segunda-feira, março 17, 2014

Caveat creditor - 2

A recent  paper titled Caveat Creditor by Philip Turner of the BIS  presented at CEMLA’s  Conference in Mexico City, 19–20 July 2012*  addresses one area where international monetary cooperation has  failed – the role of surplus or creditor countries in limiting external imbalances. This applies not only to post-crisis situations (when restrictive policies in deficit or indebted countries require some offset from strong external demand), but also to the pre-crisis lending policies of creditors.

As current account imbalances have grown, and the accumulated stocks of international assets and liabilities have become huge. Many have argued that there is a strong link between imbalances and financial stability.

The financing of large and persistent external deficits often takes dangerous forms.  Capital flow reversals, always difficult to predict, can have devastating consequences for debtors. The stock dimensions of external imbalances – net external positions, leverage in national balance sheets, currency/maturity mismatches, the structure of ownership of assets and liabilities, over-reliance on debt and the impact on bank  credit – can threaten financial stability in creditor as in debtor countries.
For these reasons, creditor countries have a responsibility both for avoiding “overlending” and for devising cooperative solutions to excessive or prolonged imbalances.
The need for some symmetry in adjustment between creditors and debtors is hardly novel. It was central to Keynes’s proposals for international  monetary arrangements in the post-war world. It is within the IMF’s mandate (although creditor countries, which do not need IMF money, are less susceptible to their influence).

It remains an important but as-yet-unresolved issue of international monetary reform.

The phrase "caveat creditor" was used in this blog PPP Lusofonia for the first time on 18-January 2012,
Informa   tion asymmetries in financial asset trading
The Iceland  e
The Economist 2009, Caveat Creditor 
Crisis  caused by (over)confidence of the creditors
Debt Workout 101