Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

October 1998 Many governments have faced serious fiscal instabilities as a result of their growing contingent liabilities. But conventional fiscal analysis and institutions fall short in addressing contingent fiscal risks. What approaches in fiscal analysis and standards for public sector management would foster sound fiscal performance? And how can policymakers be made accountable for recognizing the long-term costs of both direct and contingent forms of government activity in their decisions? Governments are increasingly exposed to fiscal risks and uncertainties for three main reasons: ° The increasing volume and volatility of international flows of private capital. ° The state's transformation from financing services to guaranteeing that the private sector will achieve particular outcomes. ° Moral hazards arising in markets because the government is perceived to have residual responsibility for market outcomes. Sources of fiscal risk may be direct or contingent (a liability only if a particular event occurs). Whether direct or contingent, they are either explicit (recognized as a government liability by law or by contract) or implicit (a moral obligation reflecting public expectations and pressure from interest groups). The recent Asian crisis revealed that major moral hazards exist in markets and that sizable hidden fiscal risks may arise from contingent forms of government support. Governments must understand and know how to handle contingent liabilities if they are to avoid the danger of sudden fiscal instability and realize their long-term policy objectives. They can reduce fiscal risks by incorporating contingent liabilities into their analytical, policy, and institutional public finance frameworks. Governments can address fiscal risk through three channels in particular, says Polackova: ° By including contingent and implicit financial risks in their fiscal analysis and (to deter moral hazard in the market) by publicly acknowledging the limits of state responsibilities. ° By reflecting the cost of contingent liabilities in policy choices, budgeting, financial planning, reporting, and auditing. ° By developing institutional capacity to evaluate, regulate, control, and prevent financial risk in both the public and private sectors. Given the increasingly serious implications of contingent government liabilities for the fiscal outlook of countries, Polackova argues that it is time for the World Bank, the International Monetary Fund, and others to: ° Incorporate government contingent fiscal risks in their analysis of a country's fiscal sustainability, policies, and institutions. ° Require countries to disclose information regarding their exposure to contingent fiscal risks. ° Help countries embrace contingent liabilities in their analytical, policy, and institutional public finance frameworks. This paper-a product of the Poverty Reduction and Economic Management Sector Unit, Europe and Central Asia Region-is part of a larger effort in the region to enhance the Bank's analytical and operational work in public finance. The author may be contacted at hpolackova@worldbank.org.

Contingent liabilities (Accounting)

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Government purchasing --- Public-private sector cooperation --- Finance, Public --- Contingent liabilities (Accounting)

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Contingent liabilities (Accounting) --- Liabilities (Accounting) --- Government liability --- Finance, Public --- Debts, Public --- Administrative agencies --- Executive departments --- Accounting --- Standards

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

In this paper, we develop a methodology to assess potential losses to the government that could arise from bank failures. The approach is intended to be simple, parsimonious, and used in real time. It generates an index that we call the banking sector contingent liability index (BCLI), based on the banking sector’s size, concentration, diversification, leverage, and riskiness of assets. The index is illustrated for 32 advanced and emerging market economies from 2006 to 2013, as well as a group of banks including global systemically important banks (G-SIBs).

Banks and banking --- Contingent liabilities (Accounting) --- Bank failures --- Failure of banks --- Business failures --- Liabilities (Accounting) --- Agricultural banks --- Banking --- Banking industry --- Commercial banks --- Depository institutions --- Finance --- Financial institutions --- Money --- Econometric models. --- Banks and Banking --- Financial Risk Management --- Macroeconomics --- Public Finance --- Contingent Pricing --- Futures Pricing --- option pricing --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Corporate Finance and Governance: Government Policy and Regulation --- Public Administration --- Public Sector Accounting and Audits --- Financial Crises --- Public finance & taxation --- Economic & financial crises & disasters --- Contingent liabilities --- Global financial crisis of 2008-2009 --- Financial crises --- Public financial management (PFM) --- Banking crises --- Fiscal policy --- Global Financial Crisis, 2008-2009 --- Australia