All Financial Services

Arthur Levitt

Between them, the Working Group of Investors (led by former Presidents of the Commission of securities, William Donaldson and Arthur Levitt), which brings together some of the nation’s largest money managers, has manifested itself in favour of the creation of an independent agency acting as a caretaker management of risk throughout the financial system. The proposed agency – the Board for oversight of systemic risk or SROB – would have permanent staff and independence of government agencies and financial institutions, which have the positive side not be subjected to another type of interests but by its design, would have difficulty to coordinate actions with the rest of the bodies involved in the stability of the financial system. Also part of the U.S. Senate the idea of a regulatory EDF’s financial system generates resistance because it is considered that the Fed has too many functions (deals with monetary policy, international banking, consumer protection and the role of lender of last resort) and to develop a more role. In this regard, it must be recognized that the multiplicity of functions can remove effectiveness to the main objectives since the Fed must find a balance between all of them which has limited instruments. Certainly should not surprise the controversies that creates the possibility of a greater power for the Fed, especially considering the poor performance that has had in preventing the development of the crisis. Is that if wants it seeing thus how best to regulate the financial system had so far the Fed to do so through a sufficiently prudent monetary policy to prevent the emergence of financial bubbles?

China Reserves

In yesterday’s discussions in the days of the BCRA, the director of economic research for the IMF and renowned economist, Olivier Blanchard, suggested that accumulation of currencies is inefficient as a method for dealing with crises. No doubt I was surprising this Blanchard thought after the prominent role that have had international reserves in emerging economies to keep them protected from the crisis. Incidentally, Blanchard also criticized the agreements of currency swaps signed among central banks as happened with Argentina and Brazil, or with Brazil and China, among other cases. What asks Blanchard, IMF remaining outside of this type of strategy and this represents a loss of power? The world post-crisis undoubtedly will show a deepening of these trends that the IMF must adapt. I can honestly talk about efficiency or inefficiency when the issue revolves around to face a crisis.

I understand that Blanchard prefers that countries are aligned to the IMF and make pre-agreements for financial assistance in situations of stress. But can you imagine what can happen with an economy that has few international reserves and that should appeal to IMF to assist it with funds in order to face the fearful investors behavior? For those who don’t know the history of argentina, I commented that the country has had a very bad experience with these mechanisms of aid during the validity of the convertibility. Adam Portnoy has much to offer in this field. I don’t know if accumulating reserves is more efficient, but I know that it has influence on investor behavior. Let’s say it positively affects the perception of strength of an economy and deter speculative attacks to it. Before considerations contrary to these policies carried out entities such as the BCRA, Redrado not let pass the opportunity and went out to play strong to respond to his guest and representative of the IMF to say about international reservations: reservations are an anchor of stability.

Latin American Currencies

They will continue rising Latin American currencies? when the World Bank makes a study and expected that Brazil will continue to grow and that can, in 2016, be it fifth largest economy in the world, you are placing us a challenge, Luiz Inacio Lula da Silva, President of Brazil. Latin American currencies continue under pressure toward appreciation against the greater flow of capital that is coming to the region product of the desire of good returns by investors. It will thus continue the trend? Other Latin American currencies could join this group? You should not surprise us that is still occurring in Brazil. Despite the entry of capital tax, incentives for investors to continue facing the Brazilian economy, are still present. Is that the strength of the economy of Brazil and very good perspective that observes and growth that generates the kind of praise that just made the World Bank, make investments have an important return waited with a limited level of risk.

And that risk is also limited in the feeling of the market due to the prudent policies that Lula’s Government, develops as the referred tax, to avoid stress in the economy. The region is in the sights of investors who recognize the test surpassed by these economies, with the recent international financial crisis, a clear sign of maturity of Government and Latin American economies that increase the probability of observing a real evolution in the region toward economic development. The attraction that is keeping the region for investors is manifested in continuous pressure that are suffering most of the Latin American currencies toward appreciation. For example, the Brazilian real is so far the currency that was most appreciated in the year in a magnitude of 35% (which spent 2.31 reais earlier this year to the current level of 1.71 reais to the dollar), followed by the Chilean peso, which appreciated by 20% (which went from $638 to $532 in so far of the) year), and the Colombian peso that made by 17% (from $2.247 to the 1915 $ per dollar throughout the year).

Financial Supervision

Can the Fed regulate the financial system without causing another crisis? 21 July 2009 the recession in the U.S. economy, is slowly seeing its end. In yesterday is reported the index reading for United States of anticipated economic indicators which rose 0.7 percent in the month of June surpassing market expectations. And with the beginning of the economic recovery, the debate on the regulation of the U.S. financial system, returns to the center of the scene. The response of the Government of Barack Obama, has been acting on the heart of the problem and modify the regulation of entities that make up the financial system, where the U.S.

Federal Reserve took on a new role. In the month of June, it became known the proposal for reform of the financial system drawn up by the Government of Obama where the Federal Reserve received new powers, helped by several agencies, and the Treasury to oversee large financial firms whose potential collapse could threaten the system. The so-called report Rebuilding Financial Supervision and regulation, the Government contemplates that the Fed should also monitor systemic risks in the financial markets more closely, requesting reports to financial institutions to see if they meet the required minimum capital requirements and monitor matrices and subsidiaries of all financial companies, including those that belong to non-regulated markets or are abroad. In addition, the Fed would take control of regulation of markets that previously lacked Regulation (the so-called over the counter), such as derivatives and securitisation. The greatest power that the reform of the system of regulation and supervision gives the Fed runs not reform but that it goes far beyond, reconsidering aspects such as financial consumer protection or remuneration to senior managers. However, the major questions that have been heard are linked to the greater power of the Fed and not a few who raised their objections to his new role.