Regional financial architecture
This presentation is the property of its rightful owner.
Sponsored Links
1 / 16

Regional Financial Architecture PowerPoint PPT Presentation


  • 59 Views
  • Uploaded on
  • Presentation posted in: General

Regional Financial Architecture. Side Event: The Role of Regional Cooperation and Global Partnership in Financing for Development Organized by United Nations Regional Commissions

Download Presentation

Regional Financial Architecture

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Regional financial architecture

Regional Financial Architecture

Side Event: The Role of Regional Cooperation and Global Partnership in Financing for Development

Organized by United Nations Regional Commissions

Follow-up International Conference on Financing for Development to Review the implementation of the Monterrey Consensus.

Doha, November 2008

Alicia Bárcena

Executive Secretary, ECLAC


The role of regional and sub regional financial institutions in latin america

The role of regional and sub-regional financial institutions in Latin America

  • Regional financial institutions must play an important role in the new international financial architecture by complementing global financial institutions:

    • Mobilizing financial resources for development.

    • Counter cyclical financing.

    • Reserve pooling.

    • Surveillance.

    • Macroeconomic coordination.

  • Regional financial institutions have specific characteristics which makes them particularly valuable:

    • They provide a sense of ownership of resources and of their destination.

    • They posses the knowledge that is specific to the workings of the region.

    • They have the capacity to act and provide a response in a timely manner.


The regional architecture in latin america

The regional architecture in Latin America

  • The regional architecture comprises:

  • Development Banks

    • Inter-American Development Bank (1959).

    • Andean Development Corporation (1968).

    • Central American Integration Bank (1961).

    • Caribbean Development Bank (1969).

  • Reserve pooling institutions

    • Latin American Reserve Fund (1978).

  • Mechanisms for Trade Facilitation.


Development banks

Development Banks

  • The functions of development banks include:

  • Investment finance.

    • Provides loans and extend lines of credit to corporations, and banks financing foreign trade and working capital operations.

    • Provides the financial sector with credits for channeling resources to a variety of productive sectors.

    • Offer governments and government bodies development bank services for special financing of physical infrastructure and integration projects.

    • Provides financing for projects to promote human development and integrate marginalized groups.


Regional and sub regional development banks have increased their relative importance

Regional and sub-regional development bankshave increased their relative importance

Loans by regional and sub-regional development

Banks in the region. 1990-2007 (US$ Bn)

US$ Billion

IDB


Financing investment

Financing Investment

Andean development Corporation

Loans portfolio by sector of economic activity (Percentage of the total)

1997-2001 and 2003-2007 (% of total)

Percentage


Financing investment1

Financing Investment

Central American Bank for Economic Integration

Loan portfolio by sector of economic activity (Percentage of the total)

2007

Source: BCIE. Annual Report (2007)


Development banks1

Development Banks

  • The functions of development banks include:

  • Provision of liquidity.

    • Andean development Corporation (CAF) established in 2008 a contingency line of credit of US$ 1 to 2 billions

  • Provision of countercyclical finance.

    • Intermediation of financing funds from international markets to the countries of the region.

    • Plays an important role in stabilizing access to financial flows.


  • The provision of counter cyclical finance

    The provision of counter-cyclical finance

    GDP GROWTH, LOAN APPROVALS AND INFLOW OF PRIVATE CAPITAL

    Andean Community

    Millions of US$

    GDP growth %

    Loan approvals

    Inflows of private capital

    GDP Growth


    The provision of counter cyclical finance1

    The provision of counter-cyclical finance

    GDP GROWTH, LOAN APPROVALS AND INFLOW OF PRIVATE CAPITAL

    Central American Common Market

    GDP growth %

    Millions of US$

    GDP Growth

    Loan approvals

    Inflows of private capital


    Additional advantage that facilitates intermediation of development banks is their investment grade

    Additional advantage that facilitates intermediation of development banks is their investment grade

    RISK RATING OF PUBLIC AND PRIVATE FINANCIAL INSTITUTIONS IN LATIN AMERICA (745 INSTITUTIONS)

    CAF= A+

    BCIE= A-

    Source: Fitch Corporate (2008)


    The latin american reserve fund

    The Latin American Reserve Fund

    • The Latin American Reserve Fund covers:

      • Bolivia

      • Colombia

      • Ecuador

      • Costa Rica

      • Peru

    • The Latin American Reserve Fund’s main functions are:

      • To provide financial support for its member countries’ balances of payments complementing IMF financing (this is the main function of the FLAR).

      • To improve the terms for its member countries’ reserves investments.

      • To help harmonizing its member countries’ monetary and financial policies.

    • In order to provide balance of payments financing, FLAR operates as a credit cooperation in which the member countries’ central banks are able to take loans in proportion to their capital contributions. There are different credit facilities:

      • Credits for balance of payments support.

      • Credits for restructuring the external national debt.

      • Liquidity credits Standby credits.

      • Treasury credits


    Latin american reserve fund

    Latin American Reserve Fund

    Granted credits per year for balance of payments support and liquidity provision

    1980-2005

    US$ Millions

    Source: On the basis of official data.


    The latin american reserve fund1

    The Latin American Reserve Fund

    IMPACT OF FLAR ON FINANCIAL VULNERABILITY

    (SHORT-TERM DEBT/INTERNATIONAL RESERVES, MARCH 2003

    Note: The quotient of short-term debt over increased international reserves is calculated by adding to international reserves the debt capacity in FAR/FLAR, which is equal to 2.5 times the paid-up capital, except for Bolivia and Ecuador, where it is 3.5 times.

    Source: Titelman (2006)


    Challenges in improving the regional financial architecture

    Challenges in improving the regional financial architecture

    • The process of financial globalization has heightened the need to strengthen regional financial architecture to help reduce financial volatility and vulnerability in the region.

    • To deepen regional financial integration development banks should:

      • Continue to provide countercyclical financing.

      • Expand their functions to include supporting and facilitating the countries’ access to international financial markets.

      • Actively support national and regional financial development.

    • With respect to reserve pooling intitutions FLAR should:

      • Support coordination of the macroeconomic and monetary policies of the countries in the region.

      • Contribute to establish common standards for regulation and financial supervision.

      • Expand its reserve pooling and countries coverage to improve its resource base helping to reduce contagion between countries.

    • New initiatives such as Bank of the South can complement the objectives and functions of the existing regional financial institutions.


    Regional financial architecture1

    Regional Financial Architecture

    Follow-up International Conference on Financing for Development to Review the implementation of the Monterrey Consensus.

    Doha, November 2008

    Alicia Bárcena

    Executive Secretary, ECLAC


  • Login