Prudential Issues in Less Diversified Economies

32 Pages Posted: 6 Feb 2006

See all articles by Aditya Narain

Aditya Narain

International Monetary Fund (IMF)

Pau Rabanal

La Caixa

Steen Byskov

International Monetary Fund (IMF)

Date Written: October 2003

Abstract

This paper examines the prudential issues associated with credit concentration in less diversified economies (LDEs), which are identified as countries where one or two sectors represent a large share of exports. In preparing this analysis, the characteristics of their financial and banking systems and their interactions with the real sector are studied. The paper also examines the limitations on portfolio diversification confronting banks in these countries, both from the viewpoint of the real sector and of the financial system. The paper finds that banks in LDEs, particularly in low-income countries, appear to face higher risk than their peers in more diversified economies and makes suggestions for policy options and regulatory practices which could be encouraged in such systems.

Keywords: Less Diversified Economies, Credit Concentration Risks, Capital Adequacy

JEL Classification: G21, G38

Suggested Citation

Narain, Aditya and Rabanal, Pau and Byskov, Steen, Prudential Issues in Less Diversified Economies (October 2003). IMF Working Paper No. 03/198, Available at SSRN: https://ssrn.com/abstract=880328

Aditya Narain (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Pau Rabanal

La Caixa ( email )

Av Diagonal 629
Barcelona, 08028
Spain

Steen Byskov

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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