This puts further emphasis on supervisory review process and market discipline, which borders on transparency and full disclosure of financial information. These are intended to provide clear bases for effective management of risks and allocation of capital to cover them with the view to making safe and sound institutions.
Now FDI and portfolio equity together dominate the stock of their liabilities (Table 1). The advantage of FDI and portfolio equity flows over pure debt flows is that there is risk sharing between the lender and borrower in the case of the former. Moreover, FDI flows tend to be more stable than other forms of capital flows.