The Financial Stability Forum (FSF) today held its second regional meeting with Latin American countries at the Central Bank of Brazil in Rio de Janeiro. Senior representatives from finance ministries, central banks, and supervisory and regulatory authorities from 11 FSF member and regional countries attended the meeting. A list of participating institutions is attached.

Participants exchanged views on vulnerabilities in financial systems from both a global and a regional perspective and noted that financial systems have shown significant resilience. They agreed that the improved economic outlook should create a more benign financial stability environment in the period ahead, supporting capital flows to the region. Although the Argentine crisis had had little direct immediate impact on the regional economy, participants from the region warned of the potential consequences of a prolonged crisis and a failure to resolve it quickly. Participants expected a strong signal from the Argentine authorities to reverse prior policy actions that had aggravated the crisis.

The meeting also addressed the issues arising from the collapse of Enron and other recent large corporate failures and the need for reform. Participants observed that these issues were also relevant to Latin America and underscored the importance of reinforcing market foundations through sound practices in corporate governance, improved audit quality, and strengthened independence of oversight and enforcement institutions. Moreover, it will be equally important to reinforce transparency in the financial and non-financial sectors both for parent companies and local subsidiaries throughout the region.

The meeting also reviewed the focus of ongoing work to strengthen financial systems and progress made in combating money laundering and terrorist financing by international bodies and efforts within the region. Efforts within the region centre on the implementation of international bank and insurance supervisory standards and international principles for securities market regulation, in many cases following up on recent IMF/World Bank Financial Sector Assessment Programs (FSAPs). Regional participants underscored the importance of participation by emerging market economies in the setting of new international standards.

Participants thanked the Central Bank of Brazil for its hospitality and expressed interest in future regional FSF meetings.