Latin America Financial Problems Solve

1. PPT

2. Recommendation (1)
• Mercosur to revisit its plans for financial integration and to consider how
to take them forward at the present time.
• PA to establish a small secretariat in one of the PA countries. It could work
to
• Permit pension funds and insurance companies to count cross-border PA
investment as domestic.
• Replace remaining ratings-based country limitations for pension funds
investments across MILA countries with specific foreign exchange and
corporate limitations.
• Complete MILA expansion beyond equities (primary and secondary
markets) to include sovereign and corporate bonds.

3. Recommendation (2)
• Harmonize operational procedures, including all aspects of listing
requirements, for capital markets.
• Ensure all countries have signed IOSCO MOUs.
• “Passport” the licensing of broker dealers, while keeping them
subject to host as well as home regulation.
• Enhance contacts amongst national regulators and supervisors,
including through exchanges of staff and secretariat.
• Examine the potential for expanding geographic scope

4. Risk ad Mitigation(1)
• There are currently low levels of contagion spillover risks in the LA-7
• Market-based spillover analysis (based on estimated default linkages)
suggests that contagion risks among large financial institutions in Latin
America remain contained.
• A key pre-condition for substantial cross-border financial integration is to
also have a robust and forward-looking best-practice regulatory and
supervisory framework in place
• Branches/subsidiaries have to follow all regulations and practices of the
host countries. All countries require endowment capital of branches, and
most authorities have the powers to restrict issuing of dividends of
subsidiaries (including cross-border), as well as of capital of subsidiaries.

5. Risk and Mitigation (2)
• Even where there are no direct financial flows between the bank and non-bank parts of a
conglomerate, problems in the non-bank can have major knock-on effects on the bank. Problems in
the retail arm of the group with the first Chilean bank to move cross-border led to financial
pressures and ultimate sale to another regional bank, although the Chilean bank itself had faced no
difficulties and was making substantial profits
• There is increasing awareness of the importance of consolidated supervision.
• Conglomerate supervision complements supervision of individual sectors by adding a layer to the
solo and consolidated sectoral supervision

6. Risk ad Mitigation (3)
• The Principles are flexible and use a non-prescriptive approach to the
supervision of financial conglomerates to cover a wide range of
structures.
• Beyond consolidated supervision there is also need for increased
cooperation amongst supervisors to tackle conglomerate and cross-
border risks more broadly
• Macroprudential authorities have the power to impose additional
capital charges if they consider that cyclical conditions so warrant.
Specific instruments such as limits on loan-to-value and debt-to-
income are also being studied
The Principles are flexible and