Banking Soundness and Monetary Policy
Front Matter

Front Matter

Editor(s):
Charles Enoch, and J. Green
Published Date:
September 1997
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    Banking Soundness and Monetary Policy

    Issues and Experiences in the Global Economy

    Editors

    Charles Enoch

    John H. Green

    Papers presented at the seventh seminar on central banking Washington, D.C. January 27–31, 1997

    IMF Institute and Monetary and Exchange Affairs Department

    International Monetary Fund

    Washington • 1997

    © 1997 International Monetary Fund

    Cover design by IMF Graphics Section

    Cataloging-in-Publication Data

    Central Banking Seminar International Monetary Fund (7th: 1997: Washington, D.C.)

    Banking soundness and monetary policy : issues and experience in the global economy : papers presented at the Seventh Seminar on Central Banking Washington, D.C. January 27–31, 1997 / editors, Charles Enoch [and] John H. Green. — Washington : IMF Institute and Monetary and Exchange Affairs Dept., International Monetary Fund, 1997

    p. cm.

    ISBN 1-55775-645-7

    1. Banks and banking — Congresses. 2. Monetary policy — Congresses. 3. Banks and Banking, Central — Congresses. 4. Banks and banking — State supervision — Congresses. I. Enoch, Charles. II. Green, John Huss, 1955-III. IMF Institute. IV. International Monetary Fund. Monetary and Exchange Affairs Dept. V. Title.

    HG1521.C36 1997

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    Foreword

    While there is now wide consensus that price stability should be the primary concern of a central bank, there is also increasing awareness that this price stability—and indeed, more generally, the macroeconomic position of a country—may be jeopardized by an unsound banking system. An unsound banking system could undermine monetary and fiscal policies, and could fail to provide the intermediation functions that are integral for the achievement of economic development. Thus central bankers have been very much involved in recent years in devising structures and procedures to seek to ensure that the banking systems in their countries are sound. This work is being undertaken against a background where the banking sector itself is in many countries changing rapidly, as a result of domestic deregulation, the growth of conglomerates involving both banks and nonbanking entities within the same institution, and the widespread liberalization of international capital flows.

    This volume brings together contributions on a wide variety of banking soundness issues. It includes the papers presented at the Seventh Seminar on Central Banking organized by the International Monetary Fund and held in Washington, D.C. on January 27–31, 1997, as well as discussants’ comments on these papers, and some of the key points raised in the discussions during the seminar. The contributions range from papers focusing on theoretical aspects of ensuring banking system soundness to others presenting practical lessons from individual country experiences. They cover advanced, developing, and transition economies. The seminar benefited from the participation of senior central bankers and banking supervisors from around forty countries, as well as the Bank for International Settlements and the Basle Committee, and also involved presentations from staff of the IMF and the World Bank. As on the occasions of the previous seminars in this series, the presentations and discussions were lively and productive. A number of useful lessons were learned which are likely to have widespread applicability. We are grateful to all those, both inside and outside the IMF, who contributed to the success of the seminar.

    Michel Camdessus

    Managing Director

    International Monetary Fund

    Preface

    The IMF Central Banking Seminars have been organized roughly every two years by the Monetary and Exchange Affairs Department (and its predecessor, the Central Banking Department) together with the IMF Institute. They have provided a useful forum for wide-ranging discussions on upcoming central banking and monetary management issues among senior practitioners from the membership of the IMF, as well as IMF staff. As the international economy became increasingly integrated, and as the membership of the IMF reached virtual universality, the focus of these seminars has been directed to topics of direct relevance to central bankers in all regions of the world. In this context, the issue of banking soundness in a global economy clearly represents a subject particularly suitable for this seminar, the seventh in the series. As indication of the appropriateness of this seminar theme is the growing amount of time and energy that central bankers in all parts of the world have had to devote to banking issues in recent years, and the consequent recognition of the interaction between banking soundness and effective monetary management, both nationally and internationally.

    A subject of relevance in the context of banking soundness questions is banking supervision, which in some countries is a direct central bank responsibility, while in others it is vested in a separate supervisory agency. For this reason, on this occasion, in addition to gathering many central bankers as speakers and seminar participants, there have also been officials from some national supervisory institutions or from supervisory groups, like the Basle Committee on Banking Supervision, as well as from international institutions like the Bank for International Settlements and the World Bank. This additional diversity in speakers and participants added an extra dimension to the seminar, thus providing opportunities for interaction that were particularly productive and contributed strongly to the depth of the discussions.

    The issues examined are of considerable interest to all involved in monetary or banking issues. Banking sector problems have affected many countries in the IMF membership, and measures to remedy these problems as well as to prevent their recurrence will deeply concern central bankers and policy makers more widely for some time to come. This volume is intended to disseminate the presentations and discussions of the seminar to this wider audience.

    In addition to the authors, many in the IMF have contributed to the successful production of this book. In particular, I would wish to note the contributions of Charles Enoch and John H. Green in organizing the seminar and editing the book, as well as the editorial assistance provided by Natalie Baumer, Rozlyn Coleman, and Juanita Roushdy of the External Relations Department. In addition, this volume could not have been completed without the secretarial support provided by Amelia de Lucio, Funke Orimoloye, and Janet Stanford.

    Manuel Guitián

    Director

    Monetary and Exchange Affairs Department

    International Monetary Fund

    Contents

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