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INTERNATIONAL LOANS; THE NEW INTERAGENCY EXAMINATION TREATMENT Remarks Jo h n Federal of J. B a l l e s , P r e s i d e n t Re s e r v e Bank Meeting Ba n k e r s ' Association Coronado, April of San Fr a n c i s c o with for Fo r e i g n California 9, 1984 Tr a d e 1 - - INTERNATIONAL LOANS: THE NEW INTERAGENCY EXAMINATION TREATMENT LDC D e b t P r o b l e m As y o u k no w, Recovery and F i n a n c i a l provisions I would the relating like to Some Each which, straits in 1982, developed erupted, these additional "b i g -b a n k persuade U.S. was of the lending, implications history of the Ac t painfully so, of the a l a r m over M e xico's with examination debt of ," a n d it the of treatment the International the Fu n d , took a in the great "LDC of U.S. in the banks debt have of by l e s s to of first kept U.S. banks in the de ba te Monetary members Un i t e d financial "crisis" during deal , debt Concerns role reluctant So m e useful the the LDC pronounced quite was of over was it to when renegotiations first that owed voiced particularly at is a l o t of p r e s s . Controversy support Co n g r e s s international the to b o l s t e r bailout some contained the were wide ly alive, Co n g r e s s of which concern received subsequent to L D C s oh 1983, International they o v e r t h e a m o u n t of over p r o p o s a l s The has countries and today perhaps starting concerns lending on is a w a r e , States supervision the , loans crisis" United as year passed S t a b i l i t y A c t of concentrate background of us last to t h e Ac t , e s p e c i a l l y international a Congress Fund, approve argued effort St a t e s ' best it to was INTERESTS TO A P P R O V E LEGISLATION FEDERAL THAT BANK OF AS WERE REGULATORS FINALLY REGULATORS SUPERVISION IT WERE, THE ADDITIONAL PASSED, TO TAK E INTERNATIONAL CLOSE EARLIER TH E CERTAIN THE FOCUSED ON F O U R POINTS, FEDERAL BANKING REGULATORS CONSULT COUNTERPARTS DIRECTLY ON W H A T THEREFORE DESIGNED ABOUT OTHER TO S T R E N G T H E N Re q u i r e m e n t s of of these FOR A S S E T S EXPOSURE PROCEDURES I SHOULD AN D TRANSFER PAST , BUT SOME IT IS T H A T TO C O U N T R Y TO S T R E N G T H E N TH E "MARCHING RESERVE THE THE ESSENTIALLY NOT I WILL THE AND O T H ER THAT THE FOREIGN .. D O E S TODAY, OF AND O R D E R S ," REQUIREMENT THEIR ADEQUACY IMPROVE NOTE RISK a Ad, SYSTEM requirement VALUE THE RISK BEAR CONCENTRATE WHICH ARE U.S. OF BANKING MORE THE PARENTHETICALLY USUAL HAVE MADE PRACTICE special BECAUSE AGENCIES CLOSELY AND THAT reserves OF R I S K . SHOULD be A MONITOR ESTABLISH OR T R A N S F E R ADEQUACY INTERCHANGEABLY that IS I M P A I R E D THAT COUNT RY IN E V A L U A T I N G WRITERS IS THE is WHOSE FOR A S S U R I N G INTO A C C O U N T AND — WITH REQUIREMENTS THE Ac t SECOND R E Q U IREMENT BANK CAPITAL DIRECTED CONGRESS OF T H E S E In THE LENDING. first SE T A S I D E TO I W A N T TO D I S C U S S ON T H E INTERNATIONAL The BANK THESE IMF, THE ALSO STEPS FEDERAL HAD R E C O M M E N D E D FOR CONGRESS LENDING, TO W H A T ONE SUPPORT RISK ARE TAKEN OF A B A N K 's C A P I T A L . I WILL THROUGHOUT USE MY T A L K. DISTINCTIONS BETWEEN NOW THE TO T R E A T COUNTRY RISK In THE THE T W O T E R M S T W O AS E S S E N T I A L L Y - THE S A ME, RISK AMD I SHALL I AM T A L K I N G FOLLOW ABOUT COUNTRY W I L L BE U N A B L E SERVICE AND RE P AY I WILL MINUTE, BUT FIRST R E Q U I R E M E N T OF RECEIVED IN C O N N E C T I O N LOAMS THE ASSOCIATED ORIGINAL CONSIDERATION IN T H E LOAN OF FINAL ASSOCIATED RESTRUCTURED EXPENSES, FEES OVER THE PUT IN A A THIRD WITH ARRANGING THE OUT ESPECIALLY FOR C O M M E N T CALLED LENDING, HOWEVER, THUS ONLY MOST RECOVERY THE INCOME FOR SYNDICATION. AS R E C E I V E D , LOAN. OF TO THE THE CAREFUL IT W A S D E C I D E D FEE FEE INCOME INCOME ON OUT-OF-POCKET AND WI L L HAVE FEES, TO T H E E X T E N T RENDERED COMMITMENT PRIOR WHEN FOR AFTER SYNDICATION AS R E C E I V E D SERVICES FELT ON R E S T R U C T U R E D AN A D J U S T M E N T TO Y I E L D OF FEES As Y O U W I L L R E C A L L , TO A M O R T I Z E ABOVE T HE CONGRESS FEES EARNINGS, RECEIVED, LI F E REMUNERATION TO THE A C T HANDLING LOAN ONE, LOANS, AND REPRESENT LOAN , TERM ISSUED INTO FOR INTERNATIONAL BE C O N S I D E R E D INCOME OF OF C R E D I T . OVERSTATED RE STRUCTURED OVER METHODS INCLUDING COMMENTS C A N BE T A K E N INTO OF ON A L L THEY TAKEN IN A G I V E N EXCHANGE BIT A B O U T EXTENSIONS PROPOSALS LOANS, WILL FOREIGN REQUIREMENTS A LITTLE WAS A LO N G REGULATIONS TO BE A M O R T I Z E D HOWEVER, WITH INCOME OF THE WITH TWO SAY BANKS IN REGULATORY AMORTIZATION FIRST ACCOUNTING SOME IMMEDIATELY ENOUGH BORROWERS THE Ac T , W H I C H D I R E C T S F E D E R A L B A N K R E G U L A T O R S TO THE OF THAT BASICALLY, LOANS, L E T ME ALTERNATIVE PRACTICE CONVENTION, RISK TO O B T A I N THE CONSIDER THE - THAT IS T H E THEIR DISCUSS 3 THAT IN C O N N E C T I O N FEES ALSO M A Y BE DISBURSEMENT OF THE -Z|- In ter a g e n c y ,Coy n i r y E x p o s u r e R i s k C o m m i t t e e In d i s c u s s i n g INVOLVE REVIEW I S S U E S OF WHAT REGULATORS the have been equal HAVE The Office of Committee, C o m m i t t e e 's m e e t i n g debt ratios -servicing hold to their experience among risk the will several in members be field impaired the of FEDERAL was three THE just aspects times Reserve, BANKING The organizations lending, other TO established, banking as to they of t h e i r a year, has FDIC, a n d t h e the presented briefings a be foreign is is first their to IS U S E F U L IN 1979, AREA, summaries in Ac t , w h i c h the Currency, give and for taken , a at set the of impression of D istrict of their , After on a country purposes . and countries which Reg i o n or lending how of interviews informed examination financial in ' field order current discussion 's t r a n s f e r There are , transfer ," o r or , and , a vote alternatives Federal bankers assessed F i r s t , the "v a l u e the to opinions the OTHER foreign meets of IT Committee which --- e c o n o m i c intended with Risk information abilities examiners obtain IN T H I S to d i v e r s i f y from of AND THE in t h e i r encouraged variety RISK, is to e n c o u r a g e the C o m p t r o l l e r A wide economic DONE exposure representation requirements OR T R A N S F E R RESERVE Committee their lending, two Country Exposure diversify long COUNTRY ALREADY of first THE F E D E R A L InterAgency purpose the risk " l o s s ," may be classified Se c o n d , the as country " s u b s t a n d a r d ," may be listed - FOR COMMENT ), classified DISCUSS AN D D I S C U S S I O N A nd finally THE C O U N T R Y TRANSFER RISK,) RISK AND IS E I T H E R DISCUSSION WHICH , the Co m m i t t e e REPORTS may IN E X A M I N A T I O N (BU T decide NOT not REPORTS. to (THIS L A S T I N V O L V E S C O U N T R I E S WIT H L I T T L E OR NO IN THE THE TWO C A S E S — FIRST CLASSIFIED — - IN E X A M I N A T I O N AT ALL SET OF C A S E S U S U A L L Y 5 OR L I S T E D COMMITTEE IS M AD E A V A I L A B L E THA T IS, AS A P P R O P R I A T E PREPARES WHERE TR AN SF ER FOR A STANDARD COMMENT ANALYSIS TO AND U S E D BY E A C H F E D E R A L B A N K REGULATOR, 1 MENTION OF YO U ARE THE C O U N T R Y R l S K C O M M I T T E E , A W A R E OF, i!P ■ 1 :h F e DERA: FOR TWO R E A S O N S , IN B A N K S ' This listing is a c c o m p l i s h e d RISK If '"EXPOSURE" PURPOSELY PURPOSE FlRST, I AM S URE M A N Y I W A N T TO P O I N T OUT R r OUL/’,,'i:S A L R E A D Y H A V E B E E N A C T I V E L Y ENCOURAGING DIVERSIFICATION TRANSFER WHICH by t h e WHERE WE AKN ES S IN T R E S E HIGHLIGHTED OF E N C O U R A G I N G P O L I C I E S AND P R A C T I C E S for comment IN P A R T I C U L A R COUNTRIES IN THE EACH INTERNATIONAL PORTFOLIOS, APPEARS EXAMINATION BANK'S and discussion COUNTRIES IS E V I D E N T , CONSIDERABLE, REPORT DIRECTORS FOR TH E TO R E V I E W IN I N T E R N A T I O N A L L E N D I N G , of THEY ARE SPECIFIC THEIR W I T H A V I E W TO ACHIEVING GREATER DIVERSIFICATION. Co n c e n t r a t i o n s TRANSFER RISK TAKE credit OR W H E T H E R IS O NL Y ONE OF M A N Y ANALYSTS of , whether in c o u n t r i e s subject to IN O T H E R P A R T I C U L A R F I E L D S OF L E N D I N G , C O N S IDE RAT IONS T H A T OUR E X A M I N E R S A N D INT O A C C O U N T IN A S S E S S I N G THE ADEQUACY OF A B A N K ' S - capital , Al t h o u g h GUIDELINES REFERRING IN T O A C C O U N T WHEN THE AMOUNT THE ABILITIES NAME DECIDING AND THE IS T H A T OF OF M A N A G E M E N T , SECOND IT IDENTIFY R isk REASON ASSETS MANY THE ratio F A C T O R S ARE T A K E N -- F A C T O R S QUALITY AND C O N C E N T R A T I O N S OF SUCH AS OF A S S E T S , CREDIT, TO WHOSE TRANSFER reserve w i l l SINCE COMMITTEE VALUE FOR RISK , of THE Re s e r v es THE BE A C C O M P L I S H E D , EARNINGS HAS an ALLOCATION HAVE WILL ADD P A R E N T H E T I C A L L Y , ACCOUNTING DETAILS, THAT M A Y BE S E T UP,) RESERVES CLEAR I N T E N T OF T H E BE D E T E C T E D REPORTED MORE TWO C O N D I T I O N S , TRANSFER-RISK A PROTRACTED FOREIGN CONGRESS COUNTRY AN O N - G O I N G OF TO M A K E OF P U B L I C PAYMENTS ARE THAT BASIS, TO C U R R E N T GOING INTO THE IS T H A T POTENTAL IT IS LOSSES SO T H A T A B A N K ' S ITS T R U E SPECIFIED OR P R I V A T E on OF W A Y S T H E S E REQUIRES ON T H E I R effect HOWEVER, REPRESENT WHICH RESERVES, INABILITY POINT, OR BE E S T A B L I S H E D . WITHOUT TO E N S U R E ACCURATELY EITHER RELATED ON TO TO RISK A SPECIAL BE C H A R G E D A COUPLE THE M A I N AND R E C O G N I Z E D EARNINGS ARE MANDATE BY T R A N S F E R immediate (I W O U L D RISK C O M M I T T E E CONGRESS'S IMPAIRED WILL , have THERE COUNTRY IMPAIRED CREDIT, RESERVE RESERVE THAT BEEN EACH course THE EARNINGS, TH E issued ADEQUACY EARNINGS, FO R D I S C U S S I N G IS T H R O U G H ALLOCATED" Th i s CAPITAL, ON C A P I T A L QUALITY has B U T A FEW, My " - Reserve TO M I N I M U M "Al l o c a t e d " Tr a n s f e r WILL Federal the 6 POSITION. ESTABLISHING IN T H E ACT, BORROWERS EXTERNAL ONE IS IN A INDEBTEDNESS. The other is RESTORATION The a lack of OF D E B T a g e n c i e s may AMD DURING THE ADDITIONAL It 's GENERALLY NET NEW HAVE COUNTRIES' REASON MAY STRENGTHEN HELP EXPOSURE) SUCH THE BY THE orderly ARE TRANSFER NEW UNDER HAVE CREDITS. TO BE M A D E ON T H E A N D AN IN S U P P O R T WHETHER SUBJECT OF IS, to ECONOMIC correct MANNER. TO THE the THE CIRCUMSTANCES, REDUCE THESE THE TH E AND RISK NEW LOANS RESERVES WILL LOANS' PERFORMANCE. Bank Re p o r t i n g on Co u n t r y Exposure As I m e n t i o n e d e a r l i e r , NEW Act is t h a t EXPOSURES MORE regulators CLOSELY. another are YOU of t h e r e q u i r e m e n t s to m o n i t o r WILL SOON OF BY T H E APPROPRIATE (THAT BASIS be RESERVES OF T H E A D J U S T M E N T P R O C E S S , THE Q U A L I T Y AGENCIES RISK designed IN AN O R D E R L Y FUNCTIONING must 10 P E R C E N T INITIALLY, APPROVED are judgment IMPAIRED, IMPLEMENTING AS P R O G R A M S LENDING, that BE IS best YEAR, AT L E A S T THAT and WOULD DIFFICULTIES IMPROVE WILL THESE Fu n d , w h i c h OF O U T S T A N D I N G SUBSEQUENTLY DETERMINED TO SUCH THIS SUBSEQUENT THAT IN C O U N T R I E S Monetary IS T H A T THEREBY IN E A C H N O J BE R E Q U I R E D , ECONOMIC the reserves iii u'HICH A L O A N ' S V A L U E TO N O T E PROGRAMS, In t e r n a t i o n a l for discretion THAT GE N E R A L L Y YEAR IMPORTANT WILL their special risk-related 15 P E R C E N T LENDING ADJUSTMENT exercise STATED FIRST prospects SERVICE. as to t h e a m o unt of HELD, definite banks' OF T H E country BE E X P E R I E N C I N G THE BE RESULTS BANK OF T H I S REPORTING ANNUAL FROM DIRECTIVE, ON C O U N T R Y BASIS, USED "g o o d news TO P R O V I D E " is COUPLE OF C H A N G E S , ADDITION ON E X P O S U R E REPORTING YOUR MORE OF Y O U R (BANKS, EXPOSURE ASSETS, IN A N Y OF T H E SECOND 3 / 4 OF CASES, FOR THE REQUEST, AND Examination T he of REQUIREMENTS EXAMINATION Ba n k s OF and OF YOUR INFORMATION REQUIRE WILL FOR OF YOU TO 1 P E R C E N T OR IN S U C H C A S E S Y O U W I L L H A V E TO S H O W AND THE DEBTORS OTHERS), SOMEWHAT AND GI VE TOTAL BE A V A I L A B L E THERE LESS EXPOSURES OF Y O U R R isk BY B R O A D C A T E G O R I E S THE A M O U N T M A T U R I N G TO C R E D I T GUESS A PERCENTAGE ACCOUNTS 1 PERCENT I WOULD ARE A CERTAIN WHICH WILL SOME ADDITION, PROVIDE COUNTRY REQUIRES INFORMATION being FOR THERE IMPORTANT, PART OR AL L ACCOUNT is USED BECAUSE FIRST SECTOR, PERTAINING BEEN WHICH WILL SHORTENED PERIOD, report THE LIST INFORMATION HAS BEEN same HAS BUT EXCEEDS EXPOSURE, PART the INCREASED FROM A SEM I E N D OF E A C H THAT A SMALL, THAT TIME REPORT," SUMMARY IN 1 Y E A R OR L E S S THE SAME B A N K ' S ASSETS, THE P U B L I C MATURING YEAR, BANK'S THE virtually INCLUDING IS A T W O - P A R T REPORTING AMOUNT THE HAVE TO A Q U A R T E R L Y INFORMATION TO A N Y C O U N T R Y LIST THE THE that COUNTRY I SAY " V I R T U A L L Y TH E EXPOSURE IN A D D I T I O N , T IME, TH E THE R E G U L A T O R S 6U D A Y S TO 45 D A Y S F O L L O W I N G Th e The SINCE MAY IN O V E R 1 DETAILED IN C O U N T R I E S ASSETS, TO T H E WHICH IN B O T H PUBLIC BE A L O T OF UPON REQUESTS! Ma n a g e m e n t THE N E W A C T A L S O W I L L BANKS, THE A M O U N T FOR BE REFLECTED E X A M P L E , BANK EXAMINERS IN - PROBABLY WILL country risk focuses on our BE D I S C U S S I N G -m a n a g e m e n t three examiners strengths T he first socio where type of or is part very and that , whole project third of of DETAIL, the on YOUR OWN examination important in management enabling abilities and the This system ), a s to and per the control is of from to your internal in or these data lenders , officers by the the B a n k 's level in establishment all maturities and trade and each for as of foreign financing , . the like bank 's o w n reporting , country , perhaps for , such exposure bank assume the economic economic define to (a n d limits the undertaking involves , and country from willing risk , in international country the country evaluate In f o r m a t i o n management as to , including foreign credit financing , reports involves well of r i s k , and typically limits is at bank management developments obtained the 's r i s k procedures sources senior component management monitor 's o w n or in country are variety categories -term This social funds component lending a and stationed country as b a n k a commentaries exposure different T he a directors aggregate lending IN G R E A T E R decision of borrower second of foreign long the -p o l i t i c a l The board bank from by traveling each political comes provided , , and their component covers , and countries areas reach YOU, . evaluation trends to - WITH systems components 9 country system T he risk which reporting is used system SHOULD :0 Slk-‘ -i C O M P L I A N C E DESIGMK!! WITH THE BANK'S OWN I N T E R N A L P O L I C I E S A N D L IM I TS ; IT S H O U L D TO THOSE P O L I C I E S IT S H O U L D E S T A B L I S H A M E T H O D TO REPORT THE E X C E P T I O N S ; A N N U A L R E V I E W OF Se t t i n g the bank ACCOMPLISH THEM, MANAGEMENT TO ARE AND L IMITS; AMD IT S H O U L D P R O V I D E FOR AT L E A S T AN THE P O R T F O u i O 's o v e r a l l TAKING C O M P O S I T I O N OF EA C H C O U N T R Y , goals , determining INTO A C C O U N T IMPLEMENT THE WANT INCLUDING TO A S S U R E THE R I S K POLICIES, B AS I C D I R E C T O R R E S P O N S I B I L I T I E S OPERATIONS, I D E N T I F Y A NY E X C E P T I O N S COUNTRY to INVOLVED, AND M O N I T O R I N G DIRECTING THE R E S U L T S IN E V E R Y A S P E C T OF BA N K INTERNATIONAL LENDING, THAT YOUR methods RISK OUR E X A M I N E R S WILL MANAGEMENT SYSTEM IS C O M P R E HE NS IV E AND E F F E C T I V E , I SHOULD THROUGH THAT REGULATIONS CORPORATIONS, NOT NOTE A P P L Y TO THE A d IS B E I N G A F F E C T O N L Y U.S. WHICH AND B A N K CURRENTLY HOLDING COMPANIES, U.S, B R A N C H E S AND IMPLEMENTED DOMESTIC BANKS, EDGE T H E R U L E S C U R R E N T L Y DO A G E N C I E S OF F O R E I G N B A N K S OR C O M M E R C I A L L E N D I N G C O M P A N I E S W H I C H ARE S U B S I D I A R I E S OF F O R E I G N ban k s , Ho w e v e r , c o n s i d e r a t i o n currently R E G U L A T O R S AS TO W H L iH E R T H O S r THE R E G U L A T I O N , AND TIES THE R E G U L A T O R S HAVE is being given by the S H O U L D BE M A D E S U B J E C T TO I N V I T E D C O M M E N T ON THE SUBJECT, This i s s u e of w h e t h e r INSTITUTIONS COMPLICATED SHOULD ONE, BE branches SUBJECT ON T H E ON E and a g e n c i e s TO THE P R O V I S I O N S H AND, SOM E OBSERVERS of f o r e i g n OF THE ACT IS A POINT OUT THAT 11 - O U R P O L I C Y OF A C C O R D I N G ORGANIZATIONS IN T H I S OTHER H A N D, MAJOR COUNTRIES BANKS' THERE NATIONAL COUNTRY IS OUR THAT WORLD-WIDE THE OPERATIONS HO M E IS THE FALL CONSOLIDATED INTO THE MENTIONED, TIME, AMD ONLY THE INTERESTED FEDERAL INTERNATIONAL FIRST THAT TO D E V E L O P I N G CHARACTERISTIC COUNTRY DEVELOPMENT W hat I do DEVELOPMENT OF make THE THE CENTRAL B A N K S OF OF T H E GENERAL SOLVENCY THE ACCOMPLISH HOME OF BEEN the SUPERVISION GENERAL HAS OF COUNTRY that TRANSFER RISK STILL RECEIVING a remarks ON A WOULD As I SOLVENCY, REACHED NOR COMMON IS IT W R O N G FINANCE STAGES TO A L A R G E THE W E S T AT T H I S COMMENTS DURING ECONOMIC GROWTH, GROWTH, FROM subject BANK THIS L E T ME LENDING NATION IS A A S W E L L AS TO OUR OWN BORROWING FOR THE CENTURY, , h o w e v e r , is IN THE L A S T WITH CORPORATIONS 19T H the COUNTRIES, WRONG ON F O R E I G N THE on FOR A D E V E L O P I N G OF E C O N O M I C EXTENT disturbing FINANCING BASICALLY TO A L L G R O W I N G EARLY few LESS-DEVELOPED IS N O T H I N G TO H E L P find to to COUNTRIES, IN T H E RELIED like LENDING THERE TO B O R R O W A B R O A D COUNTRIES ISSUE ON T H E L E N D ING TO LDCS Finally, I would SAY THEM, AGAINST SUPERVISION ARE INCLUDING on t h e a r g u m e n t THAT CAN AGENCIES BANKING PARTIES, INTERNATIONAL OF is b a s e d ON T H I S TO A L L REST WITH RESERVES OF NO D E C I S I O N FOR WITH SHOULD ONE BASIS. CATEGORY ARGUES SUPERVISION This agreement FULLY TREATMENT AGREEMENT supervisor. COUNTRY - TEN YEARS. the wide THROUGH swing in MOST OF THE 12 - 1970s, that funds were interest often were developing borrowed rates , nations took CIRCUMSTANCES, LEADING to IN LENDING, APPROACH EXACERBATED MAKE IN, AND PROGRAM Banks IS a IN THE P A S T IN T H E I R WERE THE OF WITH TO E L I M I N A T E not LONG-RUN I SUBMIT the face ENCOURAGED ; of BY AFTER TROUBLE TOOK FUNDS PLACE, FROM IN A COUNTRIES T H E I R H E A V Y B U R D E N OF TO M A N A G E OF l e n d THE THAT SUCH A FEAST-OR- A FINANCIAL CAUSES OF SYSTEM. THE EXCESSIVE RETRENCHMENT PROBLEM. comparison JOINTLY WAY to , and in HOWEVER, BORROWING IS ONE PROBLEM, with domestic In D O M E S T I C IN F I N A N C I A L do t h i s credit IN S E N T I M E N T AND L E A V I N G inflation eager growth IN E F F E C T WITHDRAWAL markets IN T H E S E AND O V E R - I N V E S T , LARGE of were cheap economic COUNTRIES IS A D I S R U P T I V E MY P O I N T C L E A R . CUSTOMER the RECESSIONS, SHIFT rate , banks TO C A R R Y AND S E R V I C E INTERNATIONAL-DEBT Perhaps of the capital As E V E R Y F I N A N C I A L M A N A G E R K N O W S , D EBT . 1.F O V E R - L E N D I N G HAS AND for funds their AND WORLD AN A B R U P T DESPERATE STRUG GL E FOREIGN with maintain TO A S T E A D Y international advantage BORROWING 1982, in allowing Flush TO O V E R - S P E N D INTERNATIONAL FAMINE , after INCREASES TH E M A R K E T plentiful negative heavily OIL-PRICE SURFACED so - THE TROUBLE, just LENDING, AND PUT THE as a s e r v i c e INTEREST WORKS TO DO SO. to practices will WHEN A L O N G - T E R M THE L E N D I N G MANAGEMENT, WASTE lending BANK USUALLY GOES OUT A R E S T R U C T U R I N G CUSTOMER BACK society, but ON T R A C K . because it is 15 - In INTERNATIONAL CONSIDERABLY BANKS WORK ARE DIFFERENT, NOT OUT, GOVERNMENT OF YEARS WITH Solving in are financial banks can country . are at a T he problem in because problem is community one United WITH THE TO DO T H A T A FEW TO L E A V E , to retrench . sovereign , there in exacerbate is their the to the problem -d e b t does problem country L ike collective security that the world a stability community face and jointly regard, the IMF—f u n d i n g , the fall of that that on of banks financial the world international through November stride the joined the truly mark ed towards bill's the economy debt banking cooperation ITS the President a milestone international passage other bill which and s i g n i n g IMF-member is 's d e b t - , including resolve to burden world nation little lending not is debtor indeed Fo r t u n a t e l y , h o w e v e r , the and With States alone a prosperity collective stability, Left process into l a w l a s t world's A ND , In t h i s signed ASKED NATION PROGRAM ATTEMPTED the , must coordination then , when ? solution , QUICKLY do international stake BANKS to than the problems developing alone banks other , and COMMERCIAL IN T O A S O V E R E I G N A STABILIZATION SOME AND WERE LENDING, ARE D e bt P r o b l e m trouble do servicing COUNTRY, THE C O N S T R A I N T S DOMESTIC TO GO STIPULATE, PERU LDC the What THE HOWEVER, UNLIKE IN A P O S I T I O N LET ALONE BACK LENDING, - in the financial into law, nations in the and 14 - INCREASING THE RESOURCES Fu n d , The result is ASSIST THE DEBTOR NATIONS AVAILABLE that DIFFICULT DEBT SO-CALLED "CONDITIONALITY" TO IMF CREDIT ADOPTING OF-PAYMENTS OF FINANCING ECONOMIC WHAT CUSTOMERS, BANKS AND DO IS W H A T amount of else to WITH assess international individual THE and prudence in the Co n g r e s s international international coordination international financial accountable for Su m m a r y and Co n c l u s i o n L e t me summarize. deal of c o n c e r n their IMF banks risks in in risk have is system own risk The in r e c e n t THE LENDING cannot to , THAT REDUCING ; individual T h IS IS TO D O M E S T I C PROGRAMS. on That IMF lending is high the the can In s h o r t , t h e safeguard OF INTERNATIONAL rely a ACCESS BALANCE- COUNTRY, lending on IS T H E THE A V A I L A B I L I T Y international -t a k i n g . VERY COUNTRY'S LENDING IN to EFFORTS IMPLEMENTATION DOING in SOME MEANS THAT BORROWING insisted lending FOR MEANS LONG-TERM coordination responsibility agencies UPON THEY NOW ARE IN C O O R D I N A T I O N anyone THIS IN T H E I R O U T OF BORROWING MONETARY equipped OF T H E S E PROGRAM BY T H E Ne v e r t h e l e s s , u l t i m a t e l y upon THE ADJUSTMENT PROGRAMS better L O A N S , WHICH UPON IN S H O R T , been FEATURE IMF OF INTERNATIONAL THEMSELVES A KEY CONTINGENT ADJUSTMENTS PRECISELY LENDING IS M A D E has TO H E L P IS C O N D I T I O N E D DEFICITS, TO THE IMF the SITUATIONS, AN A P P R O P R I A T E - ever why , and replace standard purpose are of of of the still -t a k i n g . LDC- d e b t p r o b l e m h a s c a u s e d a g r e a t years. Fortunately, no regulatory soundness banks or as a r e s u l t of - 15 - U N P R E C E D E N T E D C O O P E R A T I O N A M O N G NATIONAL. G O V E R N M E N T S , I N T E R N A T I O N A L A G E N C I E S AND C O M M E R C I A L BANKS, THE W O R L D HAS BEEN ABLE TO W E A T H E R A S E R I E S OF P O T E N T I A L L Y H I G H L Y D I S R U P T I V E IN THE A R E N A OF INTERNATIONAL FINANCE, FROM THESE EXPERIENCES, LOT HAS BEEN L E A R N E D A B O U T THE H A Z A R D S OF I N TE RNATION AL LENDING, AND THE S U C C E S S WE HAV E HAD IN M A I N T A I N I N G FINANCIAL STABILITY THROUGH INTERNATIONAL COOPERATION B O L S T E R E D OUR C O N F I D E N C E C O N T I N U E TO DEAL W IT H STORMS INTERNATIONAL HAS IN D E A L I N G WITH F U T U R E P R O B L E M S , IMMEDIATE PROBLEMS, E N H A N C E THE L O N G - R U N V I A B I L I T Y OF CONGRESS INTERNATIONAL As WE HAS A C T E D TO L E N D I N G BY M A N D A T I N G A S T R E N G T H E N I N G OF THE R E G U L A T O R Y AND S U P E R V I S O R Y FRAMEWORK LEARNED OF I N T E R N A T I O N A L BAN K L E N D I N G , S U F F I C I E N T L Y FR O M PA S T E X P E R I E N C E S L E N D I N G ON A S O U N D E R F O O T I N G , HOPEFULLY, TO PUT WE ALL HAVE INTERNATIONAL A
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