Caprio, Gerard, Jr.2014-09-022014-09-022010-02https://hdl.handle.net/10986/19916Most explanations of the crisis of 2007-2009 emphasize the role of the preceding boom in real estate and asset markets in a variety of advanced countries. As a result, an idea that is gaining support among various groups is how to make Basel II or any regulatory regime less pro-cyclical. This paper addresses the rationale for and likely contribution of such policies. Making provisioning (or capital) requirements countercyclical is one way potentially to address pro-cyclicality, and accordingly it looks at the efforts of the authorities in Spain and Colombia, two countries in which countercyclical provisioning has been tried, to see what the track record has been. As explained there, these experiments have been at best too recent and limited to put much weight on them, but they are much less favorable for supporting this practice than is commonly admitted. The paper then addresses concerns and implementation issues with countercyclical capital or provisioning requirements, including why their impact might be expected to be limited, and concludes with recommendations for developing country officials who want to learn how to make their financial systems less exposed to crises.en-USCC BY 3.0 IGOACCESS TO CREDITACCESS TO FINANCEACCOUNTINGACCOUNTING SYSTEMSADVANCED COUNTRIESAGENCY PROBLEMARBITRAGEASSET MARKETSASSET PRICEASSET PRICESASSET SALESAUDITORSBAILOUTBALANCE SHEETBALANCE SHEETSBANKBANK ASSETSBANK BEHAVIORBANK CREDITORSBANK LOANBANK LOANSBANK MANAGEMENTBANK OF SPAINBANK POLICYBANK REGULATIONBANK RISK TAKINGBANK SUPERVISIONBANK SUPERVISORSBANKERBANKERSBANKINGBANKING CRISISBANKING SUPERVISIONBANKING SYSTEMBANKING SYSTEMSBANKSBASIS POINTSBILLS OF EXCHANGEBINDING CONSTRAINTBISBORROWERBUSINESS CYCLEBUSINESS CYCLESCAPITALCAPITAL RATIOCAPITAL RATIOSCAPITAL REGULATIONCAPITAL REQUIREMENTCAPITAL REQUIREMENTSCDSCENTRAL BANKINGCENTRAL BANKSCOLLATERALCOMMERCIAL BANKSCOMMERCIAL CREDITCOMMON CURRENCY AREASCOMMUNICATIONCOMPLEX SECURITIESCONSUMPTIONCORPORATE GOVERNANCECORPORATE PAPERCOST OF CREDITCREDITCREDIT CRUNCHCREDIT DEFAULTCREDIT DEFAULT SWAPSCREDIT EXPANSIONCREDIT GROWTHCREDIT LINESCREDIT MARKETSCREDIT RATINGCREDIT RATING AGENCIESCREDIT RATINGSCREDIT RISKCREDITORSCREDITWORTHY BORROWERSCURRENCIESCURRENCYCURRENT PRICESDEBTDEBTORSDEFAULT PREMIUMDEFAULT PROBABILITIESDEPOSITDEPOSIT INSURANCEDEVELOPING COUNTRIESDEVELOPING COUNTRYECONOMIC CONDITIONSECONOMIC DEVELOPMENTECONOMIC GROWTHECONOMIC POLICYECONOMICSEMERGING MARKETEMERGING MARKET DEBTEUROPEAN CENTRAL BANKEXCHANGEFACE AMOUNTFACE VALUEFACTORSFEDERAL RESERVEFEDERAL RESERVE BANKFEDERAL RESERVE BANK OF ATLANTAFIDUCIARY STANDARDSFINANCEFINANCIAL CRISESFINANCIAL CRISISFINANCIAL DEVELOPMENTFINANCIAL DISTRESSFINANCIAL INNOVATIONFINANCIAL INSTITUTIONSFINANCIAL INTERMEDIARIESFINANCIAL MANAGEMENTFINANCIAL MARKETSFINANCIAL POLICIESFINANCIAL REGULATIONFINANCIAL SERVICESFINANCIAL STABILITYFINANCIAL SYSTEMFINANCIAL SYSTEMSFINANCINGFORECASTINGFORMAL FINANCIAL SECTORFORMS OF DEBTFUND MANAGERSFUTUREGLOBAL BANKINGGOODGOVERNANCEGOVERNMENT FUNDSGOVERNMENT SPENDINGGOVERNMENTSHOLDINGHOLDINGSHOME OWNERSHIPHOUSINGHOUSING PRICESINCOMEINDUSTRIAL COUNTRIESINFORMATIONINFORMATION ASYMMETRIESINSTRUMENTSINSURANCE AGENCYINTERESTINTEREST RATEINTEREST RATESINTERNATIONAL BANKINTERNATIONAL BANKINGINTERNATIONAL ECONOMICSINTERNATIONAL FINANCEINVESTMENTINVESTMENT BANKSINVESTMENT VEHICLESINVESTORSLANDLAWSLEGISLATIONLENDINGLIQUID ASSETSLIQUIDITYLOANLOAN OFFICERSLOAN PROVISIONINGLOANSLONG-TERM INTERESTMARKET PARTICIPANTSMARKET RISKSMARKETSMATURITYMATURITY MISMATCHESMINIMUM CAPITAL REQUIREMENTSMONETARY AUTHORITIESMONETARY POLICYMONEY SUPPLYMORAL SUASIONMORTGAGEMORTGAGE BROKERSMORTGAGE MARKETNET WORTHNONBANKSOPTIONOPTIONSPAYMENTPAYMENT OF INTERESTPENSIONPENSION FUNDSPHYSICAL CAPITALPORTFOLIOPRESENT VALUEPRICE STABILITYPRICE VOLATILITYPRICINGPRINCIPALPRIVATE SECTOR DEVELOPMENTPROBABILITY OF DEFAULTPROFITSPRUDENTIAL REGULATIONPUBLIC DEBTRATE OF RETURNRATES OF RETURNRATING AGENCIESREAL ESTATERECESSIONRECESSIONSREGULATORY AGENCIESREGULATORY AUTHORITIESREGULATORY FRAMEWORKREGULATORY POLICYREGULATORY REGIMEREGULATORY REQUIREMENTSREGULATORY STANDARDSREGULATORY SYSTEMRISKRISK AVERSIONRISK EXPOSURERISK EXPOSURESRISK PREMIARISK PROFILESRISK TAKINGRISK WEIGHTSRISK-BASED PRICINGSAFETY NETSSAVINGSSAVINGS BANKSECURITIESSECURITIZATIONSHARESHAREHOLDERSSPECULATIVE BUBBLESSTOCKSUPERVISORY AGENCIESSUPERVISORY AUTHORITIESSUPERVISORY POWERSSYSTEMIC RISKTOTAL DEBTTRACK RECORDTRANSACTIONSTRANSACTIONS COSTSUNEMPLOYMENTUNEMPLOYMENT RATESUSURYVALUEVALUE OF COLLATERAL10.1596/1813-9450-5198