Exam 17: International Banking: Reserves, debt, and Risk

Which term best describes the process in which the International Monetary Fund provides loans to countries facing balance-of-payments difficulties provided that they initiate programs holding promise of correcting these difficulties?

The SDR has replaced the dollar,yen,and mark as the key asset of the international financial system.

The exchange of borrowing country debt for an ownership position in the borrowing country is known as:

A debt-equity swap results in a trade surplus nation forgiving the loans made to a trade-deficit nation.

Under a debt-for-debt swap,a commercial bank sells its loans at a discount to a developing country government for local currency which it then uses to finance an equity investment in the debtor country.

A main purpose of the International Monetary Fund is to make loans of foreign currencies to member countries which are experiencing current-account surpluses.

Why do countries hold international reserves?

Concerning international lending risk,country risk refers to the risk that part or all of the interest or principal of a loan will not be repaid.

A debt buyback is a debt-reduction technique in which a government of a debtor nation buys loans from commercial banks at a discount.

The U.S.dollar has been considered a reserve (key)currency because trading nations have been willing to hold it as an international reserve asset.

Concerning international lending risk,currency risk is the risk of asset losses due to changing currency values.

"Owned" international reserves consist of:

With an international gold standard,if a country ended up with a deficit from the balances on its current and capital accounts,it would:

Concerning international lending risk of commercial banks,____ is closely related to political developments in a borrowing country,especially the government's views concerning international investments and loans.

When exchange rates are fixed by central bankers,international reserves are necessary for financing payments imbalances and the stabilization of exchange rates.

The International Monetary Fund has sometimes demanded that financially-troubled nations,that borrow from the IMF,undergo austerity programs including slashing of public spending and private consumption.

Concerning international debt,____ refers to a negotiated reduction in the contractual obligations of the debtor country and includes schemes such as markdowns and write-offs of debt.

International reserves allow a country to finance disequilibria in its balance-of-payments position.

Which of the following is not considered a "borrowed" reserve?

Because the value of the SDR is tied directly to the value of the U.S.dollar,a 10 percent dollar depreciation would result in a 10 percent decrease in the SDR's value.