Systems
Asian Banking Systems
Latin American Banking Systems
European Banking Systems
   Czech Republic

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Annex II: Dynamics of Asset Prices Around Large Price Changes

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Annex III: Leading Indicators of Currency and Banking Crises

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Annex IV: Chile's Experience with Capital Controls
A Brief Survey of the Literature on the Effectiveness of the
   Chilean Controls
Selective Capital Controls and Prudential Regulation

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Annex V: Globalization of Finance and Financial Risks
Consolidation and Restructuring of the Global Financial Services
   The Changing Business of Banking
   Desegmentation of Financial Services and the Institutionalization
      of Asset Management
Closer Integration of Financial Markets
   Cross-Border Finance in a Global Securities Market
   Exchange Trading Links
   Similarities Between OTC and Exchange-Traded Markets
      Increase Market Integration
New Markets and Products for Unbundling, Pricing, Trading, and
      Managing Risk
   Recent Developments in Markets for Unbundling Risks
   Developments in Risk Management



           1.1.   Efforts to Improve the International Architecture
  2.1.  Capital Flow Reversals During the Mexican and Asian Crises
 2.2.  The Resilience of FDI in Emerging Markets: An Update from the Asian Crisis
  2.3.  Unrecorded Capital Flight from Asia?
 2.4.  Alternative Forms of Central Bank Intervention in Foreign Exchange Markets
 2.5.  The Liquidity of Measured Reserves and "Usable" Reserves: The Case of Korea
 2.6.  Enhancements and Innovations in Bond Structures in Response to the Asian Crisis
 2.7.  Key Financial Sector Policy Responses to the Asian Crisis
 2.8.  Bank Capital Adequacy: Issues for Emerging Markets
 2.9.  The Asian Carry Trade
 2.10.  Peregrine and the Growth of Investment Banking in Asia
 2.11.  Reserve Impact of Forward Foreign Exchange Market Intervention
 2.12.  Chronology of Major Events in the Asian Crisis and Its Spillover
 2.13.  The Timings of Ratings Actions and the Behavior of Spreads
 4.1.  The October 1997 Turbulence in International Equity Markets
 5.1.  ESCB Role in Prudential Supervision and Financial Stability
 5.2.  Remaining Scope for Lender-of-Last-Resort Operations in EMU
 5.3.  Turbulence in the Japanese Interbank Market
 5.4.  The Expansion of the Bank of Japan's Balance Sheet
 5.5.  Banks' Self-Assessments and the PCA Framework
 5.6.  Resolution Agencies in Japan
 5.7.  Exposures of Mature-Market Banks to Asian Crisis Countries
 5.8.  Basle Capital Accord: Risk Weights by Category of On-Balance-Sheet Asset
 5.9.  The Financial Services Authority of the United Kingdom



 2.1.  Private Capital Flows to Emerging Markets
 2.2.  Secondary Market Transactions in Debt Instruments of Emerging Markets
 2.3.  Emerging Market Bond Issues, Equity Issues, and Loan Commitments
 2.4.  Changes in Net Assets of BIS-Reporting Banks Vis-ŕ-Vis Banks in Selected Countries and Regions
 2.5.  Annual Stock Market Turnover Ratios in Selected Countries and Regions
 2.6.  Average Bank Financial Strength Ratings for Selected Countries and Regions
 2.7.  Banks' Liquidity and Solvency Risks--Selected Asian Countries
 2.8.  Number of Financial Institutions--Selected Latin American Countries
 4.1.  Major Industrial Countries: Outstanding Amounts of Private Sector Domestic Debt Securities
 4.2.  Announced International Syndicated Credit Facilities by Nationality of Borrowers
 4.3.  Outstanding Amounts of International Debt Securities
 4.4.  Outstanding Amounts and Net Issues of International Debt Securities by Currency of Issue
 4.5.  Currency Composition of Notional Principal Value of Outstanding Interest Rate and Currency Swaps
 4.6.  Markets for Selected Derivative Financial Instruments: Notional Principal Amounts Outstanding
 4.7.  Notional Value of Outstanding Interest Rate and Currency Swaps of ISDA Members
 4.8.  New Interest Rate and Currency Swaps
 4.9.  Annual Turnover in Derivative Financial Instruments Traded on Organized Exchanges Worldwide
 5.1.  Japan: Regulatory Changes in the Computation of Prudential Capitalization of Banks
 5.2.  Japan: Profit and Loss Accounts of the Major Banks in FY1997
 5.3.  Self-Assessments of Loan Classifications
 5.4.  Japan: Asset Quality of Major Banks in FY1997
 5.5.  Japan: Selected Corporate Financial Indicators
 5.6.  Planned Personnel and Other Expenses Included on the Application for the First Round Capital Injection
 5.7.  Conditions for the Subscription of Capital Using Public Funds, March 1998
 5.8.  Schedule for Reforming the Securities Market and for Big Bang Financial Reform
 5.9.  Claims of Selected Major Banking Systems on Emerging Markets
 5.10.  International Organizations' Documents Proposing Principles of Supervision and Regulation
 A4.1.  Bank Borrowing by Maturity for Selected Emerging Markets, End-December 1997
 A4.2.  Selected Chilean Capital Account Controls and Banking Regulations
 A5.1.  Major Industrial Countries: Bank Deposits
 A5.2.  Selected Industrial Countries: Negotiable Liabilities
 A5.3.  Major Industrial Countries: Bank Loans
 A5.4.  Selected Industrial Countries: Tradable Securities Holdings
 A5.5.  Top 50 Banks: Balance Sheet Information
 A5.6.  Major Industrial Countries: Assets of Institutional Investors
 A5.7.  Selected Industrial Countries: Institutional Investors' Holdings of Securities Issued by Nonresidents
 A5.8.  Major Industrial Countries: Gross and Net Flows of Foreign Direct and Portfolio Investment
 A5.9.  Selected Major Industrial Countries: Cross-Border Transactions in Bonds and Equities
 A5.10.  International Equity Issues by Selected Industrial and Developing Countries and Regions
 A5.11.  Outstanding International Debt Securities by Nationality of Issuer for Selected Industrial and Developing Countries and Regions
 A5.12.  Nonresidents' Holdings of Public Debt
 A5.13.  Foreign Exchange Trading



 2.1.  Net Private Capital Flows to Emerging Markets
 2.2.  Exchange Rates of Selected Emerging Markets
 2.3.  Selected Asian Currencies: Exchange Rate Volatilities
 2.4.  Selected Asian Currencies: Bid-Ask Spreads
 2.5.  Bond Markets: Selected Returns, Yields, and Spreads, January 1992­May 29, 1998
 2.6.  Yield Spreads for Selected Brady Bonds and U.S. Dollar-Denominated Eurobonds
 2.7.  Emerging Market Debt: Volatility of Returns
 2.8.  Private Market Financing for Emerging Markets
 2.9.  Spreads and Maturities for Sovereign Borrowers
 2.10.  Emerging Equity Markets: Selected Returns, Price-Earnings Ratios, and Expected Returns
 2.11.  Emerging Equity Markets: Selected Volatilities Comparisons
 2.12.  Emerging Market Mutual Funds: Estimated Net Flows
 2.13.  Financial Sector Lending: Growth and Leverage, 1990­96
 2.14.  Bank and Nonbank Financial Intermediaries
 2.15.  Real Estate and Stock Prices: Selected Asian Countries
 2.16.  Foreign Banks in Latin America: Percentage of Total Banking System Assets
 3.1.  Surges of Private Capital Flows Prior to Crises
 3.2.  Secondary Market Bond Spreads
 3.3.  Comparing Economic Fundamentals Prior to the Debt, the Mexican, and the Asian Crises
 3.4.  Claims of Banking Institutions on the Private Sector
 3.5.  Real Effective Exchange Rate Appreciation Prior to Crises
 3.6.  Stock Market Price Indices in Local Currencies
 4.1.  Major Industrial Countries: Spot Exchange Rates and Nominal Effective Exchange Rates
 4.2.  Major European Countries: Local Currency Versus Deutsche Mark, January 3, 1994­June 30, 1998
 4.3.  Major Industrial Countries: Short-Term Interest Rates
 4.4.  Major Industrial Countries: Long-Term Interest Rates
 4.5.  United States: Yields on Corporate and Treasury Bonds, January 5, 1962­June 26, 1998
 4.6.  Weighted Average Spreads for Announced Facilities in the International Syndicated Credit Market, 1992­First Quarter 1998
 4.7.  Major Industrial Countries: Stock Market Indices
 4.8.  International Equity Price Movements, 6 p.m., October 22­5 p.m., October 31 (EST), 1997
 4.9.  Major Industrial Countries: Dividend Yields
 5.1.  Japan: Interbank Rates, January 4, 1996­July 13, 1998
 5.2.  Japan: Performance of Selected Bank Stocks, January 6, 1997­July 13, 1998
 A4.1.  Chile's Short-Term External Debt