Wrangling over rules.

Author:Buchanan, Ronald
Position::TOP FINANCIAL INSTITUTIONS
 
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Bankers from Latin America are adding their voices to the debate about new standards and enhanced regulation for global financial markets.

Coming from banking systems that performed comparatively well during the recent crisis, Latin American bankers urged the Basel Committee on Banking Supervision to consider the "unintended consequences" of higher capitalization requirements and other changes that could force emerging market banks to divert funds from financing development.

Jorge Londono Saldarriaga, president of Bancolombia and chairman of the Working Group on Regulatory Reform of the Institute of International Finance's Emerging Markets Advisory Council said many banking supervisors in the region already require larger capital cushions than the international recommendations--in part because of lessons learned in past banking crises.

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"We believe that modifying the general level of capitalization - from the 8 percent capital that was set--holds little relevance for solving the problems that caused the crisis," Londono said.

The problem ties with changing what can be classified as basic capital, forcing the region's banks to boost capital for reserves instead of expansion.

The head of Colombia's largest bank said he was also concerned about proposals for new bank levies, which could hamper the recovery of global banks. "Measures have emerged that can be understood from the point of view of politics," he said in a telephone interview with Latin Trade. "But they are difficult to understand from the technical, point of view."

Londono said the working group expected their recommendations, sent to the Basel Committee, to get a fair hearing. "The regulating bodies have opened their eyes a tot to banks in emerging markets," he said.

The resilience of Latin American banks is one of the hallmarks of change in a region once known for collapses and costly cleanups.

"Thanks to about 30 crises in the financial sectors in Latin America in the last 25 years, the financial sectors have strengthened," said Enrique Garcia, president and CEO of the Corporacion Andina de Fomento, the Caracas-based lending agency. "We have good central banks, good supervisory boards."

Supervision is the key, according to Francisco Luzon, head of Spain-based Banco Santander's Latin America division. "White the regulatory framework is important, the quality of central bank supervision is a more decisive factor in the strength and efficiency of a banking system," Luzon said....

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