Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87859
Authors: 
Rojas-Suárez, Liliana
Weisbrod, Steven R.
Year of Publication: 
1997
Series/Report no.: 
Working Paper, Inter-American Development Bank, Office of the Chief Economist 336
Abstract: 
This paper raises fundamental questions about how banks in Latin America ought to be supervised. The concentration of wealth holders in Latin America and the equity markets` resulting illiquidity permit investors who control banks to subvert the intent of capital requirements, even when the bank itself is subject to rigorous accounting standards. A number of policy implications follow from the analysis. Three of policy recommendations derived from this analysis can be successfully implemented in the short run. Latin American supervisors should focus on: improving the markets that already work in Latin America, which currently are markets for bank liabilities; severely limiting public safety nets for bank liabilities so that risky banks face a high price for raising liabilities; and encouraging macroeconomic policies to play a much more important role in restraining bank risk in Latin America than in the industrial countries.
Document Type: 
Working Paper

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