Paraguay : Financial Sector Review

The report examines the highly vulnerable situation of the financial system in Paraguay, which suffered from a banking crisis in 1995-98, in addition to recent competitive devaluations of the Brazilian currency, the fall in cotton prices, as well as the regional economic slowdown. A major factor obscuring the reality of banking system solvency, is the practice of substituting needed loan provisions, with collaterals which underlie the loans. The main issue here is the relative liquidity absence, and delays inherent in unwinding such collateral, as well as its potential over-valuation, making it an ineffective substitute for cash provisions. The report further examines banking reforms, and restructuring of the state-owned banks, institutional and regulatory framework, and the safety net mechanisms and deposit insurance governing the system. It is suggested the reform of the pension system is crucial at this juncture, given that the current pay-as-you-go social security public pension system, is not fiscally sustainable from an actuarial, and benefits payment perspective, and, because the current system, even at its best, delivers very low returns on pension investment funds. Most importantly, for both the public, and private systems, the investment regime should permit heavy weighting in foreign hard currency securities.

Bibliographic Details

Main Author:	World Bank
Language:	English en_US
Published:	Washington, DC 2002-11-15
Subjects:	ACCOUNTING, ACCOUNTING PRACTICES, ACCOUNTING STANDARDS, ACCOUNTS, AFFILIATES, AUTONOMY, BALANCE SHEET, BALANCE SHEETS, BANK ACCOUNTING, BANK ASSETS, BANK BRANCHES, BANK DEPOSITS, BANK EARNINGS, BANK FAILURES, BANK INSOLVENCY, BANK MANAGEMENT, BANK RESTRUCTURING, BANK RUN, BANK SOLVENCY, BANKING CRISES, BANKING CRISIS, BANKING LAW, BANKING REGULATION, BANKING SECTOR, BANKING SUPERVISION, BANKING SYSTEM, BANKRUPTCY, BANKS, BENCHMARK, BONDS, CAPITAL ADEQUACY, CAPITAL ADEQUACY RATIOS, CAPITALIZATION, CAR, CENTRAL BANK, COLLATERALIZATION, COMPETITIVENESS, CONSOLIDATION, CONTAGION, COUPONS, CREDIT RISK, CURRENCY ASSETS, CURRENCY DEVALUATIONS, DEBT, DEBT SERVICING, DEFICIENT BANK MANAGEMENT, DEMAND DEPOSITS, DENOMINATED LOANS, DEPOSIT INSURANCE, DEPOSITORS, DEPOSITS, DEVALUATION, EARNING ASSETS, ECONOMIC GROWTH, FINANCIAL ENGINEERING, FINANCIAL INTERMEDIARIES, FINANCIAL RATIOS, FINANCIAL SECTOR, FISCAL YEAR, FOREIGN BANKS, FOREIGN CURRENCY DEPOSITS, FOREIGN EXCHANGE, GDP, GROSS DOMESTIC PRODUCT, ILLIQUIDITY, INSOLVENT BANKS, INSTITUTIONAL DEVELOPMENT, INSURED DEPOSITS, INTER AMERICAN DEVELOPMENT BANK, INTEREST RATE, INTEREST RATES, INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT, INTERNATIONAL RESERVES, LENDER OF LAST RESORT, LIQUID ASSETS, LIQUIDATION, LOAN LOSS PROVISIONS, M2, M3, MATURITIES, MONETARY AUTHORITIES, MONETARY INDICATORS, MONEY SUPPLY, MORAL HAZARD, MORTGAGES, OPEN MARKET OPERATIONS, PENALTIES, POLITICAL INTERFERENCE, PORTFOLIO, PORTFOLIOS, PROFITABILITY, PROPERTY OWNERSHIP, PRUDENTIAL REGULATIONS, PUBLIC BANKS, RATING SYSTEM, REGULATORY FORBEARANCE, RESERVE REQUIREMENT, RESERVE REQUIREMENTS, RETURN ON ASSETS, RISK MANAGEMENT, RISK WEIGHTED ASSETS, SAVINGS, SAVINGS DEPOSITS, SECURITIES, SECURITIZATION, STATE BANKS, STATE OWNED BANKS, SUPERVISORY AUTHORITIES, T-BILLS, TRADE SHOCKS, TRADING, VALUATION FINANCIAL SECTOR; MACROECONOMIC ADJUSTMENT; FINANCIAL ANALYSIS; FINANCIAL INDICATORS; BANKING CRISES; CURRENCY DEVALUATION; COTTON PRICES; REGIONAL ECONOMICS; BANKING REFORMS; COLLATERAL; LIQUIDITY (ECONOMICS); BANKING REFORM; RESTRUCTURING; STATE-OWNED BANKS; INSTITUTIONAL FRAMEWORK; LEGAL & REGULATORY FRAMEWORK; SOCIAL SAFETY NETS; DEPOSIT INSURANCE; PENSION REFORM; PAY-AS-YOU-GO SYSTEMS; FISCAL CONSTRAINTS; PENSION FUNDS; INVESTMENTS; FOREIGN INVESTMENTS; FOREIGN SECURITIES,
Online Access:	http://documents.worldbank.org/curated/en/2002/11/2083430/paraguay-financial-sector-review https://hdl.handle.net/10986/13878
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