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CGD in the News

May 21, 2019

Making Basel III Work for Emerging Markets

From the article: 

"The Global Crisis originated in the financial systems of advanced countries, so it is unsurprising that the Basel III international standards focused on the stability needs of these countries. This column assesses the implications of Basel III for emerging markets and developing economies. It also outlines the recommendations from a task force of current and former senior officials from central banks in these countries on how to make Basel III work for them.

The 2008 crisis originated in the financial systems of advanced countries and, not surprisingly, one of the important responses to prevent another credit crunch – the Basel III international standards – focused primarily on the stability needs of these countries. A detailed and wide-ranging set of measures developed by a forum of bank regulators, representing mainly the G20 nations, Basel III aims to strengthen the regulation, supervision and risk management of large banks around the world (BCBS 2017). While it is calibrated primarily for advanced countries, many emerging market countries are in the process of adopting and adapting to these rules, and many others are considering it (Hohl et al. 2018).

A recent report from the Center for Global Development (Beck and Rojas-Suarez 2019) assesses the implications of Basel III for emerging markets and developing economies (EMDEs) and provides recommendations for both international and local policymakers to make Basel III work for these economies. It is the outcome of intensive discussions among a task force of current and former senior central bank officials from EMDEs, led by the two of us."

May 20, 2019

Basel Rules 'Curbing Infra Investment in Emerging Markets' (GlobalCapital)

From the article: 

 

"New rules aimed at making financial institutions safer have been blamed for a slump in investment in infrastructure projects in developing and emerging countries over the last decade. The task force of experts looking at the impact of the Basel III banking rules called on regulators to loosen liquidity requirements for infrastructure lending in domestic currencies. It also recommended development banks offer credit guarantees to make bank lending less risky.

A task force, co-chaired by Thorsten Beck and Liliana Rojas-Suarez, respectively professor of banking and finance at Cass Business School in London and senior fellow at the Center for Global Development think tank, found that finance volumes for infrastructure had stalled since about 2010 in developing and emerging countries, while doubling in advanced countries. While other factors are also at play, Basel rules do not help, it said. Banks can only gain a certain amount of capital relief from using their own models rather than standardised ones. This could make project finance more expensive, particularly when external credit ratings for projects are non-existent in developing countries.

Furthermore, banks can only be exposed to a counterparty to the extent of 25% of their tier one capital under the 2014 Basel large exposures framework. This could force smaller banks out of the market, according to the task force. It also highlighted two standards on liquidity that made infrastructure finance more burdensome. The net stable funding ratio (NSFR) pushes banks to match long-term lending like infrastructure with long-term funding, which is perhaps less accessible. Secondly, the liquidity coverage ratio (LCR) demands 100% high quality liquid assets for special purpose vehicles (SPV) commonly used for project finance."

May 4, 2019

Making Basel III work for emerging markets (VoxEU)

By Thorsten Beck and Liliana Rojas-Suarez

From the article:

The 2008 crisis originated in the financial systems of advanced countries and, not surprisingly, one of the important responses to prevent another credit crunch – the Basel III international standards – focused primarily on the stability needs of these countries. A detailed and wide-ranging set of measures developed by a forum of bank regulators, representing mainly the G20 nations, Basel III aims to strengthen the regulation, supervision and risk management of large banks around the world (BCBS 2017). While it is calibrated primarily for advanced countries, many emerging market countries are in the process of adopting and adapting to these rules, and many others are considering it (Hohl et al. 2018).

A recent report from the Center for Global Development (Beck and Rojas-Suarez 2019) assesses the implications of Basel III for emerging markets and developing economies (EMDEs) and provides recommendations for both international and local policymakers to make Basel III work for these economies. It is the outcome of intensive discussions among a task force of current and former senior central bank officials from EMDEs, led by the two of us. 

Read more

April 23, 2019

Six Recommendations for Making Basel III Work for Emerging Markets and Developing Economies, by Liliana Rojas Suarez and Thorsten Beck (Mondovisione)

By Liliana Rojas Suarez and Thorsten Beck

The 2008 crisis originated in the financial systems of advanced countries. Not surprisingly, one of the important responses to prevent another credit crunch, the Basel III international standards, is focused primarily on the stability needs of these countries. Basel III, a detailed and wide-ranging set of measures developed by a forum of bank regulators representing mainly the G20 nations, aims to strengthen the regulation, supervision and risk management of large banks around the world. While it is calibrated primarily for advanced countries, many emerging markets are in the process of adopting and adapting to these rules. Many others, too, are considering it.

In previous blogs, we have analyzed the potential repercussions of Basel III for emerging markets and developing economies (EMDEs). These blogs focused on potential spillover effects from the implementation of Basel III in advanced countries and possible effects in EMDEs from implementation of Basel III in these countries. As an outcome of intensive discussions among a CGD Task Force, the new Task Force report on Making Basel III Work for EMDEs offers recommendations resulting from this analysis that urge EMDEs to adapt Basel III according to their unique needs and capacities.

Our conceptual framework starts from five specific characteristics of EMDEs that, while not universal, are common enough to not be disregarded. These characteristics include variable access conditions to international capital markets; high macroeconomic and financial volatility; less developed domestic financial markets; limited transparency; and capacity, institutional, and governance challenges. These differentiating factors help explain why the impact of regulatory reforms, such as those under Basel III, is expected to be different in EMDEs than in advanced countries. Our analysis underscores the need for a differentiated approach to bank regulation to make Basel III work in these countries.

Our conceptual framework starts from five specific characteristics of EMDEs that, while not universal, are common enough to not be disregarded. These characteristics include variable access conditions to international capital markets; high macroeconomic and financial volatility; less developed domestic financial markets; limited transparency; and capacity, institutional, and governance challenges. These differentiating factors help explain why the impact of regulatory reforms, such as those under Basel III, is expected to be different in EMDEs than in advanced countries. Our analysis underscores the need for a differentiated approach to bank regulation to make Basel III work in these countries.

In the following, we discuss six of the key Task Force recommendations. These recommendations all refer to specific principles that have guided our analysis. 

Read more

December 12, 2018

“La política expansiva es el ajuste” (Página 12)

From the article:

“Tenemos que seguir el camino del desierto de consolidar las cuentas públicas. Transitamos una posición muy sólida en términos de liquidez y trabajamos para lograr el inédito objetivo de contar con un año de prefinanciamiento”, sostuvo Dujovne al compartir un panel con el ex subsecretario para Asuntos Internacionales del Tesoro de los Estados Unidos, John Taylor; el ex ministro de Hacienda de Chile, Andrés Velasco, y la economista peruana Liliana Rojas Suárez. “Nuestro norte era reintegrar a la Argentina al mundo y converger a cuentas públicas solventes que nos garantizaran no estar expuestos a riesgos de liquidez. Veníamos de tener controles de capital, tener que exportar para importar, y no tener respeto por la ley”, aseguró el ministro, que confinó su exposición al tradicional libreto económico cambiemita.

December 11, 2018

Argentina es una economía frágil ante los nubarrones globales (Clarín)

From the article:

Liliana Rojas Suárez, presidente del Comité Latinoamericano de Asuntos Financieros, resaltó que los países más afectados serán los que necesiten tomar deuda, los que estén más endeudados en moneda extranjera y aquellos cuya dinámica de crecimiento sea más frágil, tres requisitos con los que cumple Argentina.  En esta caracterización, Rojas Suárez precisó que Argentina y Brasil son los países más frágiles ante los shocks externos mientras que Chile y Perú se encuentran entre los más fuertes de la región.  

December 11, 2018

Economistas recomiendan a Brasil no seguir el camino argentino: "el gradualismo no funciona" (La Politica)

From the article:
 
En el tercer panel de la Conferencia Internacional de Economía y Finanzas (CIEF) 2018, los economistas más destacados de la región disertaron sobre el futuro de Argentina y Brasil y le aconsejaron a Bolsonaro no seguir el ejemplo local.
 
"Hay una lección que Brasil debería aprender de la Argentina: el gradualismo no es conveniente, por ahí no es el camino. Sería irresponsable e increíblemente riesgoso posponer el ajuste macroeconómico y las reformas que deben hacerse", subrayó la Presidenta del Comité Latinoamericano de Asuntos Financieros (CLAAF) Liliana Rojas-Suarez.
 
Read the full article here.  
December 11, 2018

Dujovne: "Seguir con la disciplina fiscal y monetaria es lo más expansivo" (La Política Online)

From the article:

Nicolás Dujovne aseguró este martes en el marco de la Conferencia Internacional de Economía y Finanzas (CIEF) 2018 que la crisis de la economía argentina está llegando a su fin de la mano del ordenamiento de las cuentas públicas, la desaceleración de la inflación y el despegue de las exportaciones. Y reiteró que la baja del déficit es "el único camino" para crear bases sólidas de crecimiento.

El ministro de Hacienda participó del primer panel del encuentro organizado por El Banco Ciudad, la Universidad Torcuato Di Tella (UTDT) y el Comité Latinoamericano de Asuntos Financieros (CLAAF) en el Park Hyatt, evento que reunió a economistas de los más destacados del continente para analizar "Las economías emergentes ante un escenario financiero internacional más desafiante: Implicancias para América Latina y Argentina".

Junto con los ex ministros de Economía de Colombia y de Chile, Guillermo Perry Rubio y Andrés Velasco, el ex asesor del Tesoro de los Estados Unidos, John b Taylor y Liliana Rojas-Suárez, presidenta del CLAAF, Dujovne presentó su evaluación de la economía argentina en un contexto global cada vez más difícil para los países emergentes.

"Como región, Latinoamérica es la más débil del mundo", advirtió Rojas-Suárez al a vez que remarcó que al interior del subcontinente "hay una gran variedad": Chile y Perú son los más fuertes, mientras que "los más frágiles son Argentina y Brasil". Los motivos de la vulnerabilidad esgrimidos fueron en esencia tres: las necesidades de financiamiento, el nivel de deuda en moneda extranjera y el bajo dinamismo del crecimiento económico.

November 15, 2018

View from Felaban 2018 with Liliana Rojas-Suarez (The Banker)

 

Hosted by Silvia Pavoni

Video description:

How is the low adoption of Basel III rules affecting Latin American banks? Silvia Pavoni asks Liliana Rojas-Suarez, Latin America initiative's director at the Centre for Global Development.

You can also watch the video here.

 

 

November 13, 2018

Maintaining macroeconomic volatility is essential to implement Basel III in AL (El Dinero)

Note: Translated from Spanish using Google Translate.

By Danielis Fermín

From the article:

The director of the Center for Global Development (CGD), Liliana Rojas Suárez, explained that in order to design regulation and complementary measures for the adoption and adaptation of Basel III in Latin America, one must take into account "the high macroeconomic volatility and that the capital markets are underdeveloped."

In addition, the "inability to issue hard currencies and governance problems, both in the public and private sectors".

During her presentation, "Basel III: Challenges for bankers and regulators in emerging countries and Latin America," she noted that "these characteristics should be the guide to the principle of proportionality in the application of international regulatory standards in Latin America and other emerging countries."

Read the full article here

 

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