 Editorial Note
New
Challenges and Commitments
Paulo Sergio Cavalheiro
President of the Board of Directors -ASBA
Having concluded the
first quarter of 2007, it is opportune to comment
on the projects that ASBA is developing with the goal
of strengthening the banking regulatory and supervisory
capacities of the region.
With the recent approval
of the revision to the Core Principles for Effective
Banking Supervision, an important step was taken for
the development of international best practices of
banking regulation and supervision. These principles,
together with the essential elements of the International
Convergence of Capital Measurement and Capital Standards,
represent the basic guidelines that, if implemented,
will strengthen the financial systems of the region.
The new principles
highlight the importance of risk management in financial
institutions and their consolidated supervision. They
also pay special attention to the exchange of information
between home and host country supervisors, to an increased
transparency of supervisory agencies and to the importance
of verifying that banks are protected against illegal
activities. In turn, Basel II considers of vital importance
that banking supervisors have the skills to evaluate
the risk management systems of banks, for them to
assure that the capital contributed by the banking
sector is in line with their market, credit and operative
risks.
The adoption of these
concepts would facilitate the adjustment process of
the banking regulation and supervision of the region
to a more risk sensitive framework, considering the
characteristics of each financial market.
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Bank
Supervision
The
Fear of Freedom: Politicians and the Independence
of Accountability of Financial Sector Supervisors
Marc Quintyn, Silvia Ramírez
y Michael W. Taylor IMF Working Paper
Compared with the
case of central bank independence, independence for
financial sector supervisors remains more controversial.
This paper analyzes changes in independence and accountability
arrangements in a set of 32 countries that overhauled
their legal and/or institutional frameworks for supervision
in recent years.
 In
the search for stability: Regulation, supervision
and macroeconomic environment
Extract
from the document “Financing for development: Latin
America from a comparative perspective”
CEPAL
The financial crises of 1994-1995 and 1997-1998
sent alert signals to Latin America and East Asia,
showing the necessity of strengthening regulation
and supervision. But, what does it exactly mean
to strengthen regulation and supervision?
(text in Spanish)
Central
banking and supervision in the United States
Remarks by Mr. Ben S. Bernanke, Chairman of the Board
of Governors of the U.S. Federal Reserve System, at
the Allied Social Science Association Annual Meeting,
Chicago, January 5, 2007.
The
Federal Reserve, like many central banks, is engaged
in a wide range of activities beyond the making of
monetary policy. In this talk I will consider the
case for one of these activities –namely, the supervision
of the banking system –being conducted at least in
part, by the U.S. central bank. Various institutional
arrangements exist around the world, including the
traditional model in which the central bank serves
as a supervisor of the banking system. In light of
these alternative models, does it make sense for the
Federal Reserve to supervise banking organizations?
Financial
regulation and the invisible hand
Remarks by Mr. Ben S. Bernanke,
Chairman of the Board of Governors of the U.S. Federal
Reserve System, at the New York University Law School,
New York, April 11, 2007.
Market forces determine most outcomes in our economy.
Today, I would like to explore the market-based approach
to financial regulation by considering its application
to two important -but very different- types of financial
institutions: commercial banks and hedge funds. For
both types of institutions, market-based regulation
has proven an effective supplement to (or substitute
for) conventional command-and-control approaches.
Financial
stability and the importance of AML/CFT supervision
and regulation
Speech by Mr. Martin Redrado, Governor of the
Central Bank of Argentina, at the FIBA Annual AML Compliance
Conference, Miami, February 13, 2007.
All
of us in this room share a vision about the need for
regional integration. Regional agreements are extremely
valuable as a way of consolidating the implementation
of a uniform set of best practices. We support all
initiatives intended to combat money laundering and
terrorist financing. Nevertheless, any counter-terrorist
effort, whether through regulation, control or the
gathering of information that is applied without understanding
of the idiosyncrasy of the region would be counterproductive.
Supervisors
must be professionals
Jean Lemierre, President of the EBRD.
Whether
responsibility for banking supervision in the EU lies
with national central banks or with separate agencies,
it must be able to stand up to pressure. Banking supervision
is paramount. Sound regulation engenders a sense of
trust not only in the financial sector itself but
beyond into the whole economy.
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Recommended
Readings
 Evolving
banking systems in Latin America and the Caribbean:
Challenges and implications for monetary policy and
financial stability
BIS Papers. No. 33
This publication provides
an overview of the issues discussed at a meeting of
central banks in Kingston Jamaica, focusing on the
open economies of LAC. In recent years, the banking
sectors of many LAC countries have undergone rapid
structural change. An important underlying determinant
of such change has been the drive by countries to
improve the efficiency and resilience of their financial
systems through deregulation. The authors argue that
these changes have brought a better allocation of
financial resources and more complex risks. They examine
how the development of the banking sector, and in
particular foreign entry, has affected a wide range
of prudential issues.
 Corporate
Governance in Financial Institutions
Enrique Marshall, Advisor of the Central Bank of Chile.
Presentation
 Bank
Failures and Bank Fundamentals: A Comparative Analysis
of Latin America and East Asia during the Nineties
using Bank-Level Data
Marco Arena, Bank of Canada
The
author develops the first comparative empirical study
of bank failures during the nineties between East
Asia and Latin America, in order to address the following
two questions: (i) To what extent did individual bank
conditions explain bank failures? (ii) Did mainly
the weakest banks, in terms of their fundamentals,
fail in the crisis countries?
Does
the Market Discipline Banks? New Evidence from the
Regulatory Capital Mix
Adam B. Ashcraft, Federal Reserve Bank of New York
of the Federal Reserve System
Although bank regulation
permits a bank to choose freely between equity and
subordinated debt to meet capital requirements, lenders
and investors view debt and equity as imperfect substitutes.
It follows that the mix of debt in regulatory capital
should isolate the role that the market plays in disciplining
banks. The author documents that since the Federal
Deposit Insurance Corporation Improvement Act of 1991
reduced the ability of the FDIC absorb losses of subordinated
debt investors, the mix of debt has had a positive
effect on the future outcomes of distressed banks,
as if the presence of debt investors has worked to
limit moral hazard.
Inflation
targeting in emerging market economies
Speech
by Malcolm D Knight, BIS General Manager, at the Seminar
on Inflation Targeting, Bank of Morocco, April 4,
2007.
Inflation targeting
has been adopted by a growing number of emerging market
economies. Mr Knight discusses the benefits of a credible
monetary policy framework, and highlights three particular
advantages of explicit inflation targeting as one
effective way of establishing such a framework. He
also argues that inflation targeting is not a panacea,
but needs to be supported by sustainable fiscal policy.
He points out that inflation targeting is a flexible
framework, and discusses three strategic choices that
need to be made by emerging market economies in adopting
inflation targeting, namely about the nature of the
inflation target, the role of macroeconomic forecasts
and the management of the exchange rate.
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ASBA
Events
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