This article continues the annual series on international banking developments expanded, as last year, to encompass wider capital market developments.
- Much of the year's international financial flows was between investors and borrowers in developed countries and was channelled through securities markets. International bank lending fell further from its pre-eminent position seen in the 1970s.
- Financial innovation continued apace and included the establishment of new markets for short-term paper, while controls were relaxed in the major capital markets. Together these forces contributed to a growing integration of markets.
- In October US Treasury Secretary Baker launched an initiative for tackling the debt problems of certain developing countries. The proposals provide a framework based on growth-oriented adjustment policies and have been broadly welcomed, although discussions on implementation continue.