Offshore Banking: An Analysis of Micro- and Macro-Prudential Issues

56 Pages Posted: 10 Feb 2006

See all articles by Luca Errico

Luca Errico

International Monetary Fund (IMF)

Alberto Musalem Borrero

International Monetary Fund (IMF) - Policy Development and Review Department

Date Written: January 1999

Abstract

The paper takes a closer look at offshore banking - a pervasive practice that has played a role in recent crises. Offshore banking is an increasingly attractive alternative to the sometimes heavily regulated financial markets of emerging economies. From a microeconomic vantage point, offshore banks seem to exploit the risk-return tradeoff by being more profitable than onshore banks, and in many instances also more leveraged. Risks stemming from offshore activities may be easily transmitted onshore with systemic consequences. Current prudential and supervisory frameworks are broadly adequate for risk management if effectively and universally implemented.

Keywords: Offshore Banking, Cross-Border Capital Flows, Banking Problems, Financial Crises, Prudential Regulations, Banking Supervision

JEL Classification: F21, F34, E58, G18, P51

Suggested Citation

Errico, Luca and Borrero, Alberto Musalem, Offshore Banking: An Analysis of Micro- and Macro-Prudential Issues (January 1999). IMF Working Paper, Vol. , pp. 1-56, 1999. Available at SSRN: https://ssrn.com/abstract=880532

Luca Errico (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Alberto Musalem Borrero

International Monetary Fund (IMF) - Policy Development and Review Department ( email )

700 19th St. NW
Washington, DC 20431
United States

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