- G. Johnson, and Richard Abrams
- Published Date:
- March 1983
During the 1960s and early 1970s, a potentially significant imbalance began to develop in the international banking system. While international banking was evolving rapidly, there was little corresponding evolution in international bank supervision and regulation. The rise in multinational banking and the increased importance of liability management in international finance had also greatly increased the integration of the world’s financial system, but national regulators had as yet devoted little attention to increased international regulatory cooperation.
National attitudes toward international banking super-vision and supervisory cooperation changed abruptly following the major bank failures of 1974. In September 1974, the Committee on Banking Regulations and Supervisory Practices (the Basle Committee) was formed at the BIS by the Group of Ten and Switzerland. This Committee was to become the most important force in the improvement of national regulation of international banking and the advancement of cooperation between national regulatory authorities.
This Appendix discusses various problems in international banking supervision and notes the progress made in regulatory cooperation since 1974, focusing on the work of the Basle Committee because of its paramount importance in this area. The presentation is divided into three parts. The first part reviews the evolution of international banking prior to 1974 and identifies gaps in national supervision of international banking and in international cooperation among national supervisory bodies. The second part examines the work of the Basle Committee and notes the progress toward effective international supervision and regulatory cooperation. This part discusses the early decisions of the Committee, with emphasis given to their most important agreement, the Concordat. Next, work in the areas of consolidation of reporting, solvency and liquidity regulation, country risk assessment, information flows, and other operational topics is examined. The part concludes with a discussion of the progress in, and the benefits from, international cooperation and understanding.
The third part discusses areas in which international cooperation in banking supervision could be strengthened within the forums already available for international dialogue. It is argued that an important gap remains in international banking regulation and cooperation vis-à-vis many countries outside the Basle Committee. Efforts to establish cooperative relationships with these countries are only now beginning to evolve. In the meantime, some banks involved in international intermediation may well not be subject to effective official supervision.
International banking expanded rapidly in the 1960s and early 1970s, as banks throughout the world increased their foreign lending and opened foreign offices worldwide. Much of the expansion involved the opening of foreign subsidiaries in locations that permitted activities that were prohibited to the foreign branches of the banks. New organizational entities also began to appear. Joint ventures, often with international ownership, began to be formed, and many banking offices were opened in locations that had little or no regulation. Other areas had secrecy laws that made information unavailable to the regulators of parent banks and, in some cases, to the parent banks as well.
This period was also marked by a change in the lending strategy of many larger, wholesale banks. Rather than basing lending decisions on availability of deposits, banks began to practice more active management of their liabilities by borrowing as needed from other financial institutions to finance new loan commitments. As a result, the market for interbank funds flourished. The growth of this market increased the integration of the international financial system. With integration, problems in one part of the market could be easily and rapidly transmitted to other parts of the market.
The expansion of international banking took place with the tacit approval of most national regulatory bodies. In general, supervisors initially viewed as minimal the potential impact of these activities on domestic bank safety and monetary control. Many regulators were also willing to exempt banks’ foreign subsidiaries and joint ventures from certain domestic regulations to allow domestically based banks to provide international banking services more competitively. Prior to 1974, therefore, most regulatory agencies devoted only minimal efforts to the study of the foreign activities of domestic banks, and in some localities, the international activities of foreign-owned domestic banks were largely ignored. Although some regulations affecting international banking were enacted, most were designed to curb capital flows rather than to assure more effective supervision and regulation of international banking.
The increased integration of the world’s financial system suggested the need for greater international cooperation and coordination between national regulators, but this need was not regarded as pressing prior to 1974. This is not to say that no cooperation was present. Starting in 1960, central bankers of the Group of Ten and Switzerland began meeting monthly at the BIS in Basle to discuss monetary and economic problems. One of the outgrowths of these meetings was the Eurocurrency Standing Committee. Composed of senior officials of central banks in countries of the Group of Ten and Switzerland, the Committee was charged with examining the expansion of the Eurocurrency market. Two significant policy decisions were reached prior to 1974. The first was an agreement to refrain from placing foreign exchange reserves in the Euromarkets. The second led to considerable improvement in statistical data on international banking.27 At this juncture, the focus was on the macroeconomic implications of market operations rather than on questions of adequate supervision and market stability.
On the supervisory front, an important early advance toward international cooperation took place within the European Community in the form of the Contact Group. This Group, made up of national supervisory authorities and founded in 1972 by members of the Community as an independent consultation group, has subsequently met periodically and informally to foster mutual understanding and practical cooperation.
Nevertheless, the perceptions and techniques of banking regulators were not keeping pace with the integration and adaptations of the world’s financial system. Supervisory techniques were primarily domestically oriented, and systems to oversee banks’ international operations were not yet fully developed. The difficulties following the international banking problems that emerged in 1974 not only highlighted problems in national regulatory and supervisory policies but also raised doubts about the viability of the international financial system. These problems were confronted in July 1974 at the regular meeting of central bankers at the BIS two weeks after Bankhaus I.D. Herstatt’s failure. In September 1974, the Governors issued a communiqué assuring the international banking community that the infrastructure for the provision of the services of lender of last resort to international banks had been created, and such support should, if necessary, be forthcoming. At the same time, “the Governors concluded that a better co-ordination of the surveillance exercised by national authorities over the international banking system was necessary, and to that end they created a new standing committee—the Committee on Banking Regulations and Supervisory Practices—with members drawn from the Group of Ten major industrialised countries and Switzerland” (Cooke (1981), p. 238). The Committee is often referred to as the Basle Committee; it is also known by the names of its chairmen, originally George Blunden and currently Peter Cooke, both of the Bank of England.
The Basle Committee and International Cooperation28
Initial Work and Concordat
The Basle Committee was initially charged with developing international early warning systems and identifying problems in national banking systems that could have international repercussions. It was also authorized to examine the condition of the international banking system, coordinate supervision across national boundaries, and respond to international banking problems as they arose.
During the Committee’s first year, understandings were reached on several important matters, including at the outset a definition of the Committee’s two primary objectives: “The first was the need to adapt the national supervisory system within each country in order to cope with the wider dimensions of their major banks’ businesses. The second and complementary task was the promotion of close co-operation between national authorities in monitoring the activities of the overseas branches, subsidiaries and affiliates of their own banks, and the offshoots of foreign banks in their own territories” (Cooke (1981), p. 239). The members also determined that the Committee could be used as a forum in which national supervisors could discuss and learn each other’s techniques and consider problems emerging in different national systems. The fostering of close, personal contacts between supervisors was to prove to be an important service of the Committee, since this permitted, inter alia, more rapid and effective cooperation when banking problems crossed national jurisdictions.
A portion of the Committee’s early work involved defining the limits to international cooperation. Recognizing that banking supervisory procedures vary in reflection of national history and differences in national legal systems and that these systems were viewed as a national prerogative, the Committee decided not to press for standardization of national regulatory procedures (Blunden (1977), p. 326). Second, as a corollary, the creation of a supranational regulatory authority to provide an early warning system was deemed to be neither feasible nor necessarily desirable. This partly reflected the concern that such an agency would result in a wasteful duplication of regulatory efforts. The Committee therefore decided that any type of early warning system should be handled through informal consultations among individual members of the Committee or associated groups.
The Basle Committee next directed its efforts to the demarcation of responsibilities of national supervisory authorities in international banking. These efforts resulted in the Concordat on international supervisory cooperation,29 which was endorsed by the participating Governors in December 1975. The principal guidelines of the Concordat, as summarized by Cooke (1981, p. 240), were as follows:
- The supervision of foreign banking establishments should be the joint responsibility of host and parent authorities.
- No foreign banking establishment should escape supervision, each country should ensure that foreign banking establishments are supervised, and supervision should be adequate as judged by both host and parent authorities.
- The supervision of liquidity should be the primary responsibility of host authorities since foreign establishments generally have to conform to local practices for their liquidity management and must comply with local regulations.
- The supervision of solvency of foreign branches should be essentially a matter for the parent authority. In the case of subsidiaries, while primary responsibility lies with the host authority, parent authorities should take account of the exposure of their domestic banks’ foreign subsidiaries and joint ventures because of the parent banks’ moral commitment in this regard.
- Practical co-operation would be facilitated by transfers of information between host and parent authorities and by the granting of permission for inspections by or on behalf of parent authorities on the territory of the host authority. Every effort should be made to remove any legal restraints (particularly in the field of professional secrecy or national sovereignty) which might hinder these forms of cooperation.
It should be noted that the provisions of the Concordat related only to banking supervision and not to the allocation of responsibilities of lenders of last resort among national authorities. Unlike the case with banking supervision, national authorities have deliberately avoided any formal, public delineation of the relative responsibilities of lenders of last resort. This reflects the traditional reluctance of lenders of last resort to specify in advance the extent and nature of the support they are prepared to offer under particular circumstances. The question, however, has not been ignored. In the BIS communiqué of September 1974, for example, the Governors “recognized that it would not be practical to lay down in advance detailed rules and procedures for the provision of temporary liquidity. But they were satisfied that means are available for that purpose and will be used if and when necessary.”
The Concordat represented a significant advance toward generalized international regulatory cooperation. The Concordat, however, was not without its shortcomings. In the words of Peter Cooke, “it should be stressed, though, that the Concordat’s guidelines are not fully implemented in practice and certainly not in law, and there remain areas where the division of responsibility is not entirely clear cut and where banking secrecy provisions are to a degree an impediment to its effectiveness” (Cooke (1981), p. 240).
The Concordat received additional attention in 1979, when its contents were outlined before the supervisory authorities of more than 80 countries at the International Conference of Banking Supervisors in London, hosted by the Bank of England, in association with the Basle Committee. Subsequently, supervisors of major offshore centers were invited to meet with the Basle Committee in October 1980, and on this occasion, the principles of the Concordat were generally accepted by the representatives of the supervisory authorities present. Thus, the landmark guidelines embodied in the Concordat have received a significantly wider international understanding and acceptance.
After establishing this broad framework for the international coordination of banking supervision, the Basle Committee devoted its efforts to several specific areas of banking supervisory practices. Reflecting the nature of the 1974 bank failures, for example, its first topic of discussion was standards for foreign exchange trading by banks. These discussions resulted in implementation of improved standards in the supervision of foreign exchange trading practices.
More recently, major topics of discussion have included consolidation of the reporting of solvency, monitoring of solvency and liquidity, analysis of country risk, and flows of information.
Consolidation of Reporting
In recent years, the Basle Committee has devoted much effort toward reaching a common understanding on the need for consolidated reporting requirements (i.e., reports on the financial position of the parent bank, overseas branches, and subsidiaries taken together). Its conclusion has been that supervisory authorities cannot be fully assured of the soundness of an individual bank unless they can be assured that the banking group’s total commitments and risks on a consolidated basis are not disproportionate to the group’s capital base (Baeyens (1979), p. 43).
Supervisors in many countries have long examined their domestic banks by consolidating the parent offices’ balance sheet with those of its branches. Even where they do not, the potential problems are usually minimal, since in practice foreign branches usually follow the same general prudential standards as their head offices; where the parent authority cannot effectively regulate the activities of a foreign branch, the domestic bank’s safety can be compromised.
Over time, banks have increasingly made use of nonbranch entities, that is, subsidiaries, affiliates, and joint ventures. One problem involved in nonbranch entities is that banks may choose to open them in areas with more liberal regulatory requirements and little or no supervision. Thus, if domestic regulations inhibit or constrain the desired amount of risk taking in certain international activities, banks may circumvent these constraints by operating foreign nonbranch “risk centers.” These entities may also be used to avoid domestic restrictions on country exposure, customer lending limits, and interest rate gapping.
In October 1978, the Basle Committee proposed to the BIS Governors that the solvency of domestically headquartered banking groups should be evaluated on a consolidated basis, including foreign branches as well as majority-owned subsidiaries, and possibly minority holdings and joint ventures. The BIS Governors strongly endorsed this proposal and recommended its early implementation (Cooke (1981), p. 241). Since that time, most of the BIS members that did not already practice full consolidation have adopted the principle. In some cases, the practice is still evolving. In the Federal Republic of Germany, for example, the necessary revisions in banking legislation have yet to be made. Nevertheless, a “gentlemen’s agreement” has been worked out under which banks are informally reporting their capital position on a consolidated basis, even though they are not as yet formally required to meet prescribed capital-adequacy standards on that basis. As recognized by the Basle Committee, circumstances differ considerably from country to country. In France, most overseas operations are conducted through branches, and international loans, other than interbank operations, are generally booked with the parent. As a result, the authorities have felt less need to progress rapidly to full consolidation.
Supervision of bank solvency thus appears likely to be carried out increasingly on a consolidated basis, although there have been some problems of implementation. One problem area lies with sharing of information among banks and their supervisors. Some authorities limit the extent to which banks chartered in their countries can provide information to their parent and the parental supervisors, which poses some obstacles to full consolidation. This led to problems between, for example, Luxembourg and the Federal Republic of Germany, but Luxembourg has now agreed that German bank subsidiaries can provide the information necessary for consolidation of bank capital positions. Luxembourg’s new banking law, moreover, permits banks to give to their parents details of large loans. Unlike the case in many other countries, Luxembourg (as well as Swiss) law does not permit inspection by foreign supervisors, though audit reports can be submitted to them through the parent bank. Another problem is some remaining ambiguity about treatment of consortium banks and of minority holdings in general.
Solvency and Liquidity Regulation
To maintain a viable and functioning international banking system, participants within the system must be both solvent and liquid. In recent years, the supervisors in many countries have been concerned about reduced solvency (capital) ratios owing in part to the rapid expansion of banks’ international business. At the same time, many banks have had difficulty raising new capital as a result of low stock prices and, where permitted, have increasingly substituted long-term debt for equity capital. Nevertheless, in some major financial market countries, capital ratios have either continued to decline or the decline has been arrested at historically low levels. Recently, bankers have also voiced concern about this fundamental aspect of prudent bank management.
While problems of declining solvency ratios and techniques of solvency analysis have been regularly considered at meetings of the Basle Committee, the Committee’s formal action in this area has been limited to its consolidation proposal. The Committee has accepted implicitly that a variety of procedures may be adequate to gauge bank solvency but that a consolidated view of domestic banks’ total commitments is needed in order for regulators to effectively evaluate them.
Much of the Basle Committee’s work in the area of liquidity management has been directed at improving the statistical data on bank maturity mismatching. In 1978, at the request of the Governors of the Group of Ten, the Committee began construction of a uniform reporting system for collecting data on banks’ maturity transformation in their international business (Cooke (1981), p. 242). In September 1980, it was agreed that the BIS would begin collecting consolidated data with detailed maturity breakdowns from sight to seven years on all international assets and liabilities of reporting banks. Data collection began in March 1981. The system, however, is not expected to be fully operational for some time, because participating countries still have to substantially extend or amend their data collection on maturity transformation before they can provide this information.
Country Risk Assessment
The Basle Committee has devoted considerable attention to country risk analysis. The Committee began collecting data on country exposure and maturity transformation in 1977, and in 1979 the BIS published a handbook on country indebtedness statistics. The Committee also discussed broad, informal guidelines for the supervision of banks’ country risk exposure,30 as well as alternative approaches to the measurement of country risk exposure. These guidelines seemed to be in general conformity with country risk evaluation procedures already in place in several countries.
The consensus view of the Committee appears to be that country risk, like other forms of credit risk, should be left to the judgment of the lending bank. Under this approach, the role of the supervisor should be (1) to ensure that country risk, as well as other risks, is not excessive relative to the banks’ capacity to meet losses; (2) to assist banks to assess their risks by ensuring they have the best possible data; (3) to ensure that banks have adequate assessment and control procedures; and (4) to improve prudential reporting and monitoring systems (Cooke (1981), p. 242). Consistent with this approach, the responsibility of country risk assessment and portfolio diversification would be left to the individual banks, but evaluation of their country risk management system would be an important aspect of official supervision.
The Committee has also discussed major aspects of the measurement of country risk. The general view is that, as with overall solvency, country exposure should be assessed on a consolidated basis.
In the belief that the exchange of information across national borders was crucial to the effective supervision of international banking, three types of improvement in information flows were proposed in the Concordat. The first was for the direct transfer of information between host and parent authorities of reports submitted by foreign banks. Second, direct inspections by parents of their domestic banks’ foreign establishments were proposed. Third, when direct inspection was not possible, indirect inspections through the agency of the host authorities were called for.
The reason for these proposals was that “bank secrecy laws or regulations in some countries can enjoin banks not to reveal information about their customers and can preclude supervisors from divulging to other supervisory authorities information which they have acquired in the course of their duties. Obstacles to free cross-border flows of information between foreign offshoots and their parents and between host and parent authorities, while their significance should not be overemphasised, raise a number of practical barriers to fully effective cooperation. First, foreign establishments may not be able to reveal information to their parent banks, or the parent bank may invoke the secrecy rules of the host country not to divulge information to its parent authority. Second, host authorities may be precluded by local laws or practice on professional secrecy from revealing information about the banks under their supervision to parent authorities. Third, differences in the laws of professional secrecy applied to different supervisory authorities could potentially make information less well protected in one country than in another. Finally, parent authorities may be prevented from conducting on-the-spot inspections to verify the information they receive” (Cooke (1981), p. 243).
Although views naturally differ, impediments to information transfers between foreign banks and their parent regulators were, and are, viewed by many regulators as potentially one of the most damaging obstacles to regulatory cooperation and a sound international banking system. Because of these concerns, much effort has been expended by Committee members to expedite the international exchange of supervisory information and to implement cross-border on-sight inspections. Nowhere has the progress been more apparent than within the EC. The early efforts of the Contact Group were taken a step further at the end of 1977, by the First EEC Banking Co-ordination Directive. The Directive required supervisory authorities in EC member countries to supply one another with “all information concerning the management and ownership of such credit institutions that is likely to facilitate their supervision and the examination of conditions for their authorization and all information likely to facilitate the monitoring of their liquidity and solvency.”31 Some EC members have extended cooperation beyond that outlined in the Directive. For example, several EC members have entered into bilateral direct inspection agreements with one another and with some countries outside the Community.
Other Basle Committee members have also expedited international exchanges of information. The United States now directly inspects the foreign branches and majority-owned subsidiaries of U.S. banks in several countries with the permission of the local authorities. The U.S. authorities also encourage joint inspection pacts that allow foreign regulators to inspect their U.S. branches and subsidiaries. Outside the Basle Committee, the progress toward international information flows has been varied. Some countries allow direct foreign inspection; others support complete secrecy. In some countries, despite a shortage of trained supervisory personnel, foreign consolidated supervision of domestic subsidiaries on a consolidated basis is not permitted. In other countries, government inspectors may neither publish nor communicate any information relating to a bank’s operations, its accounts, or the quantity or origin of its earnings, profits, or losses.
A subsidiary problem of international information flows is the problem of data consistency. Differing national accounting and auditing practices as well as varying data requirements may result in confusion or regulatory breakdowns when data are exchanged internationally. Progress in this area has been limited.32
International Cooperation and Understanding
An important but rather vague goal of the Basle Committee has been the fostering of mutual understanding and cooperation between national supervisory bodies. As was discussed earlier, prior to 1974 few national regulators had much contact with their counter-parts in other nations. The creation of the Basle Committee ameliorated this problem for members of the Group of Ten and Switzerland. These face-to-face meetings and the agreements that ensued have aided national regulators and the banks themselves to reduce the risks present in the international banking system. The progress toward operational goals, however, should only be regarded as the most visible benefit of the Committee. Many less visible but highly beneficial results have also been derived.
Through these discussions, regulators have been able to observe and reduce the weaknesses within their own systems as well as to take advantage of the strengths of other systems. This, in turn, has allowed national regulators not only to increase their own effectiveness but also to prepare improved legislative proposals as well. These discussions have helped national supervisors understand the constraints and preferences of their foreign counterparts, and this has promoted compromise and cooperation. Supervisors have become more willing to discuss actual and potential banking problems, within the limits of national secrecy laws, moving closer toward a de facto early warning system for banking crises. Finally, the growth of mutual trust and understanding has created a situation in which national regulators can cooperate more easily and effectively when banking problems cross national boundaries. An example of this was the effective cooperation between Belgian and U.S. authorities following the joint collapse of American Bank and Trust of New York and Banque de 1’ Amérique du Sud of Belgium in 1979. Prior contacts allowed for the rapid exchange of information and effective joint action. The case was later discussed and reviewed within the Committee.
Future Work in International Coordination
Future efforts toward the more effective supervision of international banking will probably continue to be centered around the Basle Committee. Fuller and wider implementation of the Concordat appears to be an important priority goal as is encouraging more effective supervision by Committee nonmembers. Cooperation with national supervisors outside the Basle Committee has been evolving and could prove increasingly important in the future. Although the Concordat has been generally accepted by Committee membership, much work remains to be done for its implementation. If the Concordat were more fully and extensively implemented, regulators would not only be able to monitor the international activities of their own banks more thoroughly, but they could also more effectively spot systemic problems as they develop. If a country finds some aspects of this agreement unacceptable, efforts should be devoted to achieving the spirit of the agreement within the constraints imposed by that country.
One of the most important areas of work for the Basle Committee involves further efforts to assist in the improvement of supervision and cooperation with supervisors who are not members of the Committee. As long as the banks of Committee members can have branches or subsidiaries in locations that are exempt from supervision by the parental authorities, and with minimal or no local regulation, banks that wish to can bypass supervisory constraints imposed elsewhere in the world by using these entities as risk centers. Risk centers could prove damaging to the parent bank’s domestic banking system as well as the international banking system as a whole.
Although most of the largest and most important banks in the international markets are headquartered in the countries of Committee members, many nonmembers possess banks that are closely and extensively involved with the international banking markets. If some banks are inadequately supervised, they may be prone to failure either as a result of their own actions or as a result of difficulties elsewhere in the system. Difficulties in these banks could also damage otherwise sound banks as a result of interbank exposures. Therefore, it is in the interest of members and nonmembers alike to cooperate and to encourage as wide acceptance as possible of the basic principles of the Concordat.
The first major step toward cooperative action involving nonmembers was the International Conference of Banking Supervisors held in London in July 1979, where the precepts of the Concordat were generally accepted. A second meeting was held in September 1981 in Washington, D.C. Occasional worldwide meetings are an efficient way to disseminate information about international banking regulation, but their main importance is that they can set the stage for later direct contact between regulators on a bilateral basis.
Two new organizations similar to the Basle Committee have been formed recently, the Offshore Supervisor’s Group and the Commission of Latin-American and Caribbean Banking Supervisors and Regulatory Bodies (CLABSR). In October 1980, the Basle Committee sponsored a meeting with supervisors from major offshore centers in Basle. The participants at this meeting broadly endorsed the principles of the Concordat, but adaptations in their supervisory practices and policies will necessarily take time to implement. The Offshore-Group held additional meetings in September 1981 and again in September 1982. Among the important actions of this Group have been its endorsement of the principles of the Concordat and its support of the view that no foreign banking institution should escape supervision. The Group also recognizes the advantages of international supervision on a fully consolidated basis and, within the constraints imposed by national legislation, seeks to force the development of acceptable systems for the exchange of supervisory information. It has also found that, although diverse, its members share many common problems, and it has established a coordinating framework for working toward joint solutions to their problems. The agreement to form the CLABSR was concluded in July 1981. These kinds of organizational grouping and contact and dialogue among them are important further steps toward the strengthening of international banking supervision, which are needed to underpin the stability of the system. Individual cooperative actions, such as the opening of U.S. banking supervisors’ schools to foreign regulators, are also to be welcomed.
The purpose of this Appendix is to examine how the role of the national lender of last resort is modified in the presence of large-scale international banking activities. It is limited to a survey of concepts and practices.
The presentation is divided into five parts. The first defines “lender of last resort.” The second part examines the need for providing lender of last resort services in an internationally oriented banking system. The third part outlines the requirements for effectiveness of a lender of last resort. These include sensitivity to the full costs of inaction, effectively unlimited resources, and the ability to offset the undesirable effects the presence of a lender of last resort may tend to create.
The objectives of lenders of last resort in providing their services are examined in the fourth part. While they are naturally concerned with maintaining the world’s payments system, their primary motive is the protection of the domestic financial system. They may also wish to support their banks in the export of international banking services or to encourage foreign banks to locate domestically. As the various national lenders of last resort may attach different weights to these objectives, there might well be certain banks or groups of banks that would not receive direct support in the event of banking difficulties. However, the operation of the world’s payments system may be protected indirectly as national lenders of last resort pursue their primary goal, that is, protection of their domestic financial systems. The fifth part examines the available information about the provision of lender of last resort services in actual or hypothetical situations.
The Lender of Last Resort
Banks, as financial intermediaries, take on liquid short-term liabilities and use them to create less liquid, longer-term assets. Outflows of liabilities are normally offset by cutting back new lending or liquidating existing assets. When the financial system comes under severe stress, however, large-scale liquidations of deposits may occur. When this happens, otherwise solvent banks may fail as a result of large losses taken in the process of liquidating their assets, and bank customers may be forced into bankruptcy by the ensuing monetary and credit contraction.
The role of the lender of last resort is to stand ready in times of stress to provide credit to solvent, but temporarily illiquid, institutions. While lenders of last resort have at times assisted foreign intermediaries or foreign financial systems, in general their efforts have been directed to the protection of the domestic financial system. Certain classical writers, such as Thornton (1802) and Bagehot (1873), believed that the lender of last resort should aim at assuring the liquidity of the banking system as a whole rather than at supporting individual banks.33 In practice, however, lenders of last resort have also undertaken to provide liquidity to individual financial institutions whose solvency was endangered by liquidity problems.
Lender of last resort services have been provided by a variety of official institutions with the power, the resources, and the disposition to do so, such as monarchs and government treasuries (Kindleberger (1978), pp. 165–74). In the last century, however, this responsibility has become largely consolidated in the hands of central bankers.
Need for Lenders of Last Resort
The argument for the provision of services by official lenders of last resort is based on the notion that the social cost of bank failure (or multiple bank failures) significantly exceeds the private costs. This in turn is based on the notion that the financial system is inherently so fragile that one bank’s problems may easily spread to other banks. Guttentag and Herring (1981, p. 8) have observed that, in most industries, one firm’s failure will not hurt the credit standing of the other firms. But in banking, interbank credit extensions may cause one bank’s failure to damage the solvency of other banks. Many banks, especially large ones, also hold similar assets in their portfolios, so that one bank’s weakness may raise suspicions about other banks. On either ground, failure of one bank may result in deposit outflows from other banks. Deposit insurance, where it exists, may reduce depositors’ propensity to withdraw, but in no banking system does such insurance cover all deposits.
Large-scale withdrawals of deposits impair the liquidity of the system and ultimately could threaten bank solvency. To the extent that bank assets are not highly liquid, when large-scale withdrawals occur, asset liquidation is difficult and expensive, impairing the capital bases of the banks involved. Such withdrawals may also result in a potentially dangerous monetary contraction if the deposits should be moved into assets with higher required reserve ratios or into cash. The associated shortages of loanable funds may force customers into bankruptcy. The resulting loan losses may, in turn, further threaten bank solvency.
Disruption of financial intermediation by banks, of course, entails major problems for the real economy. Many authors have argued that a lender of last resort is thus needed to stem potential crises by providing sufficient funds, at a price, to offset the liquidity problems caused by a major outflow of funds. In this way, solvent banks may survive, the confidence of depositors in the safety of their funds may be restored, and the social costs of a banking crisis may be avoided.
These arguments probably apply with even greater force where banks have an international involvement. The role played in international banking by interbank credit is especially large. There is also a strong degree of similarity in many banks’ international bank portfolios, given the large share of international loans taken up by, or with the guarantee of, a few large sovereign borrowers and a small number of major multinational corporations. Information problems, moreover, may make it especially difficult for international depositors to distinguish between sound and unsound banks. The large size of individual deposits also implies not only minimal coverage by deposit insurance but also the possibility of abrupt outflows of deposits.
A general finding of the Kindleberger study (1978, pp. 218–26) of the history of bank crises and financial panics was that the existence of a lender of last resort can forestall many potential panics and that the crises that do occur in the presence of an effective lender of last resort tend to be shorter and milder than ones that take place without the presence of an effective lender of last resort. The central banks of most countries appear to accept the need to act as lender of last resort for their domestic banking systems, and they have generally supported the need for international cooperation in performing their role.
Criteria for the Effectiveness of Lenders of Last Resort
Guttentag and Herring (1981, pp. 13–23) have explored the criteria for the effectiveness of lenders of last resort at some length, and this part is largely based on their findings. According to them, an effective lender of last resort must meet three criteria. First, for its actions to be timely and effective, it must be sensitive to the full range of social costs resulting from its inaction. Second, its resources should be either unlimited or greater than its largest conceivable needs. Third, it must be able to limit socially unacceptable forms of risk taking that the presence of a lender of last resort may tend to promote. The last of these points refers to the fact that the presence of a lender of last resort may encourage banks in general to pursue less prudent policies. Troubled banks actually being supported by the lender of last resort, moreover, may engage in particularly imprudent activities, following what Guttentag and Herring (1981, p. 11) have called “go for broke” strategies in the hope of averting failure. Effective bank supervision is essential to meeting the third requirement.
International banking poses special problems for lenders of last resort in meeting these requirements. First, the social costs of international bank failures extend beyond the purview of any single country’s lender of last resort. International banking problems pose a danger to the international payments system that could cause losses to all users of international banking services. A crisis in one region may cause losses to depositors in other regions, as well as hurt current and potential borrowers in other parts of the world. Thus, no single lender of last resort may be willing to save a given international bank from a liquidity crisis, because the domestic consequences of inaction do not appear to outweigh the potential cost of support, even though the global consequences may.
Second, even when a lender of last resort has effectively unlimited resources in domestic currency, the fact that international bank deposits may be denominated in foreign currencies can pose problems. If the domestic lender of last resort does not have large foreign exchange holdings, support of its banks’ international operations will be effective only as long as currency convertibility is maintained. Such an operation could result in downward pressure on the home currency of the lender of last resort in the foreign exchange markets. If the country is unwilling to allow such a depreciation, it has to either cease providing lender of last resort support, borrow foreign exchange, or undertake domestic adjustment policies.
Another aspect of the availability of resources is collateralization. Most lenders of last resort protect themselves against default of the troubled bank on advances by requiring specified types of collateral against all lending. In some cases, foreign assets may not be acceptable as collateral. In others, needed collateral may be at foreign locations and may be legally unavailable for pledging against advances. If it can be pledged, official international cooperation may be needed to perfect these assets.34
Third, an international bank’s lender of last resort may also be unable to assure the prudent behavior of the troubled bank. To the extent to which the troubled bank has offices in foreign jurisdictions, the lender of last resort may not be in a position to supervise the activities of all of the offices of a troubled bank or even be able to gauge its overall solvency.
Even if ways are found to deal with these problems, so that national lenders of last resort are effective in providing their services to international banks, one of the chief arguments for the provision of such services might not be met. One implicit assumption in domestic operations by lenders of last resort has always been that banks will use the proceeds of the support by lenders of last resort to continue their intermediary role, an assumption that may not be applicable to international banking. International banking is not always marked by close customer relationships, so protecting the solvency of an international bank may not guarantee the bank’s continued role in international intermediation, or that important international borrowers will not lose their access to credit.
Motivations of Lenders of Last Resort with Respect to International Banks
The world’s payments system is a common good, with its benefits accruing to all users of international banking services. In the absence of an ultimate lender of last resort that is fully sensitive to these costs, the provision of services by lenders of last resort to a particular bank in a particular situation must be based on the benefits seen to each potential lender of last resort. If one (or more) of a country’s internationally oriented banks experiences problems, the major consideration for a potential lender of last resort is likely to be the implication of any action or inaction for its domestic financial system. Since international banking problems would tend to fall most heavily on some or all of a nation’s large banks, the protection of the domestic financial system could provide sufficient impetus to warrant the provision of services by lenders of last resort to domestic banks as well as to their foreign branches.
Frankel (1975, pp. 122–23) has suggested that lenders of last resort could be motivated to provide support on the basis of either nationality of bank charter or residence of facility. A lender of last resort may support the foreign branches of domestic banks, and possibly their foreign subsidiaries and joint ventures, to enhance the “brand name” capital of domestically chartered banks. Domestic banks could thus compete more effectively in the international market and export more international banking services. Support may also be extended to foreign subsidiaries and joint ventures, since the profits from these operations, as well as corollary business, accrue to the bank’s domestic parents.
Support based on residence of facility, on the other hand, would enhance the “brand name” capital of a potential banking jurisdiction and encourage more foreign banks to locate in that region. The local authority would benefit from this in the form of increased licensing fees, higher tax revenues, and increased local employment. A lender of last resort pursuing this policy would protect domestically located subsidiaries and joint ventures as well as branches of foreign banks.
The possibility of differing motivations among lenders of last resort suggests the possibility of gaps in coverage. A lender of last resort seeking to protect its domestic financial system would not necessarily support its country’s foreign subsidiaries and joint ventures. On the other hand, if the goal was to support the expansion of international banking by domestically chartered banks, all foreign offices could be supported, but local subsidiaries of foreign banks might not be supported. By the same token, however, multiple motivations could also lead to multiple coverage.
Evidence on the Provision of Lender of Last Resort Services
Given the requirements of an effective lender of last resort and the reasons for providing its services, who then will provide such a lender’s international services for a given bank in a given situation? The question is a difficult one, as lenders of last resort are generally unwilling to specify in advance the situations in which they would provide their services. Official statements on the subject have been rare. However, some generalizations may perhaps be made from statements by individual lenders of last resort as well as from their responses to recent events involving international banks.
The problem for lenders of last resort is that any indication of even the possible provision of their services, or any apparent generalization from cases where their services were provided, may reduce bank prudence. This view has been publicly espoused by central bankers. According to U.S. Federal Reserve Board Governor Wallich (1978, pp. 95–96), for example, “There are dangers in trying to define and publicize specific rules for emergency assistance to troubled banks, notably the possibility of causing undue reliance on such facilities and possible relaxation of needed caution on the part of all market participants.” Bank of England Executive Director (now Deputy Governor) McMahon (1978, pp. 108–109) expressed the same view: “… banks might be tempted to sail too close to the wind with the presumption that support would automatically be forthcoming if they got into difficulties.” Central bankers attempt to minimize this potential by generating uncertainty about the availability of the facilities of lenders of last resort. When facilities are provided, lenders of last resort go to great pains to stress the specificity of the case and to warn bankers that such services will not necessarily be available in the future.
Guttentag and Herring (1981, pp. 27–28) have contended that this lack of assurance may not necessarily be socially optimal. First, they argue that it falls primarily on smaller banks, since large banks are perceived by depositors to have more reliable access to the facilities of lenders of last resort and therefore are able to attract greater funds more easily and independently of their risk. Against this view, however, it should be noted that, following the failure of Bankhaus I.D. Herstatt, much of the tiering of interest rates that occurred was directed against banks of particular nationalities, even when such banks were large; and the tiering after the Penn Square National Bank failure in 1982 was particularly pronounced for some very large banks. Second, Guttentag and Herring argue that such statements may make uninsured depositors more likely to panic in the event of systemic problems.
Despite the general secretiveness of lenders of last resort, some information is available about possible support from them. According to Andrew Brimmer (1976, pp. 28–29), at the meeting of Central Bank Governors of the Group of Ten and Switzerland at the BIS in July 1974 following the collapse of Bankhaus I.D. Herstatt, a general agreement as to lenders of last resort was reached in principle. In deference to one member’s objections, however, no explicit commitment was made.
On September 10, 1974, however, the BIS released the following communiqué on behalf of the Central Bank Governors from the countries of the Group of Ten and Switzerland:
- The Governors . . . had an exchange of views on the problem of the lender of last resort in the Euro-markets. They recognized that it would not be practical to lay down in advance detailed rules and procedures for the provision of temporary liquidity. But they were satisfied that means are available for that purpose and will be used if and when necessary.
Some observers have speculated that behind this broad statement was an agreed plan with respect both to the allocation of responsibilities of lenders of last resort and the circumstances under which such support would be provided to banks experiencing difficulties. Although such speculation is interesting, subsequent developments with respect to individual banks, as in the case of Banco Ambrosiano, have cast doubts on whether such firm commitments exist. Nonetheless, central bankers (for example, Wallich (1978) and McMahon (1978)), while noting the impropriety of making definite advance commitments, stressed that the infrastructure for providing international assistance by lenders of last resort was in place.
Some analysts have contended that the Concordat on banking supervision of the Basle Committee35 could be applied to the allocation of responsibilities to lenders of last resort. There is, however, no direct link between the two, and it has often been pointed out that the work of the Basle Committee (also called the Cooke Committee) involves supervision, not financial support. The coordination of responsibilities of lenders of last resort lies with the BIS Committee on Euromarkets. Moreover, a number of the country representatives on the Basle Committee are not central bankers.
Empirical evidence on the division of responsibility among lenders of last resort in the event of an international banking crisis is lacking, given the fortunate absence of such crises in recent years. Beyond their primary function of directly or indirectly providing liquidity to illiquid but solvent institutions, however, lenders of last resort generally acknowledge a related responsibility for ensuring an orderly resolution of the affairs of failing banks, as disorderly failures could lead to uncertainty about other banks and a consequent demand for services of lenders of last resort in the narrower sense. Few banks with significant international operations have run into trouble in recent years. Four cases seem worthy of note: Bankhaus I.D. Herstatt, the Franklin National Bank, the Israel-British Bank, and Banco Ambrosiano.
The failure of Bankhaus I.D. Herstatt clearly fell within the sphere of responsibility of the German authorities and thus did not raise significant jurisdictional questions. The treatment of foreign creditors, however, was an issue for a time. Initially, some questions were raised as to whether foreign creditors would receive treatment comparable to that accorded to domestic creditors, but in the end their treatment of the former was at least as favorable as their treatment of the latter. This appeared to demonstrate an awareness on the part of lenders of last resort of a need to be particularly careful about international aspects of bank failures (Spero (1980), pp. 110–13).
Responsibility for resolving the affairs of the Franklin National Bank was equally clear cut, but this bank failure provides an example of international cooperation in providing financial support. The U.S. Federal Reserve permitted discount window borrowings to support the bank’s branch in London from the time problems were announced until the bank was merged, effectively accepting responsibility for its foreign branches. In doing so, it received the cooperation of the Bank of England.36
Partly as a result of fraud at its parent bank and partly as a result of the difficulties after the failure of Bankhaus I.D. Herstatt, the London subsidiary of the Israel-British Bank of Tel Aviv failed in July of 1974. After the collapse, British and Israeli authorities both maintained that they did not have responsibility for the failed bank. In the end, the Israeli authorities accepted responsibility. As a compromise, but not as a precedent, the Bank of Evidence on the Provision of Lender of Last Resort Services England contributed ₤3 million to the Israel-British Bank’s pool of assets (Spero, (1980), pp. 156–57).
The Italian Banco Ambrosiano failed in the summer of 1982. Under the guidance of the Italian authorities, the parent bank was closed and reorganized, with full protection provided to depositors. Banco Ambrosiano Holding of Luxembourg, a 65 per cent controlled subsidiary, however, was allowed to fail with no guarantee of depositor protection. The Luxembourg authorities and the creditors of Banco Ambrosiano Holding objected to this course of action. The basic issue was obscured by certain technical questions,37 but it nonetheless points up the possibility of gaps in coverage by lenders of last resort.
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Baeyens, Herman, “Banking Supervision on a Consolidated Basis,” in International Conference of Banking Supervisors: Record of the Proceedings, London, July5—6, 1979, pp. 43–46.
Bagehot, Walter, Lombard Street: A Description of the Money Market (London: John Murray, 1924). Originally appeared in 1873.
Blunden, George, “International Co-operation in Banking Supervision,” Bank of England Quarterly Bulletin, Vol. 17 (September 1977), pp. 325–29.
Brimmer, Andrew F., “International Finance and Management of Bank Failures: Herstatt vs. Franklin National,” paper prepared for a presentation before a joint session of the American Economic Association and the American Finance Association, Atlantic City, New Jersey, September16,1976.Reproduced from typewritten copy.
Cooke, W.P., “Developments in Co-operation Among Banking Supervisory Authorities,” Bank of England Quarterly Bulletin, Vol. 21(June 1981), pp. 238–44.Paper prepared for the Conference on the Internationalization of the Capital Markets,New York, March1981.
Dale, Richard, Bank Supervision Around the World(New York:Group of Thirty,1982).
Ellis, J.G., “Eurobanks and the Inter-Bank Market,” Bank of England Quarterly Bulletin, Vol. 21(September 1981), pp. 351–64.
Frankel, Allen B., “The Lender of Last Resort Facility in the Context of Multinational Banking,” Columbia Journal of World Business, Vol. 10(Winter1975), pp. 120–27.
Friedman, Milton, AnnaJacobson Schwartz, A Monetary History of the United States, 1867–1960,National Bureau of Economic Research Studies in Business Cycles, No. 12(Princeton, New Jersey:Princeton University Press,1963).
Grubel, M.G., “Risk, Uncertainty, and Moral Hazard,” Journal of Risk and Insurance, Vol. 38(March1971), pp. 99–106.
Guttentag, Jack, and RichardHerring, “The Lender of Last Resort Function in an International Context,” Rodney L. White Center for Financial Research, Working Paper No. 9–81(Philadephia:The Wharton School, University of Pennsylvania, 1981). Reproduced from typewritten copy.
Humphrey, Thomas M, “The Classical Concept of the Lender of Last Resort,” Economic Review, Federal Reserve Bank of Richmond, Vol. 61(January/February1975), pp. 2–9.
Kindleberger, Charles P., Manias, Panics, and Crashes: A History of Financial Crises(New York:Basic Books,1978).
McMahon, C.W., “Central Banks as Regulators and Lenders of Last Resort in an International Context: A View from the United Kingdom,” in Key Issues in International Banking, Federal Reserve Bank of Boston, Conference Series No. 18 (1978), pp. 102–110. Paper presented at a conference held in Melvin Village, New Hampshire, October 1977.
Revell, Jack R.S., Costs and Margins in Banking: An International Survey(Paris: Organization for Economic Cooperation and Development, 1980). Also published in French.
Spero, Joan Edelman, The Failure of the Franklin National Bank: Challenge to the International Banking System(New York:Columbia University Press for the Council on Foreign Relations,1980).
Thornton, Henry, An Enquiry into the Nature and Effects of the Paper Credit of Great Britain(New York:Farrar and Rhinehart,1939). Originally appeared in 1802.
Wallich, Henry C, “Central Banks as Regulators and Lenders of Last Resort in an International Context: A View from the United States,” in Key Issues in International Banking, Federal Reserve Bank of Boston, Conference Series No. 18 (1978), pp. 91–98.Paper presented at a conference held in Melvin Village,New Hampshire,October1977.
“What Was Agreed in Basle,” Euromoney(October1974),p. 5.
Williams, R.C.,others,International Capital Markets: Recent Developments and Short-Term Prospects,IMF Occasional Paper No. 1(Washington:International Monetary Fund,September1980).
Williams, Richard C., G.G. Johnson, others, International Capital Markets: Recent Developments and Short-Term Prospects, 1981, IMF Occasional Paper No. 7(Washington:International Monetary Fund,August1981).
Williams, Richard C., G.G. Johnson,others, International Capital Markets: Developments and Prospects, 1982, IMF Occasional Paper No. 14(Washington:International Monetary Fund,July1982).
The term “safety net” is often used in a narrow sense to mean a system of providing financial support for troubled institutions; here, the term includes all aspects of the safeguards that enhance the stability of banking systems.
Grubel (1971) discusses the concept of moral hazard. The expression originated with the economics of insurance, where it initially referred to the danger of fraud where insurance applied. It has since acquired the more general definition used here.
A major factor in such shifts in the United States appears to have been the deposit concentration associated with the growth of money market funds. Small deposits had shifted from banks, where deposit insurance would have limited the incentive to withdraw, to money market funds. The large-scale redeposits of such funds were only partly covered by insurance and, hence, were subject to withdrawal from banks whose situation appeared at all doubtful.
The classification of countries here is the standard classification of the International Monetary Fund (see International Financial Statistics).
The data on bank claims cited here, which come from the Bank for International Settlements (BIS), are not fully comprehensive. Some countries have substantial liabilities to banks outside the BIS reporting area.
A brief description of financial developments during the 1974 experience can be found in Williams and others (1980), pp. 23–26.
There are major differences in the definition of capital among banking systems. Problems of double counting also arise from the fact that banks in one country may own banks in other countries. This figure thus provides only a broad order of magnitude.
The figures in Table 5 take into account risk transfers in measuring exposure. The two main sorts of risk transfers involved are guarantees by parent organizations located in other countries and guarantees by export credit insurance agencies located in the country of the lending bank. The fact that much of the nominal exposure of banks to the offshore centers is comprised of credit to branches of banks based in other countries accounts for the much lower exposures to those centers in Table 5, compared with Table 4.
One particular aspect of loan agreements that has sometimes been mentioned as a problem in interbank relationships is the default clause. It should be noted, however, that in syndicated loans such clauses generally become operative only if a large majority of the participating banks agree.
Neither the Franklin National Bank nor Bankhaus I.D. Herstatt, for example, was considered to be undercapitalized prior to its difficulties.
These data are taken from Revell (1980). Because of conceptual differences and problems of data availability, data on capital asset ratios should be interpreted with caution; in particular, they cannot be used for cross-country comparisons.
In most countries, moreover, supervisors give implicit or explicit recognition to the riskiness of a bank’s portfolio in measuring capital adequacy. A change in the mix of assets could thus lead to a supervisory judgment that capital had become more adequate, even though the ratio of capital to unweighted assets had not changed.
At the same time, of course, such actions reduce reported bank profits, a practice which may be awkward for bank management when profits are poor. Hidden reserves provide bank management with a flexibility in declaring profits and hiding losses that does not exist in countries with more stringent disclosure requirements. Abuses have led to a recent tightening of procedures in Switzerland. The case of a bank declaring a substantial profit when, in fact, it had incurred large losses in silver speculation led to a requirement that banks disclose the extent to which they use hidden reserves to maintain the appearance of continued profitability. Hidden reserves, nonetheless, constitute an important addition to bank capital in a number of systems.
The BIS and the Fund are working on projects in this area. Going a step further, the staff of the European Community have advocated an international extension of the systems maintained by a number of the Community’s members for reporting large credits to individual borrowers.
Appendix II provides more detail on the role of national lenders of last resort in international banking.
Arthur Burns, when Chairman of the Board of Governors of the U.S. Federal Reserve System, reportedly was asked by a senior banker, “What would you do if my bank ran into problems?” The reply: “That, sir, is a question I would have to discuss with your successor.” The dilemma faced by lenders of last resort has been described by Spero (1980) as “the problem of trying to make depositors feel confident without making bankers feel complacent.”
The main source for the description here of the events of 1974 is Spero (1980). It provides a thorough study of the failure of the Franklin National Bank, with extensive allusions to the failure of Bankhaus I.D. Herstatt and the other bank failures of the period.
The major exceptions are exchange or other restrictions applied by the host country that prevent the branch from meeting its obligations, though even these exceptions have been challenged in the U.S. courts. Legal responsibility, of course, does not mean that obligations are carried out in all cases.
The balance of payments constraint may have been one factor in Argentina’s attitude on its responsibility to foreign creditors in the failure of Banco Intercambio Regional.
Most central banks outside the Group of Ten and Switzerland, however, did not follow the first initiative, and only a limited number of industrial countries participated in the second. For a discussion of developments during this period, see Blunden (1977), pp. 326–27.
Peter Cooke’s speech, “Developments in Co-operation Among Supervisory Authorities,” delivered at the Conference on the Internationalization of the Capital Markets in New York in March 1981 (reproduced in the June 1981 issue of the Bank of England Quarterly Bulletin), is a principal source of information in this area. Two other primary sources on this topic are Blunden (1977) and Spero (1980).
This document, which was released to the public in March 1981 by Peter Cooke, was reproduced in Williams, Johnson, and others (1981).
In this context, country risk was defined as the risk faced by banks that one or more borrowers, whose liquidity and solvency by normal tests are not in question, may be unable to service their debts because of events in their own country.
Attempts to expand this legislation to banks’ foreign subsidiaries and to allow direct foreign inspection, however, have been abandoned.
Besides the topics mentioned above, other subjects reviewed by the Basle Committee include “the role of profit and loss analysis in bank supervision; techniques of rescue and support; deposit protection arrangements in different countries; the supervision of banks’ trust business; and the prudential implications of certain aspects of loan syndication agreements” (Cooke (1981), p. 242).
In the case of the Franklin National Bank, the Bank of England quickly and effectively aided the Federal Reserve Bank of New York by accepting in trust the assets of Franklin’s London branch, thereby permitting use of these assets as collateral for discount window borrowings at the Federal Reserve Bank of New York (Spero (1980), pp. 148–49).
See footnote 34.
Banco Ambrosiano Holding was technically a holding company, not a bank. The Italian authorities cited this as one reason for their inaction. The Luxembourg authorities, at the same time, pointed out that they had no supervisory responsibility for holding companies, implying that they could certainly not be expected in that case to share in the responsibilities of lender of last resort.
Occasional Papers of the International Monetary Fund
1. International Capital Markets: Recent Developments and Short-Term Prospects, by a Staff Team Headed by R.C. Williams, Exchange and Trade Relations Department. 1980.
2. Economic Stabilization and Growth in Portugal, by Hans O. Schmitt. 1981.
3. External Indebtedness of Developing Countries, by a Staff Team Headed by Bahram Nowzad and Richard C. Williams. 1981.
4. World Economic Outlook: A Survey by the Staff of the International Monetary Fund. 1981.
5. Trade Policy Developments in Industrial Countries, by S.J. Anjaria, Z. Iqbal, L.L. Perez, and W.S. Tseng. 1981.
6. The Multilateral System of Payments: Keynes, Convertibility, and the International Monetary Fund’s Articles of Agreement, by Joseph Gold. 1981.
7. International Capital Markets: Recent Developments and Short-Term Prospects, 1981, by a Staff Team Headed by Richard C. Williams, with G.G. Johnson. 1981.
8. Taxation in Sub-Saharan Africa. Part I: Tax Policy and Administration in Sub-Saharan Africa, by Carlos A. Aguirre, Peter S. Griffith, and M. Zühtü Yücelik. Part II: A Statistical Evaluation of Taxation in Sub-Saharan Africa, by Vito Tanzi. 1981.
9. World Economic Outlook: A Survey by the Staff of the International Monetary Fund. 1982.
10. International Comparisons of Government Expenditure, by Alan A. Tait and Peter S. Heller. 1982.
11. Payments Arrangements and the Expansion of Trade in Eastern and Southern Africa, by Shailendra J. Anjaria, Sena Eken, and John F. Laker. 1982.
12. Effects of Slowdown in Industrial Countries on Growth in Non-Oil Developing Countries, by Morris Goldstein and Mohsin S. Khan. 1982.
13. Currency Convertibility in the Economic Community of West African States, by John B. McLenaghan, Saleh M. Nsouli, and Klaus-Walter Riechel. 1982.
14. International Capital Markets: Developments and Prospects, 1982, by a Staff Team Headed by Richard C. Williams, with G.G. Johnson. 1982.
15. Hungary: An Economic Survey, by a Staff Team Headed by Patrick de Fontenay. 1982.
16. Developments in International Trade Policy, by S.J. Anjaria, Z. Iqbal, N. Kirmani, and L.L. Perez. 1982.
17. Aspects of the International Banking Safety Net, by G.G. Johnson, with Richard K. Abrams. 1983.
18. Oil Exporters’ Economic Development in an Interdependent World, by Jahangir Amuzegar. 1983.
19. The European Monetary System: The Experience, 1979–82, by Horst Ungerer, with Owen Evans and Peter Nyberg. 1983.
20. Alternatives to the Central Bank in the Developing World, by Charles Collyns. 1983.
21. World Economic Outlook: A Survey by the Staff of the International Monetary Fund. 1983.
22. Interest Rate Policies in Developing Countries, by the Research Department of the International Monetary Fund. 1983.
23. International Capital Markets: Developments and Prospects, 1983, by Richard Williams, Peter Keller, John Lipsky, and Donald Mathieson. 1983.
24. Government Employment and Pay: Some International Comparisons, by Peter S. Heller and Alan A. Tait. 1983.