In recognition of the region’s growing economic interdependence, the Central American Monetary Council and the IMF on July 25–26 convened a conference in La Antigua, Guatemala, to discuss regional surveillance of the area’s economies and the policies needed to ensure macroeconomic stability and higher growth.The high-level meeting drew presidents of central banks, ministers of finance, and bank supervisors from Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and Panama. Also attending were representatives from the World Bank and the Inter-American Development Bank.
Mr. Charles R Taylor, Christopher Wilson, Eija Holttinen, and Anastasiia Morozova
Fintech developments are shaking up mandates within the existing regulatory architecture. It is not uncommon for financial sector agencies to have multiple policy objectives. Most often the policy objectives for these agencies reflect prudential, conduct and financial stability policy objectives. In some cases, financial sector agencies are also allocated responsibility for enhancing competition and innovation. When it comes to fintech, countries differ to some extent in the manner they balance the objectives of promoting the development of fintech and regulating it. Countries see fintech as a means of achieving multiple policy objectives sometimes with lesser or greater degrees of emphasis, such as accelerating development and spurring financial inclusion, while others may support innovation with the objective of promoting competition and efficiency in the provision of financial services. This difference in emphasis may impact institutional structures, including the allocation of staff resources. Conflicts of interest arising from dual roles are sometimes managed through legally established prioritization of objectives or establishment of separate internal reporting lines for supervision and development.
Unlike most nonfinancial corporations, in a market-based economy, banks are subject to a special regime of licensing, regulation, and supervision (hereinafter also “prudential regulation”). In a market-based economy, the function of banks differs from that of other enterprises, calling for special treatment of banks by the state.
Banks require a strong legal framework providing certainty concerning their rights and obligations under the law and permitting them to enforce their financial claims expeditiously and effectively against counterparties in default. Conversely, weaknesses in the legal system that create uncertainties concerning the existence and enforceability of property rights increase the risk that, as debtors hiding behind such weaknesses default on their obligations, banks will not be able to collect on their claims. Inefficiencies in the judicial processing of financial claims by banks may inhibit the marketing of financial assets and reduce their value; this often results in unhealthy accumulations of nonperforming assets on banks’ balance sheets, weakening the banking system as a whole. Meanwhile, banks will cover these risks and market inefficiencies in the form of higher charges, creating upward pressure on transaction costs throughout the economy.
Regulatory intervention includes all action taken by the bank regulator with respect to a bank in response to continuing violations of prudential law (banking law, implementing regulations, etc.) on the part of that bank. Thereby, the bank regulator intervenes directly or indirectly in the bank’s management and operations.
The Irish authorities are adopting consolidation measures to meet the original fiscal targets as well as implementing structural reforms in the labor market and sheltered sectors to enhance competitiveness. Strengthened euro area support for Ireland’s growth and debt sustainability would greatly reinforce prospects for Ireland to regain market access at an early stage given more adverse circumstances. Reports suggest that investors are differentiating Ireland based on its policy implementation track record and growth prospects. Vulnerabilities persist, however, as international demand for Irish bonds is sensitive to developments in the euro area.
This paper discusses Romania’s Seventh and Eighth Reviews Under the Stand-by Arrangement and Request for Waiver of Nonobservance of Performance Criteria. Continued strong fiscal consolidation would enable Romania to exit the EU Excessive Deficit Procedure by mid-2013; prudent monetary policy kept core inflation low, and close supervision buttressed banking sector stability. Fiscal and international reserves buffers and a well-capitalized banking sector provide a cushion against shocks. Market sentiment toward Romania improved as political uncertainty subsided in the aftermath of the December 2012 parliamentary elections, which the ruling coalition won. Structural reforms, however, advanced slowly, and the recovery has lagged behind that in most other European emerging economies.