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Risk Analysis in Lending to LDCs

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Abstract

What is the proper mix of portfolio considerations when a commercial bank engages in international lending? How should considerations of liquidity, profit, and safety be balanced? What is the appropriate level of risk assumption by a bank when it participates in international lending? These questions become basic considerations when undertaking an analysis of risk in international lending. By their international lending, banks have not only added to their own profitability,1 growth, and ability to service customer needs overseas: they have also recycled petrodollars and thereby prevented a major international payments and transfer-of-purchasing-power calamity. Moreover, the international banks have contributed to a more orderly evolution and development of world financial markets. In short, while the major international lending banks have not consciously embarked upon a course of action whereby they would assume important responsibilities for financing world prosperity and growth, the end result of their international loan activities has been to make important contributions in the above-mentioned areas.

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Chapter 4

  1. Henry C. Wallich, ‘How Much Private Bank Lending is Enough?’, paper presented at a symposium on LDC debt, held in Washington, DC, on 21 April 1977; proceedings published as Financing and Risk in Developing Countries (Washington, DC: Eximbank, Aug 1977) p. 3.

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© 1979 Anthony Angelini,Maximo Eng and Francis A. Lees

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Angelini, A., Eng, M., Lees, F.A. (1979). Risk Analysis in Lending to LDCs. In: International Lending, Risk and the Euromarkets. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-03807-7_4

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