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Monitoring Country Risk

In: How to Handle Problem Loans

Author

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  • T. H. Donaldson

Abstract

A country is more difficult to monitor than a company, partly because country risk is a more diffuse concept than corporate risk. In lending to lesser developed countries with little or no private sector, country risk may be simply the risk of lending to the government or government agencies. In lending to even partly developed countries, however, it is more complex, harder to define and therefore to monitor. A bank lending to a country has different types of country risk. A branch in the country will lend local currency: to corporate customers or to government; it will lend foreign currency from outside the country short- or medium-term, to finance trade, a project or balance of payments; to central or local government or to a wide range of companies; and in each case the risk is different. The bank must monitor aspects which do not depend on the make-up of its portfolio.

Suggested Citation

  • T. H. Donaldson, 1986. "Monitoring Country Risk," Palgrave Macmillan Books, in: How to Handle Problem Loans, chapter 5, pages 54-72, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-07740-3_5
    DOI: 10.1007/978-1-349-07740-3_5
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