Editorial Note

The context for a year of change
Association of Supervisors of Banks of the Americas

We are pleased to greet our readers and update them about the context in which the activities of the Association of Bank Supervisors of the Americas will be carried out during this year, one that will not be free of challenges due to the actual and potential effects of the subprime loan crisis in the United States.


A year has gone by since the subprime loan crisis is affecting the North American market and its impacts have begun to be felt internationally. However, to date, these impacts have not had the same effects in the region due to various reasons, among them, the greater capacity of the region to absorb shocks, achieved through the adoption of sound macroeconomic policies, and the insufficient development of its capital markets. Albeit the latter, it must be recognized that this crisis will have an indirect effect through the deceleration of the American economy, which will affect the region’s economic growth prospects as well as its financial market expansion.


Within this context, bank supervisors, in compliance with their main mandate, will continue contributing to the financial stability of the region by promoting a greater regional dialogue, through the implementation of financial regulation and supervision actions that should concentrate in the identification of risks within a lower economic growth scenario; strengthening consolidated supervision; revising the role of the bank supervisor; and by searching for an adequate balance between the implementation of more risk sensitive regulation and supervision framework and the enforcement of a more active prudential supervision.


Given this context of economic deceleration, it is necessary to understand the risk exposures of the financial entities, as well as to analyze their resiliency capacity when confronting adverse effects. This task must be complemented by the implementation of a more effective consolidated supervision of financial groups, where the risk exposures of the different business units of the group are fully analyzed.


Likewise, the current context and a medium term perspective calls for an analysis and strengthening of the role of the bank supervisor in relation to its capacity to assess and take timely action in the compliance of its main objective. It is evident that the risk management mechanisms and the periodic revision of the financial health of the intermediaries by external auditors, as a complement to the work of the supervisor, are not attaining the expected results. Because of this, there is need for a thorough evaluation of the role these companies shall play. In order to complement this analysis, a revision of the role of the rating agencies should be performed, since their methods have not seem to have neither the precision nor the scope to properly assess the debt vehicles that the markets generated in the past years.


There is no doubt that we are in a situation where bank supervision must be close and active. Bank supervision should concentrate in the assessment of risk exposures, identified through an off-site assessment based on timely and detailed data of the operations carried out by financial intermediaries, more than on internal risk management methods, since they are still in process of being implemented. Thus, we have to reiterate the importance of the search for a balance between the development of the financial sector and the obligation of the State to verify that it operates with stability, solvency, liquidity and acceptable profitability.


For the Association of Supervisors of Banks of the Americas, the current economic context requires profound analysis and the adoption of actions that will contribute to the financial market’s continued support of the economic development and growth of the region. This will be a year of change.

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