Precarious Credit Equilibria: Reflections on the Asian Financial Crisis

Bisignano, Joseph

doi:10.2139/ssrn.850072

Cited by 5 publications

(5 citation statements)

References 31 publications

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“…Table 1 reports responses to questions concerning over‐optimism. Over‐optimism was widely emphasised in the academic literature, the financial press and among policymakers as one of the primary causes of the Asian crisis (see, for example, Aghevli, 1999, or Bisignano, 1999). Given that there was at the time widespread consensus that over‐optimism was indeed one of the causes of the crisis, most of our questions were aimed at establishing the main sources of over‐optimism.…”

Section: Over‐optimismmentioning

confidence: 99%

Financial Liberalisation and the South Korean Financial Crisis: An Analysis of Expert Opinion

Amess

Demetriades

2010

World Economy

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This paper provides a novel analysis of the South Korean financial crisis drawing on the findings of a unique survey of IMF/World Bank and South Korean experts. The survey reveals that over-optimism and inadequate recognition of financial risks inadvertently led to excessive risk-taking by Korean financial intermediaries. It also indicates that the sources of over-optimistic assessments of East Asian economies were mainly to be found outside East Asia and included the Bretton Woods Institutions themselves, Western media and analysts. In Korea, weaknesses in risk management were the result of (i) lack of expertise in relation to handling the risks associated with capital flows, and (ii) disincentives to manage risks emanating from a relatively successful history of government-provided safety nets for both industry and banking. Financial liberalisation widened risk-taking opportunities, by allowing Korean financial institutions to both borrow from and lend to institutions outside Korea. It also created additional disincentives for managing risk by intensifying competition and eroding bank franchise values. Weaknesses in prudential regulation allowed bank portfolios to become riskier, especially in terms of increased liquidity risk as a result of maturity mismatches between dollar-denominated assets and liabilities. The liquidity crisis, which followed the re-assessment of the South Korean economy by international lenders in late 1997, triggered a full-blown financial crisis because of the absence of an effective international lender of last resort. Copyright 2009 Blackwell Publishing Ltd. Journal compilation 2009 Blackwell Publishing Ltd.

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Section: Over‐optimismmentioning

confidence: 99%

Financial Liberalisation and the South Korean Financial Crisis: An Analysis of Expert Opinion

Amess

Demetriades

2010

World Economy

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“…25 Giannini (1999) and Bisignano (1999) both draw attention to the major growth in international interbank lending to emerging market countries in Asia in the 1990s and the possible role played by implicit government guarantees. The contribution of implicit guarantees is also noted in an official review of the supervisory lessons to be drawn from the Asian crisis.…”

Section: Recent Behaviour Of International Interbank Activity: the Liquidity Valvementioning

confidence: 99%

“…Short-term debt flows to East Asia and the Pacific went from $43 billion in 1995 to -$6.1 billion in 1998, a good portion of which were interbank flows. Giannini (1999), Bisignano (1999) and others have pointed in particular to the enormous growth in international interbank flows to Thailand, Malaysia, Indonesia, Korea and the Philippines in 1995 and 1996, and their subsequent tumble. What begs explanation is the large growth in commercial bank lending to Asian countries from 1995 to 1997, much of which was interbank lending.…”

Section: Push and Pull Of Capital Flow Crisesmentioning

confidence: 99%

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Information, Liquidity and Risk in the International Interbank Market: Implicit Guarantees and Private Credit Market Failure

Bernard¹,

Bisignano²

2000

SSRN Journal

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“…Précisons qu'à cette période, même les spreads de taux sur les émissions des pays en voie de développement n'étaient pas encore touchés par la crise de l'Asie de l'Est. Voir Bisignano (1999), graphique 11. terme des taux d'intérêt sur les émissions d'un emprunteur de référence (choisi par Datastream) pour toute date donnée : l'emprunteur de référence est celui qui est supposé fixer le plancher des taux du marché considéré. Ce programme ajuste une courbe aux observations des rendements à l'échéance de l'emprunteur de référence, aux dates sélectionnées, et fournit ainsi un profil temporel continu des rendements, qui peut servir de repère à la comparaison.…”

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Discrimination par le marché entre les dettes des États membres de l'UEM

Frémont¹,

Mélitz²,

Zumer³

2000

ofce

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[eng] What will become of the interest spreads on the debts of different sovereign borrowers under EMU ? Will these always be small and merely reflect differences in liquidity, as they do today, or will they progressively widen and also reflect default risk? Such are the questions posed in this study. We offer a variety of reasons for doubting that the current convergence of interest rates in the euro zone constitutes a permanent situation. Prominent among these is a large set of new data of our own construction concerning the spreads on the debts of lower-level governments, or governments without money-issuing power, for a dozen countries. Those spreads clearly give rise to the suspicion that default-risk premia may reappear in the yields on the debts of different sovereigns in EMU. JEL Codes : E43, E60, F36 [fre] Que deviendront les « spreads1 » de taux d'intérêt qui prévalaient encore récemment entre les dettes des différents États souverains de l'Union économique et monétaire? Ces spreads, bien sur, ne résulteront plus des primes de taux de change. Néanmoins, ils pourraient clairement persister. Ils proviendraient alors pour une part des différences de liquidité relativement aux émissions d'un emprunteur de référence, sûrement le « Bund » allemand ou le Trésor public français, ou une combinaison des deux (peut-être aussi avec le gouvernement néerlandais). Mais, de toute évidence, les spreads pourraient également persister en raison du risque de défaut. Dès lors, quelle sera l'ampleur de ces différentiels et jusqu'où pourraient-ils augmenter en fonction du risque ? Telle est l'une des questions importantes que se posent actuellement les économistes qui étudient l'UEM, en raison notamment de son lien étroit avec les préoccupations sous-jacentes au traité de Maastricht : dérapage possible des dettes publiques, risques de monétisation, refus proclamé du « bail-out » (renflouement).

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Precarious Credit Equilibria: Reflections on the Asian Financial Crisis

Cited by 5 publications

References 31 publications

Financial Liberalisation and the South Korean Financial Crisis: An Analysis of Expert Opinion

Financial Liberalisation and the South Korean Financial Crisis: An Analysis of Expert Opinion

Information, Liquidity and Risk in the International Interbank Market: Implicit Guarantees and Private Credit Market Failure

Discrimination par le marché entre les dettes des États membres de l'UEM

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