Liquid Asset Ratios and Financial Sector Reform

Download or read book Liquid Asset Ratios and Financial Sector Reform written by Ms.Anne Marie Gulde and published by International Monetary Fund. This book was released on 1997-10-01 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: As a monetary, selective credit, and government debt-management instrument, a liquid asset ratio is generally inefficient and may introduce serious distortions. However, it may play a limited role as a prudential instrument, particularly in less sophisticated banking systems or in the context of currency board arrangements. Recent trends in the use of this instrument have been to either abolish it altogether or to design it so as to minimize distortions. When necessary, these changes have been part of a broader effort to make financial intermediation more efficient by relying more on markets and less on regulations.