World Bank2013-06-122013-06-122002-11-15https://hdl.handle.net/10986/13878The 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.en-USCC BY 3.0 IGOACCOUNTINGACCOUNTING PRACTICESACCOUNTING STANDARDSACCOUNTSAFFILIATESAUTONOMYBALANCE SHEETBALANCE SHEETSBANK ACCOUNTINGBANK ASSETSBANK BRANCHESBANK DEPOSITSBANK EARNINGSBANK FAILURESBANK INSOLVENCYBANK MANAGEMENTBANK RESTRUCTURINGBANK RUNBANK SOLVENCYBANKING CRISESBANKING CRISISBANKING LAWBANKING REGULATIONBANKING SECTORBANKING SUPERVISIONBANKING SYSTEMBANKRUPTCYBANKSBENCHMARKBONDSCAPITAL ADEQUACYCAPITAL ADEQUACY RATIOSCAPITALIZATIONCARCENTRAL BANKCOLLATERALIZATIONCOMPETITIVENESSCONSOLIDATIONCONTAGIONCOUPONSCREDIT RISKCURRENCY ASSETSCURRENCY DEVALUATIONSDEBTDEBT SERVICINGDEFICIENT BANK MANAGEMENTDEMAND DEPOSITSDENOMINATED LOANSDEPOSIT INSURANCEDEPOSITORSDEPOSITSDEVALUATIONEARNING ASSETSECONOMIC GROWTHFINANCIAL ENGINEERINGFINANCIAL INTERMEDIARIESFINANCIAL RATIOSFINANCIAL SECTORFISCAL YEARFOREIGN BANKSFOREIGN CURRENCY DEPOSITSFOREIGN EXCHANGEGDPGROSS DOMESTIC PRODUCTILLIQUIDITYINSOLVENT BANKSINSTITUTIONAL DEVELOPMENTINSURED DEPOSITSINTER AMERICAN DEVELOPMENT BANKINTEREST RATEINTEREST RATESINTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENTINTERNATIONAL RESERVESLENDER OF LAST RESORTLIQUID ASSETSLIQUIDATIONLOAN LOSS PROVISIONSM2M3MATURITIESMONETARY AUTHORITIESMONETARY INDICATORSMONEY SUPPLYMORAL HAZARDMORTGAGESOPEN MARKET OPERATIONSPENALTIESPOLITICAL INTERFERENCEPORTFOLIOPORTFOLIOSPROFITABILITYPROPERTY OWNERSHIPPRUDENTIAL REGULATIONSPUBLIC BANKSRATING SYSTEMREGULATORY FORBEARANCERESERVE REQUIREMENTRESERVE REQUIREMENTSRETURN ON ASSETSRISK MANAGEMENTRISK WEIGHTED ASSETSSAVINGSSAVINGS DEPOSITSSECURITIESSECURITIZATIONSTATE BANKSSTATE OWNED BANKSSUPERVISORY AUTHORITIEST-BILLSTRADE SHOCKSTRADINGVALUATION 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 SECURITIESWorld Bank10.1596/13878