l5

Question 1

banking in emerging economics

Answer 1

banking systems reflect political and economic history and share certain characteristics:
-traditional banking is key part of their financial system

-financial repression is common -gov attempts to control financial markets through:
-interest rates, usually deposit
-high reserve requirements
-direct bank credit to certain sectors, often state owned
-interfering with the day to day management of banking activates, even nationalize them
-restricting entry of new banks especially foreign
-imposing control on borrowing and lending abroad

-emerging countries are not similar to another like developed countries. degree of financial stability varies

Question 2

BRIC: Brazil

Answer 2

-not evolved from central bank
-historcial hyperinflation (over 3 digits in 1980s and over 1000% in 1990s)
- gains from float ( low cost liabilities and ST investments at much higher returns
-in 1994, Real Plan- Banks lost inflationary income and some major banks went bankrupt
-state banks play a critical role, and they underwent significant restructuring, privatization or liquidation
-highest interest margin

Question 3

BRIC: Russia

Answer 3

-emerged in 1990’s, small, highly fragmented dominated by state banks
-sudden death of centrally controlled system (economy collapsed, GDP fell dramatically, inflation reached 2510%, series of systemic mini banking crises in 1990’s and 2004

• massive and uncontrolled bank privatization
  -after 1998 crisis, banking started to reform (largely free from financial repression and positioning the banking system in international financial market)

Question 4

BRIC: India

Answer 4

from 1947, Indian financial system was quite unrestricted up to 1960s when state took control
-balance of payments crisis in 1991: financial regulation and liberalization was slow
-since 1996, partially privatized state banks while state maintaining 60-80%
- without experiencing a centrally- planned economy, state ownership dominates the banking with poor asset quality, excessive supervision, weak financial institutions and lending requirements

Question 5

BRIC: China

Answer 5

1949-79: mono-banking system
1979-current: reform (rehabilitation approach)
-a series reforms: institutional reform, deregulation, commercialization

The Non-performing loans crisis in late 1990s
from 2003, more radical reforms have been underway
-home to 4 of the worlds largest banks by capitalization