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Editorial Note
 A Tenth Annual Assembly – Regulation and Supervision Priorities
On October 11 and 12 of 2007, the Association of Banking Supervisors of the
Americas held its Tenth Annual Assembly in Montego Bay, Jamaica, to deal with
topics related with the development of the banking sector in the region and with
the challenges for its regulation and supervision, in an environment a growing
integration of financial markets.
The integration of international financial markets has increased the presence of
complex business structures and financial instruments, through financial
conglomerates. This should compel regulators and supervisors to develop norms
and to implement supervision processes that allow them to know better the
magnitude and type of risk exposure that the entities under their supervision
face, to determine the adequateness of their capital, give the risk undertaken; to
analyze the structure and effectiveness of their corporate governance; and to
establish the quantity and quality of the information that they should provide to
the market. The integration of markets has also helped to promote channels of
communication among supervisors that has become a key element for the
effective monitoring of the operations of complex entities that have activities in
several financial markets or national jurisdictions (financial conglomerates).
The actions taken by supervisors in the mentioned consider practical aspects of
the banking operation at an international level, as the one referred to the
structuring of the banking business in different legal environments, where the
consolidation norms can be limited and may not cover all the sources of risk of a
banking operator. To this, it has to be added that different methods of the New
Capital Accord, known as Basel II, have been adopted, depending on the country
in which a banking entity may be operating and the absence of standardization in
the key definitions for the banking business and others. These elements can
exacerbate the risk positions of operators given that their operations become
complex, which can lead to regulatory arbitrage and generate contagion vehicles
that may be difficult to detect in a timely way.
Banking regulators and supervisors will carry out this task through the generation
of more effective risk management norms, through the request that this process
becomes part of the decision making of a banking entity and the need that
banking operators give more relevant information to the market. In this way,
supervisors will exert a more direct control of the financial intermediation activity,
performing a permanent auto evaluation of their effectiveness, to verify if they are
contributing to the financial stability of their markets in a dynamic environment
and to avoid distortions in the market.
The Annual Assembly of the supervisors of the region gives a scenario to
analyze regional trends, to discuss structural topics and to identify regulatory and
supervision priorities, as the ones mentioned. The Annual Assembly aims to
contribute to the superior goal of attaining stable and efficient financial markets,
which help in the development of the region.
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