International Loans Research Articles

Bank Internationalisation During the Global Financial Crisis: An Asia Pacific Perspective

Bank internationalisation traditionally takes the form of lending to non-residents, but increasingly non-resident securities are purchased. These assets are funded mostly by international loans and deposits, rather than the issuance of securities. Within the Asia Pacific region, the largest net beneficiaries of international bank funding to developing economies are China, India and South Korea. Importantly, apart from the financial centres of Hong Kong and Singapore, which show significant outward as well as inward banking flows, Chinese Taipei is an important international lender. Australia and New Zealand remain significant net international borrowers. The Global Financial Crisis reversed earlier developments with China and Japan now becoming net international borrowers, while both Hong Kong and Singapore have reduced their net asset positions.

Bank internationalisation during the Global Financial Crisis: an Asia Pacific perspective

Bank internationalisation traditionally takes the form of lending to non-residents, but increasingly non-resident securities are purchased. These assets are funded mostly by international loans and deposits, rather than the issuance of securities. Within the Asia Pacific region, the largest net beneficiaries of international bank funding to developing economies are China, India and South Korea. Importantly, apart from the financial centres of Hong Kong and Singapore, which show significant outward as well as inward banking flows, Chinese Taipei is an important international lender. Australia and New Zealand remain significant net international borrowers. The Global Financial Crisis reversed earlier developments with China and Japan now becoming net international borrowers, while both Hong Kong and Singapore have reduced their net asset positions.

Loan Agreements and Human Rights: The Role of Human Rights Impact Assessments

The undeniable fact is that the financing made available to debtor countries through international loan agreements has a direct impact, whether positive or negative, upon that country’s human rights situation. There is a real possibility that borrowed funds may contribute, directly or indirectly, to human rights violations in a debtor country. This being the case, there is therefore a need, if not an urgency, to scrutinize loan agreements regarding their potential harmful effects to human rights. This is the function of a Human Rights Impact Assessment (HRIA). It aims to prevent the adverse effects of loan - supported activities or projects to human rights and enhances the effectiveness of foreign loans with respect to the improvement of the human rights situation in debtor countries.

A Fate Worse than Debt: An Alternative View of the Right to Development and its Relevance in the External Debt Problem of Developing Countries

The external debt problem of developing countries is a lacuna in public international law. An author has observed that uncertainties and questions about external debts “remain ignored by treaty law or have not been regulated by contracts and are probably not yet governed by customary law.” There is currently no multilateral treaty that specifically governs the situation of a developing country plagued by simultaneous debt repayments. Neither is a typical international loan contract useful in looking for fair and equitable solutions to the problems occasioned by external debts. This thesis aims to contribute in filling up this legal void. The main controversy in this thesis involves a collision between the principle of pacta sunt servanda as applied in international loan contracts and a proposed legal principle that may be employed to counter the ill-effects upon a debtor country of a high level of external indebtedness. This thesis will propose an alternative view of the “right to development” which is supported by certain legal norms whose bases are well-established in public international law. It will argue that the right to development can be invoked as a legal shield to protect debtor countries against the adverse repercussions occasioned by debt-related arrangements and policies in the international plane. This alternative view will be put into an empirical application within the backdrop of the external debt problem of the developing countries. Is the right to development applicable in the specific context of creditor-debtor relation between states? How can it be applied vis-a-vis the main problems occasioned by a huge external indebtedness? The area of public external debts is one of the many international settings where the cards are stacked, so to speak, against the debtor countries. This thesis will show how a high level of indebtedness adversely impacts a debtor country in two major ways. First, through the use of policy “conditionalities,” the present international debt relief mechanisms significantly limit a debtor country’s prerogative in managing its own process of economic development. And second, the creditors’ staunch claim to be repaid and the debtor country’s lack of choice but to heed such a claim result in the latter’s inability to perform its treaty obligations to realise the economic, social and cultural rights of its people. This thesis will argue that both are legally incompatible with the right to development, and both ought to be addressed by a proposed debt restructuring mechanism for debtor countries that genuinely respects and promotes this right. Contact author at Noel.Villaroman@monash.edu.

Pick your poison: economic crises, international monetary fund loans and leader survival

Loans from international organizations impose large costs on the receiving nation. The decisions to accept such loans and then whether or not to implement the prescribed reforms are made with high stakes in mind. Domestic leaders are most likely facing punishment for the current economic crisis, but what is their incentive to implement the arrangements if the costly reforms associated with the loans may reduce their ability to satisfy their supporters? To fully understand this relationship, I develop a theory that explains leader tenure in the post-reform period as a function of the rational decision to accept a loan. Leaders who expect to be secure in the adjustment period are more willing to accept the conditions that accompany loans rather than attempt to withstand the crisis on their own. With the use of a selection duration model, I examine the interplay between electoral incentives and institutional dynamics to show that leaders governing under different institutional arrangements are affected differently for involvement in IMF loans. Since leaders choose when to accept IMF loans based on their own expectations of post-reform tenure, democratic leaders are less likely to participate in loans. Authoritarian leaders, on the other hand, are more likely to participate in agreements because their hold on power in the post-reform period is stronger.

The voluntary adoption of International Financial Reporting Standards and loan contracting around the world

Using a sample of non-U.S. borrowers from 40 countries during 1997–2005, this paper investigates the effect of the voluntary adoption of International FinancialReporting Standards (IFRS) on price and non-price terms of loan contracts and loan ownership structure in the international loan market. Our results reveal the following. First, banks charge lower loan rates to IFRS adopters than to non-adopters. The difference in loan rates in excess of a benchmark rate between the two groups is about 20 basis points for all loans and nearly 31 basis points for London Interbank Offered Rate (LIBOR)-based loans. Second, banks impose more favorable non-price terms on IFRS adopters, particularly less restrictive covenants. We also provide evidence suggesting that banks are more willing to extend credit to IFRS adopters through larger loans and longer maturities. Finally, IFRS adopters attract significantly more foreign lenders participating in loan syndicates than non-adopters.

Zur Krise des Euro. Ein währungspolitisches Problem und seine Ordnungsfolgen / The crisis of the Euro – A problem of currency policy and its consequences for the economic order

Zusammenfassung Zunächst wird in Abschnitt I dargelegt, dass die politisch Verantwortlichen die ökonomischen Konsequenzen und Erfolgsbedingungen der von ihnen in Maastricht 1992 vereinbarten Europäischen Währungsunion mit dem Euro als Symbol der europäischen Einigung entweder nicht kannten oder verdrängten. Durch diese Einheitswährung werden Wachstums- und Wettbewerbsschwächen von Unionsmitgliedern an der Peripherie der Union aufgedeckt, deren Ursache nicht erkannt wurde und die defizitträchtige Gegenmaßnahmen auslöste, welche durch die Weltfinanzkrise noch verstärkt wurden. Danach (Abschnitt II) wird ein Transferproblem der Unionsmitglieder diskutiert. Es ergab sich aus fiskalpolitischem Schlendrian der Unionsmitglieder, der sich in wachsenden Haushaltsdefiziten niederschlug, die dem selbst auferlegten Defizitkriterium zuwider liefen. Die aufgelaufenen Staatsschulden und deren Bedienung durch Aufnahme neuer Anleihen auf den Weltfinanzmärkten lösten Spekulationen gegen die ursächliche Einheitswährung aus. Ihr wurde mit einem irritierenden Aktionismus mit fragwürdigen Instrumenten zu begegnen versucht (Abschnitt III). Das Schuldenproblem sollte mit einer rigorosen Sparpolitik von den betroffenen Unionsmitgliedern gelöst werden, die im Fall des überschuldeten Griechenlands von den Mitgliedern der Eurogruppe, der EZB und dem IWF durch souveränitätsgefährdende Auflagen und deren Kontrolle durchgesetzt werden sollte (Abschnitt IV). Abschließend (Abschnitt V) wird vorge schlagen, dass sich die Krise des Euro durch eine, wenn auch schmerzhafte und riskante Rückkehr vor Maastricht und dem EWS mit seinen beweglichen Wechselkursen bewältigen lässt, was eine Rückkehr zur von vielen geschätzten, weil stabilen D-Mark bedeutete.

Slow Conservation

This paper explores how the concepts of the slow movements can be applied to conservation. It examines the roots of preventive conservation, the relationship between the museum environment and the global environment and ways in which museums can reduce their environmental footprint. Links are made between sustainability and traditional conservation practices from different countries and periods. It is proposed that the long-term sustainability of museums depends on the value that the public place on them, and this can be built through the engagement of trainees, volunteers and the public through conservation. The impact of international loan exhibitions in driving common environmental specifications which reflect international standards rather than the local climate and the energy consumption that is involved in achieving these conditions is discussed. Finally, a manifesto for slow conservation is proposed.

Going global: examining issues and seeking collaboration for international interlending, the view from the US

PurposeInternational interlibrary loan remains a persistent and sometimes vexing topic in US libraries. Technology's advance allows libraries and library users to easily identify resources from across the globe. This ease of discovery belies the difficulty of delivery. To contribute to the conversation, the ALA RUSA STARS International Interlibrary Loan Committee conducted a survey of US libraries regarding international interlibrary loan activity. The survey uncovered elements impacting ILL success and failure and identified opportunities for US academic libraries global ILL participation. Issues that concern the survey's participants included communications, copyright, customs, payment methods, shipping, and language barriers. US interlibrary loan librarians seek cooperative responses to these problems. This paper seeks to address this issue.Design/methodology/approachThis paper discusses the current climate of international interlibrary loan from a US perspective and highlights efforts to use STARS survey results to inform international ILL programs and best practices.FindingsTo expand international interlending, STARS can build on today's extra‐OCLC resource sharing strategies and leverage survey results to focus programming and promotional efforts. At the same time, librarians must improve communications and foster international resource sharing communities which contributes to the international dialog essential for interlending success.Originality/valueThe paper presents a new initiative from the major professional association for North American librarians dedicated to resource sharing.

Internal Governance, Legal Institutions and Bank Loan Contracting Around the World

Using a sample of non-U.S. firms from 22 countries during 2003–2007, we examine the effect of firm-level governance on various features of loan contracting in the international loan market. We find that banks charge lower loan rates, offer larger and longer-maturity loans, and impose fewer restrictive covenants to better-governed firms. We also find that the favorable effect of firm-level governance on some loan contracting terms is stronger in countries with strong legal institutions than in countries with weak legal institutions. Our results suggest that banks view a borrower’s internal governance as a factor that mitigates agency and information risk, and that country-level legal institutions and firm-level governance mechanisms complement each other in influencing loan contracting terms.

INFLATION TARGETING IN INDONESIA: SEARCHING FOR A THRESHOLD

It could be argued that for some developing countries, low to moderate inflation is beneficially related to economic growth and that it is only after a certain threshold level that inflation becomes deleterious to growth. This has implications for macroeconomic policy requirements placed on developing countries by international loan bodies. This paper, using data from Indonesia, examines the relationship between growth and inflation. Particularly, a threshold VAR model is used to test for changes in the relationship between inflation and growth. The results so far are exploratory and limited by a small data sample. The results are consistent with a threshold level between 8.5% and 11% producing structural shifts in the relationship between inflation and growth.

Knowledge of insect diversity in Brazil: challenges and advances

Insects will soon reach one million known species worldwide. Brazil, with about 9% of this total, and possibly another 400 thousand species yet to be discovered, harbors the highest insect diversity in the world. The country has a complement of about 140 active taxonomists, which means a quota of 3,600 insect species per professional. Each Brazilian taxonomist publishes, on average, about 100 species during a professional life span, so it would take 2-3 thousand years to only know the country's insect diversity. Some of the problems hindering the development of insect taxonomy in Brazil are: difficulties with international loans; difficulties with permission for dissecting loaned type specimens; low scientific esteem of taxonomic journals as assessed by the Impact Factor index; academic low esteem of taxonomy knowledge; legal restrictions to field work and disregard of the Brazilian legislation that regulates the final destination of biological material. If truly responsible actions towards preserving biological diversity are to be undertaken nationwide, key problems must be addressed and solved: creation of a national center of information on entomological diversity; investment in a core of institutions that would act as an axis for the development of taxonomic knowledge; investment in the formation of a new generation of taxonomists; elimination of bureaucratic obstacles currently hampering the accomplishment of the constitutional mandate for developing knowledge on biological diversity and developing organized actions to control the deforestation of highly biodiverse areas.

Risk sharing, finance, and institutions in international portfolios

We develop a standard model to show how transaction costs in international investment affect conventional tests of consumption risk sharing, both in a multilateral and a bilateral setting. We implement the tests in a novel international data set on bilateral holdings of equity, bonds, foreign direct investment (FDI) and bank loans. In our data, high foreign capital holdings are associated with international consumption risk sharing as implied by our theory. This is especially true of investment in equity or bonds, but not of foreign direct investment or bank loans. In our model, the implication is that transaction costs are higher for FDI and international loans. The discrepancy could reflect technological differences, but also the prospect of expropriation, perhaps most stringent for FDI or loans. We argue that expropriation risk is endogenous to both the borrower's institutions and its openness to international markets. The detrimental impact of poor institutions is muted in open economies, where the possibility of subsequent exclusion from world markets deters expropriation of foreign capital. We show the implied effects of institutions prevail in both the cross-section of consumption risk sharing and in observed international investment patterns.

Living on the Margins: Minorities and Borderlines in Cambodia and Southeast Asia

Cambodia is undergoing dramatic political, economic and social changes, placing new pressures on minority groups and vulnerable peoples. Some changes are driven by Cambodia's uniquely troubled history. Other forces are global, affecting Cambodia and all other nations in the region. This essay introduces a volume of edited papers presented at an International Conference in Siem Reap, Cambodia, sponsored by the Center for Khmer Studies with the support of the Rockefeller Foundation as part of their Capacity Building in Cambodian Higher Education Program. Important insights can be gained by looking at the lives of those living on the margins. An appreciation of margins, minorities and borderlines teaches a number of object lessons, but it also suggests an enlightening method of analysis. Margins identify fault lines, demarcating borders where powerful tectonic plates rub against each other, whether these plates represent conflicting social institutions or the forces of transcendent, but ill-defined processes like nation-building, economic development or globalization. Engaging the lives of real people caught on these margins can lead to new understandings of the often invisible forces shaping and reshaping Cambodia and the region.The problems of ethnic groups are one concern. Transnational and cross-border influences are creating new challenges and opportunities for ethnic minorities. The Cham and other Muslim communities are reconnecting to international Islam. Labor markets cross national boundaries. Vietnamese migrant workers travel to Cambodia, as Cambodian workers travel to Thailand. International loans, agencies and programs targeting development, itself an often disruptive cross-border force, are transforming many Cambodian institutions and redefining traditional social margins in the process. This clash of forces is most profoundly felt by the indigenous peoples of the northeast, but the papers also examine other minorities and vulnerable groups who have been systematically denied access to important social resources. Theories of social exclusion teach that the landless, street children, victims of domestic violence and gay and lesbian persons are on the margins of different Cambodian institutions and that borders are not only of a geographic nature.

An African Success Story: Ghana's Cocoa Marketing System

SummaryGhana's cocoa marketing system has performed impressively over the past decade. Cocoa production has reached record high levels. Farmers receive a relatively large share of export earnings. Product quality is world renowned, and it regularly exceeds the most stringent international standards. Exports are handled professionally and efficiently. International loans are repaid reliably. Internal marketing is relatively uncorrupt and effective. This is a home‐grown success story, under the stewardship of a state‐run marketing board – the Cocobod – which manages almost all aspects of the internal cocoa marketing process and maintains a monopoly on cocoa exports. Given the dismal history of African commodity marketing boards in general, and of Ghana's cocoa marketing board in particular, this success demands explanation. It was not the result of radical transformation but of relatively subtle changes in the system that maintained the undoubted benefits of a centralised monopoly while minimising its damaging consequences. Success resulted from (1) building on the underlying strength of certain elements in the system, notably quality control and export management, (2) an episode of well‐directed reform, and (3) effective policies and organisational structures that protected the farmers' share of the cocoa revenues over time and inhibited the Cocobod returned to the politicisation it suffered in the past. The case accords with the much‐touted but oft‐neglected lesson that both context and institutions matter for organisational performance. In particular, complementary contexts and institutions can produce valuable synergies. More substantively, it suggests that poorly performing organisations in Africa may be turned around without radical measures.

INTERNATIONAL CREDIT CHANNEL OF MONETARY POLICY: AN EMPIRICAL NOTE

A longstanding macroeconomic issue is how monetary policy affects the real economy. There are economists placing an emphasis on the role of bank lending in monetary transmission. Their view, called the credit view, is that a monetary tightening shifts the supply schedule of bank loans left, thereby forcing bank-dependent borrowers to cut back on expenditures. In the literature, the credit view is typically studied in a closed-economy context. In reality, however, banks make international loans through their overseas branches and subsidiaries. This suggests that the credit view should be studied in an open-economy context. This paper proposes the international credit view: a monetary-policy shock originated in one country propagates to another through banks’ reallocation of funds between the two countries. For testing the hypothesis, Australia and New Zealand provide an excellent case to study. This is because Australian-owned banks dominate the banking market in New Zealand. This paper aims to test the international credit view within a framework of vector auto-regression models. A significant and robust finding is that the supply schedule of loans shifts left in New Zealand after a monetary tightening in Australia.

Spoilt and Lazy: The Impact of State Support on Bank Behaviour in the International Loan Market

Banks that enjoy generous financial support (typically from the public sector) tend to be associated with risk under-pricing and lack of innovation in the international syndicated loan market. Loans arranged by such banks have on average lower spreads (controlling for risk and other characteristics) and supported banks also retain loan portfolios that are on average priced below market. When supported banks' investment strategy differs materially from that of the average bank it is in holding less specialised portfolios, in aligning more closely with market trends, and in exhibiting lower persistence in their sectoral allocations.

The Term Structure of Credit Spreads in Project Finance

This paper analyses the peculiar nature of credit risk in project finance by means of a comparative econometric analysis of ex ante credit spreads for a large cross section of international loans and bonds between 1993 and 2001 in both industrialised and emerging countries. Our main contribution relates to the analysis of the term structure of credit spreads for project finance loans compared to other loans and bonds. For both investment-grade and speculative-grade bonds used for purposes other than project financing, we find that the term structure of credit spreads can reasonably be approximated by a linear positive function of maturity, once other relevant micro and macro risk factors have been controlled for. For project finance loans, instead, we show that the term structure of credit spreads is hump-shaped. This result applies to both industrialised as well as emerging countries and appears robust to a large number of sensitivity tests, controlling also for possible sample selection bias or endogeneity of maturity choice. We emphasise a number of key features of project finance structures that might underlie this finding. In particular, we illustrate the mechanisms by which higher leverage, short-term liquidity concerns due to the exclusive reliance on project cash flows as well as the sequential resolution of risks along various project advancement stages might all alleviate the perceived risk of longer-maturity project finance loans. This paper offers a number of policy implications. It provides a cross-country assessment of the riskmitigating role of explicit or implicit guarantees from multilateral development banks and export credit agencies in project finance. It also makes a number of suggestions for bank regulators on how to effectively align capital requirements with the actual term structure of credit risk in project finance. In particular, our results indicate that a linear maturity adjustment to regulatory capital with slope inversely related to the probability of default might not be applicable to project finance exposures. We acknowledge, however, that introducing different maturity adjustments for different asset classes, while improving the risk sensitivity of capital requirements, would also add to the complexity of their implementation.

A Sustainable Approach to the Remediation of the Payatas Disposal Facility in Metro Manila, Philippines

AbstractThe municipal solid waste management crisis facing the Payatas disposal facility in Metro Manila, Philippines underscores the urgent need for sustainable solutions to address leachate contamination, the geotechnical instability of the dumpsite, landfill gas generation and the safety and health of facility workers and residents. A team of environmental engineers selected the site as a design project for the Mondialogo Worldwide Engineering Award and identified the following engineering solutions suitable for the remediation of the dumpsite: slope reinforcement anchors, soil-bentonite vertical impermeable barriers, an impermeable dumpsite cap, a perimeter drainage system, a leachate recirculation system, a facultative lagoon and constructed wetland system, a methane gas collection and power generation system, and a materials recovery facility. The proposed management system and financial remediation strategy requires the local government to spearhead the programme with funding to be derived from international loans and grants. It is recommended that the energy recovery component of the project be funded under the clean development mechanism, in which the certified emissions reductions (CERs) generated may be used to offset the capital outlay for the retrofitting of the engineering solutions and continuance of the remediation programme. The proposed remediation programme addresses the Millennium Development Goals set by the Philippine government relating to protection of the environment, improvement of health and sanitation, and the enhancement of energy services and community income sharing gained from surplus CERs.

Competing Priorities, Ambiguous Loyalties: Challenges of Socioeconomic Adaptation and National Inclusion of the Interwar Bulgarian Refugees

From the estimated ten million refugees in interwar Europe, more than 250,000 were ethnic Bulgarians who found their way in the Bulgarian Kingdom following Bulgarian defeats in the Second Balkan War and World War One. For a country with a population of five and a half million in the mid-1920s, this refugee flow constituted a significant challenge from economic, political, social, and cultural viewpoints. Similarly to Germany, Hungary, and Austria, the refugee presence served as a constant reminder of national failure because Bulgaria lost territories, perceived as a part of the national homeland, to all of its neighbors. The Bulgarian state received refugees from the Ottoman Empire, Greece, Yugoslavia, and Romania, and the interwar governments were compelled to deal with a large and diverse population that suffered harsh socioeconomic problems and psychological traumas. Due to the Convention for Emigration of Minorities between Greece and Bulgaria of 1919 as well as the Greek-Turkish War of 1921–1922 and the obligatory population exchange it initiated in the period 1922–1924, refugee flows in the Balkans lasted well into the mid-1920s. Hence Bulgarians were on the move throughout 1924 and 1925. Despite these strenuous circumstances, interwar politicians boasted the successful integration of the refugees. Immediately after World War One, the government provided temporary assistance to the newcomers. In 1926, an international loan allowed the agricultural settlement of the most destitute new arrivals, and all refugees were granted the rights of Bulgarian citizens. A second loan in 1928 guaranteed the continuation of vital infrastructure projects. By the end of the 1930s, both domestic and international agencies involved in the refugee accommodation viewed the process as a successfully completed mission.