Regulators are trying to limit mismatches at banks by requiring them to hold more long-term deposits if they issue long-term loans.
Currency gyrations affect firms in three ways: by changing the rate at which foreign sales are translated into dollars, by creating financial mismatches and by altering the behaviour of competitors.
The dollar explains much of the slowdown.Financial mismatches are even more of a headache.
This is ambitious stuff, because the barriers include mismatches in corporate law, taxes and information-technology platforms, as well as straight protection.
Another systemic flaw in the OECD's sights is "hybrid mismatches"—the use of structures that let firms claim tax breaks for a subsidiary or a debt instrument in several countries.Highlighting problems is the easy part.
If not, such mismatches are cruelly exposed.Whatever the aim, the consequences will hurt smaller banks disproportionately.
According to Marcello Estevão and Evridiki Tsounta of the IMF, geographic immobility and skill mismatches reinforce each other.
The combination of large external financing needs and private-sector currency mismatches looks suspiciously like Thailand in 1997.
Importantly, such a market, if it could be established, would eventually let emerging-market economies tap foreign capital without currency mismatches.
It might even attract foreign capital into rupiah-denominated bonds, shares and direct investments, avoiding the currency mismatches that doomed the country in the late 1990s.
Banks have used interest-rate derivatives to manage potential mismatches between their assets (loans and so forth) and their liabilities (checking accounts, for instance).
