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Mr. G. G. Johnson and Mr. Richard K. Abrams

Abstract

During the 1970s, international lending by banks came to play a dominant role in the flow of international finance. In the early 1980s, banks have continued to play a major role, but the recent evidence of strains in international banking has raised questions about the prospects for continuity of international intermediation by banks.

Mr. G. G. Johnson and Mr. Richard K. Abrams

Abstract

During the 1970s, international lending by banks came to play a dominant role in the flow of international finance. In the early 1980s, banks have continued to play a major role, but the recent evidence of strains in international banking has raised questions about the prospects for continuity of international intermediation by banks.

Mr. G. G. Johnson and Mr. Richard K. Abrams

Abstract

The year 1982 was one of turmoil in financial markets. Banking problems, as measured, say, by the tiering of interest rates, were not as severe as in 1974–75, but it is nonetheless likely that substantial changes may ensue in the operation of the international banking system. This section presents a preliminary assessment of the significance of these events.

Mr. G. G. Johnson and Mr. Richard K. Abrams

Abstract

The immediate consequences of problems in international banking would be financial—the disruption of payments mechanisms and the breakdown of financial intermediation. If unchecked, these could quickly impinge on the real economy, producing declines in production, employment, and trade.

Mrs. Delia Velculescu
Traditional fiscal indicators focused on measures of current deficits and debt miss the potentially important implications of current policies for future public finances. This could be problematic, including in the case of Europe, where population aging is expected to pose additional fiscal costs not captured by such indicators. To better gauge the state of public finances in the EU27 countries, this paper derives forward-looking fiscal measures of intertemporal net worth both directly from the European Commission’s Aging Working Group’s long-run indicators and using a comprehensive public-sector balance sheet approach. These measures could be used as an "early warning" mechanism and also as a communication device with the public. Current estimates indicate that, on existing policies, the intertemporal net worth of the EU27 is deeply negative, even in excess of its GDP level, and is projected to worsen further over time. This suggests that Europe’s current policies need to be significantly strengthened to bring future liabilities in line with the EU governments’ capacity to generate assets.
Mr. G. G. Johnson and Mr. Richard K. Abrams

Abstract

As in all financial intermediation, risk is an inherent feature of international banking. This section describes the risks involved and discusses some of the threats these risks pose to the continuity of international bank lending.

International Monetary Fund. External Relations Dept.

02/97: An Interim Assessment of Ukrainian Output Developments, 2000–01, Julian Berengaut, Erik De Vrijer, Katrin C. Elborgh-Woytek, Diane E. Fisher, Mark W. Lewis, and Bogdan Lissovolik

Mr. G. G. Johnson and Mr. Richard K. Abrams

Abstract

The first line of defense for the stability of banking systems is that individual banks themselves act so as to reduce the risk of failure. Financial intermediation is inherently risky; therefore, banks must limit their risks to prudent levels.

Mr. G. G. Johnson and Mr. Richard K. Abrams

Abstract

Since no system of prudential control can eliminate the possibility of bank failure, depositors can never be certain that banks will be able to repay their deposits; and if doubts arise about the solvency of a bank, depositors will attempt to withdraw their funds. To protect themselves, banks maintain a prudent degree of liquidity. They keep part of their assets in liquid form (which, incidentally, may also reduce the risk of loss from interest rate fluctuations) and arrange for lines of credit with other banks. As with other prudential guidelines or controls, banks need to strike a balance between prudence and profitability: more liquid assets have lower yields, while charges apply to agreed lines of credit with other banks.

Mr. G. G. Johnson and Mr. Richard K. Abrams

Abstract

Viewed from an international perspective, deposit insurance plays a relatively minor role in bolstering the confidence of depositors. There are also a number of gaps in coverage by lenders of last resort, in terms of both providing support to individual banks and providing liquidity to the international banking system.20 The nature of these gaps is the subject of the remainder of this paper.