Assessing Banking Sector Soundness in a Long-Term Framework: The Case of Venezuela

33 Pages Posted: 13 Nov 2006

See all articles by Rodolphe Blavy

Rodolphe Blavy

International Monetary Fund (IMF) - African Department

Date Written: October 2006

Abstract

This paper combines financial soundness indicators (FSIs) and stress-testing methodologies to provide a broad assessment of the soundness of Venezuela's banking sector, based on a diagnosis of its structural and transient shortcomings. While the Venezuelan banking sector appears sound under current favorable economic conditions, it remains significantly vulnerable to cyclical downturns - which have been severe in the past. Banks are particularly exposed to interest rate and credit risks. This suggests that the strong FSIs may be partly the result of a conjunctural credit boom in the context of capital controls and very low real interest rates.

JEL Classification: E44, G1, G21, G28

Suggested Citation

Blavy, Rodolphe, Assessing Banking Sector Soundness in a Long-Term Framework: The Case of Venezuela (October 2006). IMF Working Paper No. 06/225, Available at SSRN: https://ssrn.com/abstract=941287

Rodolphe Blavy (Contact Author)

International Monetary Fund (IMF) - African Department ( email )

1700 19th Street, NW
Washington, DC 20431
United States

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