Towards an Effective Regulatory and Supervisory Framework for Latin America

54 Pages Posted: 20 Apr 2011

See all articles by Liliana Rojas-Suarez

Liliana Rojas-Suarez

Center for Global Development

Steven R. Weisbrod

Consultant; Inter-American Development Bank (IDB)

Date Written: February 1997

Abstract

This paper raises fundamental questions about how banks in Latin America ought to be supervised. The concentration of wealth holders in Latin America and the equity markets` resulting illiquidity permit investors who control banks to subvert the intent of capital requirements, even when the bank itself is subject to rigorous accounting standards. A number of policy implications follow from the analysis. Three of policy recommendations derived from this analysis can be successfully implemented in the short run. Latin American supervisors should focus on: improving the markets that already work in Latin America, which currently are markets for bank liabilities; severely limiting public safety nets for bank liabilities so that risky banks face a high price for raising liabilities; and encouraging macroeconomic policies to play a much more important role in restraining bank risk in Latin America than in the industrial countries.

Suggested Citation

Rojas-Suarez, Liliana and Weisbrod, Steven R., Towards an Effective Regulatory and Supervisory Framework for Latin America (February 1997). IDB Working Paper No. 277, Available at SSRN: https://ssrn.com/abstract=1815964 or http://dx.doi.org/10.2139/ssrn.1815964

Liliana Rojas-Suarez (Contact Author)

Center for Global Development ( email )

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United States

Steven R. Weisbrod

Consultant

Inter-American Development Bank (IDB)

1300 New York Avenue NW
Washington, DC 20577
United States
202-623-2445 (Phone)

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