Barriers and Opportunities for Enhancing Capital Flows
In the COMCEC Member Countries
111
1. Health and soundness of the banking sector.
 Banking system is very sound. Liquidity is ample and
well-managed. Capital adequacy ratios are on average above
recommended levels or the structure of assets carries little
risk.
 Banking sector is broadly sound. Regulation and
capital adequacy are in line with official recommended
guidelines. A few banks may need government support.
 Moderate risks: Some banks have had to write off
major liabilities. Government has bailed out a few banks, but
capital adequacy ratios are within the norm and there is
little foreign-exchange risk.
 Significant risks of systemic failure in the banking
system. There is major state intervention to maintain banks
afloat.
 High risk of systemic failure.
Based on capital adequacy, asset quality, liquidity and
sensitivity to market risk; exposure to foreign exchange risk.
*2 Financial depth; stockmarket capitalisation (US$ per
head)
 If more than US$12,000
 If between US$5,001 and US$12,000
 If between US$501 and US$5,000
 If between US$100 and US$500
 If less than US$100
**3. Degree of distortion in financial markets
 Very low: real interest rates consistently low and
positive; low differential between deposit and lending rates
 Low: positive real interest rates, but differential
between deposit and lending rates is at least 5%
 Moderate: single-digit negative real interest rates
 High: double-digit negative real rates and large
deposit-lending rate differentials
 Very high: severe disruptions in credit market
Consider: interest-rate controls; negative real interest
rates; differential between deposit and lending rates; credit
market disruptions.
VIII Financing