Financial System Standards and Financial Stability: The Case of Basel Core Principles

35 Pages Posted: 11 Aug 2009

See all articles by David Marston

David Marston

International Monetary Fund (IMF)

Date Written: May 2001

Abstract

The relationship between the observance of financial system standards and financial stability is complex owing to the multitude of macroeconomic and structural factors affecting stability. Therefore, assessments of standards in terms of technical criteria for compliance needs to be reinforced with additional information on other factors affecting risks in order to assess financial stability. Preliminary evidence from country data on observance of Basel Core Principles (BCPs) suggests that indicators of credit risk and bank soundness are primarily influenced by macroeconomic and macroprudential factors and that the direct influence of compliance with Basel Core Principles on credit risk and soundness is insignificant. BCP compliance could, however, influence risk and soundness indirectly through its influence on the impact of other macro variables.

Keywords: Financial systems, Bank supervision

Suggested Citation

Marston, David, Financial System Standards and Financial Stability: The Case of Basel Core Principles (May 2001). IMF Working Paper No. 01/62, Available at SSRN: https://ssrn.com/abstract=1446185

David Marston (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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