Europe > Montenegro
On behalf of the Montenegrin authorities, we would like to thank Mr. Seshadri and his team for their in-depth report and constructive engagement, including the in-person consultations in Podgorica last November. We would like to offer the following comments.
Abstract
This volume, edited by Robert C. Effros, focuses on how technology is affecting the world of banking and finance in an era of increasing globalization. The advent of electronic money, stored value cards, and internet transactions are discussed, as well as the impact of technology on cross-border banking and its implications for central banks. Other issues examined are the legal and regulatory frameworks for risk management of banks, sovereign debt, the international laws of bank secrecy, and financial services within the context of the GATT Agreement on Trade Services.
Abstract
Chapters 10 and 11 stress a number of trends in banking. Some of these trends—globalization, increasing diversification, and the impact of technology—have been evident for quite some time. They imply a changing view of the content of risk. There is nothing new in risk. Banks have always been in the business of risk management. The issue is one of ensuring that new risks are properly identified and properly managed. Systems of supervision need to respond to the changes within the boundaries of what is achievable and desirable. Nevertheless, risk has now taken center stage. A major underlying factor has undoubtedly been the explosive growth in the trading of derivatives and the part played in it by banks. The implications of this development are not debated here. However, the concomitant risks are and have to be in the forefront of the minds of supervisors throughout the world.1
Abstract
In Chapters 12 to 15, the concepts of sovereign debtors, liquidity crises, and external debt were explored; a legal framework for dealing with defaults and rescheduling was examined; the role of sovereign immunities was reviewed; and the pitfalls and hazards of debt rescheduling were addressed. Experts have long sought a means to resolve sovereign liquidity crises through the application of law. One important avenue that has from time to time been suggested is to build on the jurisprudence that surrounds the meaning and interpretation of Article VIII, Section 2 (b) of the Articles of Agreement of the International Monetary Fund.1
Abstract
Chapters 4 and 5 on foreign exchange settlement risk and cross-border electronic payments raise an interesting issue. Do these transactions involve (i) a delivery against payment, or (ii) a payment against payment? For example, assume that a person purchased apples with dollars instead of a foreign currency. Apples are a commodity and, as such, they get delivered rather than paid. This purchase, therefore, involves a delivery of apples against payment in dollars. However, what if a person buys francs instead of apples? Does he or she have a delivery of francs against payment in dollars or a payment of francs against payment of dollars? The answer is significant because it will lead to the application of one of two different legal regimes.
Abstract
The two preceding chapters focused on matters concerning payment systems. It is clear from them that payment system processes and issues are detailed and complex. In order to provide certainty as to how the issues that arise in these systems will be resolved, the law applicable to a system may also need to be detailed and complex. For low-value payments, the need for this certainty may be relatively low, and the development of a complex legal framework to support the arrangement may not be justified. However, as payment values grow, either in terms of the size of individual payments or in terms of the aggregate size of the payments, the case for a detailed legal framework for the payments becomes stronger.
Abstract
Three subjects raised in Chapters 8 and 9 deserve further elaboration. First, what degree of independence should the supervisory authority have? Or, in other words, what should be the relationship between the supervisory authority and the political authority? To be effective, supervision has to be independent from political considerations for reasons similar to those that justify similar independence in monetary policy. As is well known, there is a growing consensus that the monetary authority should be independent from day-to-day political interference. An analogous, even stronger case may be made with respect to supervision, where a number of very complex issues must be addressed, and delicate judgments must be made.
Abstract
FRANÇOIS P. GIANVITI