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Argentina's financial regulatory reform in the nineties and the Enlightenment


Abstract: From the 1994 Mexican financial crisis, Argentina began its supervision of banks gradually introduce market constraints, and from bonds, audit supervision, information, and five credit evaluation framework established BASIC. In the late 90s of last century the Asian financial crisis and financial turmoil in Brazil, Argentina's banking sector performance was fairly stable, the macroeconomic stability and contributed. BASIC framework for joining WTO, the country has an important reference. I. Background like other emerging market countries, Argentina in 1990 after the liberalization of banking sector reforms. Correspondingly, the financial regulatory policies to encourage financial liberalization and privatization, allowing free access to foreign domestic financial industry. However, the end of 1994 the outbreak of the Mexican financial crisis in the financial sector in Argentina was not a small impact, a number of poorly managed financial institutions forced to close or be acquired, the number of financial institutions by the end of 1994 into the end of 1995 205 158 . the crisis in Argentina, the regulatory authorities recognize that the conventional regulatory approach alone is not enough. Bank balance sheets and other statistics can not reflect the bank's mismanagement and fraud, bank failures and these are precisely the most important reason. Regulatory authorities began to consider the introduction of market institutions and operators in the financial evaluation, and as an important component of supervision. From the 20th century began in the late 90's, Argentina's regulatory constraints and gradually establish a market framework for banking supervision under the BASIC, and achieved very good results. Asia in the late 90s, Russia and Brazil,[link widoczny dla zalogowanych], the successive crises erupted, the performance of Argentina's banking system is quite stable. In 1998 World Bank report, Argentina's banking supervision in emerging market countries is considered a model in one of the most successful. Therefore, the study in the late 90's in Argentina's financial reform is important for our reference. II, BASIC framework for the contents of the BASIC is a five-letter abbreviation for the word, representing the bonds (Bonds), Auditing (Auditing), supervision (Supervision), Information (Information ) and credit assessment (Creditrating). BASIC The basic idea is that the regulatory framework, market discipline and Central Bank both in information gathering, regulatory and legal motives are different aspects of power, neither is perfect, therefore, will be the introduction of market discipline to the central bank's supervision go, the two complement each other, it will improve the quality of supervision of good. Logically, the operation of this monitoring system should be the order of information, auditing, supervision, bonds and credit assessment, the relationship between to make the following statement: (a) information (Information) good information for the market in terms of constraints and financial regulation is an important prerequisite. For each commercial bank, Central Bank of Argentina regularly publish their balance sheets, key performance indicators and the specific terms of default loans and details. In addition, the central bank's credit information disclosure authority is even extended to all 50 U.S. dollars the amount of the loan, almost all of the banking system, loans are included. These data include borrower's name and a unique identification number (in Argentina, the National Registration Authority for each of the residents and businesses are given a separate number, and its wide range of uses), the name of the bank loans, loan amount, loan quality (with the five, said loan quality classification, such as normal = 1, loss = 5) and the provision of collateral and guarantees. This information can be in the Central Bank of Argentina's official website. This means that as long as they enter the borrower's personal name or company name, anyone can immediately see that borrowers are present, for the entire financial system's total liabilities and the repayment conditions. Recently, the central bank maintained its data further expanded to include more information related with the quality of loans. (b) Audit (Auditing) usefulness of information depends not only on the amount of information, but also on the quality of information. It is published in the audit process to ensure correct information is an important step. To ensure the quality of the audit, the Central Bank of Argentina, a listed commercial banks are eligible for the auditors and the audit a list of companies. They must be responsible for the audit of the financial bonds, in the event of disputes, not only the audit of the bond they will be confiscated, the relevant central bank auditors will also be removed from the list. In addition, the Central Bank of the minimum audit requirements on a series of strict criteria, and participate in monitoring the implementation of the entire audit process. The central bank under the supervision of the audit process has greatly enhanced the quality of audit information to use the information for market evaluation of financial institutions provided a solid foundation. (c) monitoring (Supervision) the regulatory framework in BASIC, including the supervision and management essentially two aspects, which the central bank to distinguish between the internal functions of the structure. CAMELS system, the central bank to commercial banks use to judge, and the bank's capital and liquidity requirements accordingly. CAMELS rating of commercial banks lower, indicating that the bank's overall business in poor condition, the central bank requires it to hold more capital to guard against possible risks. in the Mexican financial crisis, Argentine Central Bank found that those with large deposits of commercial banks deposits in a serious loss. In contrast, greater stability of demand deposits. However, due to the statutory deposit reserve ratio requirements than demand deposits less time in the event of loss of deposits, time deposits of banks with a large number of severe lack of liquidity. To overcome this period associated with the deposit reserve policy deficiencies and prevent the loss of deposits, starting from August 1995, the Argentine Central Bank implemented a new Deposit types in the past provided only on The longer the remaining maturity, the higher the liquidity ratio requirements. Meanwhile, the central bank is close to the level of short-term dollar deposit rate paid on commercial bank liquidity compensation, so that not only reduces the requirements of the burden to commercial banks, and also enhance the liquidity of the financial system, and and liabilities so that the corresponding residual maturity, which reduces the risk of the financial system. (d) Bonds (Bonds) the end of 1996, the central bank requires all commercial banks to issue each year 2% of its total deposits in subordinated debt. Subsequent implementation of the Southeast Asian financial crisis due to the effects of repeated relax, really started the strict implementation is started from January 1998. The implementation of the provisions of a number of ways, in addition to issue subordinated debt, but also from the particular investor (such as to meet the minimum credit rating requirement of foreign investors), where deposits or obtain loans, but repayment of these debts are the order of row after the general deposits. (v) credit rating (Creditrating) Central Bank of Argentina, each commercial bank must be designated international credit rating agencies to get the appropriate credit rating. This provision also aims to improve the quality of information on financial institutions. If the requirements of subordinated debt to institutional investors, major banks to provide information and constraints, then the credit rating is to provide investors with a general operating conditions of the bank's public information. Initially due to the large number of assessment agencies, information of varying quality assessment, Argentina enacted a series of standards for the assessment agencies for implementation. Later, the central bank requires commercial banks can only be authorized to obtain credit rating of international rating agencies to enhance the availability of assessment information. Argentina is currently available domestic commercial banks in international credit rating credit rating agencies have four. Third, reform of the effectiveness of the Argentine regulatory authorities from the 20th century in the late 90's BASIC implementation of the framework to create a series of reform measures mainly achieved remarkable results. These measures to encourage competition in the market, stable deposit base, and enhance the market binding. 1996-1998, Argentina's financial system is about 30% growth in deposits. Due to domestic (presidential elections) and international (Brazilian economic recession, the dollar, etc.) Dual factors, from the second half of 1998 to 1999, Argentina's economic slowdown, the increase in non-performing loans of banks. But on the whole, the performance of its banking sector remains fairly stable: the banking system, large-scale capital flight did not occur, bank deposits and international reserves to maintain a sustained growth momentum. And the Mexican financial crisis of 1994 compared to Brazil, despite the economic turmoil on the fundamentals of the Argentine economy more damage, but the regulatory constraints in the market system, the performance of the banking system very well, and macroeconomic stability contributed. Fourth, evaluation and reference in the financial market supervision, market discipline has its own unique effect and the formation of the central bank's supervision of a useful supplement. For emerging market countries, the level of financial regulation and supervision of their generally more limited resources, in some cases, the For example, for financial derivatives and offshore financial transactions, they are