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

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 micro economic 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.

Offshore financial centres: the political economy of regulation

“…Consequently, our Index ranges from 0 to 2. 34 Rose and Spiegel (2006) build up a OFC classification gathering data from three sources: The Financial Stability Forum, the IMF and Errico and Musalem (1999).…”

Offshore Strategies in Global Political Economy: Small Islands and the Case of the EU and OECD Harmful Tax Competition Initiatives

“…The last 30 years have witnessed a rapid expansion in offshore financial activity. Over 100 jurisdictions (Palan and Abbott 1996;OECD 1998;Errico and Musalem 1999;Financial Stability Forum 2000;US State Department 2000) tender offshore financial services controlling combined assets worth $11.5 trillion (Tax Justice Network 2005b). Hampton (1996b) contends this blossoming offshore sector is consequent upon the existence of four 'spaces': political, regulatory, fiscal and secrecy spaces.…”

Combating Black Money: Money Laundering and Terrorism Finance, International Cooperation and the G8 Role

“…See also Alexander (2001). 5 On differences and similarities between NCCT jurisdictions and offshore centres see Mitchell (2003), Alworth and Masciandaro (2004); on the offshore centres issues see also Errico and Musalem (1999), Hampton and Christensen (2002), Masciandaro (2004). 6 On the qualitative and quantitative aspects of money laundering see Tanzi (2000).…”