This paper discusses systematic issues in international finance explained in the International Capital Markets report. The paper describes that the nature and extent of recent banking problems in several industrial countries along with the policy responses to those problems. It is observed that balance sheet problems in banking are widespread among the major industrial countries. The paper also analyses recent activity in the European currency unit bond and exchange markets, and reviews developments in the private financing of developing countries and discusses several issues raised by the recent experience, including the broadening of the investor base for developing country securities, the special role played by regional financial centers in East and Southeast Asia, and the systemic implications of the evolving pattern of developing country financing. A key influence on international capital movements in recent years was the rising international diversification of investment portfolios, which is generally believed to have increased in response to the liberalization of exchange and capital controls in many industrial countries in the 1970s and 1980s.
This study assesses recent trends in international capital markets. It reviews, in particular, the forces currently reshaping the markets of industrial countries and confronting financial institutions with major challenges.1 Against this background, the study reports on private sector financing flows to developing countries and discusses factors likely to influence future flows.2 More broadly, it discusses prospects for the management of financial risks at the systemic level on the basis of an analysis of macroeconomic, structural, and regulatory developments currently influencing those markets. The study concludes with a detailed discussion of the transmission mechanisms and policy reactions associated with the October 1987 instability in global equity markets.
During 1987–88, international capital flows were closely related to large and persistent external imbalances among the major industrial countries, to a reduction in the current account deficit of developing countries from the levels of 1982–86, and to a continuing process of financial market liberalization. The environment within which these flows took place was characterized by considerable financial uncertainty associated with an upturn of interest rates in late 1987 and renewed concern about inflation, with increased exchange rate volatility and sizable official market interventions aimed at stabilizing the value of the U.S. dollar, and with the shock waves of the October 1987 stock market crisis. This section reviews the macro-economic environment internationally and within major industrial countries. It then traces the most salient developments in the banking, securities, and derivative products markets.
During the past year, changes in the international capital markets have significantly influenced the financial situation of indebted developing countries. The first part of this chapter provides a detailed recapitulation of the experience of those countries during the period under review. The second part assesses important aspects of the growing secondary market for bank claims on developing countries, including recent pricing trends. Various financing techniques that have evolved partly as a result of the growth of the secondary market are then reviewed. In a related vein, the second part concludes with a discussion of several market-based risk management techniques that have potential for more extensive use by heavily indebted countries. The last part of the chapter explores the impact of the regulatory, tax, and accounting practices of industrial countries on the financial prospects of developing countries.
This paper presents Detailed Assessment of the United States’s implementation of the International Organization of Securities Commissions’ Objectives and Principles of Securities Regulation. The general preconditions for effective securities regulation in the United States are present. The legal and accounting system supports the implementation of requirements and effective regulation of market participants. The legislation regarding bankruptcy, insolvency, and winding up in the jurisdiction and the professionals associated with those matters are sophisticated.
International Monetary Fund. Monetary and Capital Markets Department
This paper presents an assessment of the level of observance of the IOSCO Objectives and Principles of Securities Regulation in China. The regulatory framework and supervisory program for the securities markets is largely compliant with the IOSCO Principles. Since 2010, the authorities have implemented several initiatives aimed at protecting China’s very large retail investor population. On the China Securities Regulatory Commission (CSRC) side, this includes strengthening the suitability requirements for intermediaries, investors’ ability to exercise their rights, and its investor education program. The CSRC has also expanded authorized activities for some categories of securities intermediaries with the objective of developing an investment banking culture to help capital markets serve the real economy better.
This technical note provides an overview of Mexico’s derivatives markets, and describes concisely the derivatives regulatory framework and risk management practices in financial institutions active in these markets. The most important derivatives market in Mexico is the over-the-counter (OTC) derivatives market, which is fully integrated with the global derivatives market. The origin of the OTC derivatives market can be traced back to the 1994 Mexican crisis that forced Mexico to abandon its fixed exchange rate regime.