International Banking:

The Framework Underlying Country Risk in International Lending

NSIAD-86-183FS: Published: Sep 4, 1986. Publicly Released: Sep 4, 1986.

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In response to a congressional request, GAO described the statutory, regulatory, and administrative system that U.S. bank supervisory agencies use to govern country risk in international bank lending.

Until the Comptroller of the Currency, the Federal Reserve, and the Federal Deposit Insurance Committee established the Interagency Country Exposure Insurance Corporation in 1979, federal agencies did not uniformly evaluate the risks arising from possible adverse economic, political, or social circumstances preventing a borrowing country's timely loan repayments. Members of these agencies periodically meet to discuss and assess the current economic, political, and debt repayment prospects of individual countries that have borrowed from U.S. banks. Recent loan repayment difficulties, which several Latin American countries have experienced, resulted in legislation that encouraged more prudent international lending practices.

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