Association of Supervisors of Banks of the Americas

The role of bank supervision is evolving to meet the challenges of a rapidly changing financial landscape. Supervisors are increasingly focused on sustainability, technology, and risk.

Banks play a crucial role in financing the transition to a low-carbon economy. Supervisors are working to ensure that banks have the necessary tools and capabilities to manage the risks associated with climate change and other sustainability issues.

Technology is transforming the banking industry at an unprecedented pace. Supervisors are working to keep pace with these changes and ensure that banks manage the associated risks effectively. This includes risks related to cybersecurity, fintech, and crypto assets.

Banks face various risks, including credit, market, and operational risks. Supervisors are working to ensure banks have robust risk management frameworks to identify, assess, and mitigate these risks.

The 72nd edition of the Journal of the Banking Supervisor highlights some of the key regulatory developments that have taken place in the Americas in recent months, including New Requirements for Disclosure of Sustainability-related Financial Information and Climate-related Disclosures, New capital requirements for banks exposed to crypto-assets;  Enhanced liquidity requirements for systemically important banks; Revised stress testing guidelines; New consumer protection regulations for digital financial services; Enhanced anti-money laundering and counter-terrorist financing regulations; and New regulations for open banking.

In addition to the articles featured in this edition of the Journal of the Banking Supervisor, the Members of the Association of Supervisors of Banks of the Americas (ASBA) also shares news and information on prudential and non-prudential financial regulations issued in their jurisdictions during the second quarter of 2023. Also, publications, technical reports, and other information that they consider relevant. This compilation is an effort to broaden communication and understanding among the countries of the Americas on the approaches used to address various issues of joint interest in financial regulation.

The 72nd edition of the Journal of the Banking Supervisor provides a comprehensive overview of the latest developments in the banking sector. It highlights the importance of collaboration and information sharing among regulators and supervisors in the Americas.

Association of Supervisors of Banks of the Americas

The outlook for global economic growth is deteriorating, and by 2030, the world economy's "speed limit" will reach its lowest level in three decades. The driving forces behind progress and prosperity in the past are diminishing, leading to a decline in potential growth. This decline will have significant consequences for addressing pressing challenges like poverty, income inequality, and climate change. To reverse this trend, it is crucial to implement policies that encourage work, enhance productivity, and promote investment. Therefore, the new challenge for bank supervisors is to design policies that foster sustained, robust, and inclusive growth, specifically tailored to tackle the region's unique challenges.

In this context, the 71st edition of the Journal of the Banking Supervisor presents a series of recommended readings that compile regulatory changes, risks and supervisory agenda topics that will be important for supervisory bodies in Latin America and the Caribbean. A series of publications related to the economic outlook on economic recovery, financial stability, and supervision are also included. The research and analysis section shares papers related to bank resolution, climate risk, and sustainability, technology, and payment systems.

Finally, in the last section, members share news and information on prudential and non-prudential financial regulations issued in their jurisdictions during the first quarter of 2023. This compilation is an effort to broaden communication and understanding among the countries of the Americas on the approaches used to address various issues of joint interest in financial regulation.

Emerging markets and developing economies are facing a number of adverse factors, amid widespread high inflation and a rapid slowdown in global growth. Growth forecasts for the short to medium term have deteriorated in all regions, in part due to the implementation of restrictive policies aimed at curbing high inflation and over indebtedness. Nevertheless, financial authorities in the region maintain a specific shared vision of stability in their expectations regarding the economic, financial, social, and political events that could take place during 2023.

During 2023, it is expected that the development of global and regional financial markets will be affected by the uncertainty derived from the normalization process of monetary policies in advanced economies, trade and geopolitical tensions in Euro-Asia, and volatility in commodity prices. The regulatory and supervisory authorities of the region must, among other things, focus on restoring consumer confidence and supporting the implementation of strategies that promote a scenario of sustainable recovery. Some of the methods employed by financial authorities have been financial innovation and environmentally responsible investments.

In this context, this new edition of the Journal of the Banking Supervisor presents a series of recommended readings that compile the most current guidelines and principles related to the evaluation of the reforms and the effectiveness of the implementation of Basel III, best practice guidelines on prudential regulation of crypto-assets, and new resolution frameworks on resolvability. In addition, a series of readings related to macro-financial expectations for 2023 and relevant topics on the technical agenda of supervisors are recommended: inflation, low growth, sustainability, and the impact of non-bank institutions on the world's financial systems. The research and analysis section of this edition of the Journal shares documents related to the regulation of digital innovation, macro-financial risks, and sustainable finance.

Finally, in the last section of the Journal, Members share news and information on prudential and non-prudential financial regulations issued in their jurisdictions during the fourth quarter of 2022. This compilation is an effort to expand communication and understanding among the region about the approaches used to address different topics of joint interest in financial regulation.

Author: Association of Supervisors of Banks of the Americas

The slowdown in economic activity is an effect occurring in all regions of the world and is limiting the outlook for recovery expected in the short term.

Likewise, inflation has risen well above central bank targets, and the Latin American and Caribbean region has been no exception. Financial pressure on households led the region's central banks to increase reference rates, reaching record highs in some countries and reducing the growth of monetary aggregates. Despite a decrease in inflation expectations and a stabilization in growth rates for 2023, uncertainty due to the war in Ukraine, the downward outlook for growth in China, and a tighter global financing environment could change expectations for 2023.

For their part, Regulatory and Supervisory Authorities should focus on restoring price stability and mitigating the adverse effects of a possible economic contraction in the most vulnerable sectors. On the fiscal front, public debt levels will remain high in a large number of countries. In the context of increased demands for public spending and high-interest rates, the authorities will have to strengthen their fiscal measures to avoid generating a sovereign debt risk that could be transmitted to the financial system. In general, the region is again facing a complex environment where fiscal, monetary and financial policy tools will be essential to counteract a possible adverse shock in the world economy while simultaneously being the precursors through public policies to generate a favorable scenario for recovery. 

In this context, the 69th edition of the Journal of the Banking Supervisor recommends different documents that compile the different global expectations and those of the Latin American and Caribbean (LAC) region for 2023. It also highlights updates, issues, and priorities in regulatory and supervisory matters from different international organizations. In addition, the research and analysis section shares documents on monetary and fiscal issues in the region, as well as an extensive analysis of the region's progress in environmental, social, and corporate governance (ESG) factors.

Finally, in the last section, associate members share news and information on prudential and non-prudential financial regulations issued in their jurisdictions during the third quarter of the year. This compilation is an effort to broaden communication and understanding among the countries of the Americas on the approaches used to address various issues of joint interest in the area of financial regulation.

Russia's invasion of Ukraine and its effects on commodity markets, supply chains, inflation and financial conditions have intensified the slowdown in global growth. Prior to the war, the world economy had embarked on a strong recovery, albeit heterogeneous across regions and more so across countries. The countries in the region have been affected by the rise in commodity prices, which is increasing inflationary pressures and contracting income and spending in real terms, further hampering the recovery and creating new risks that are escalating in the supervisory spotlight.

Due to the deterioration of economic conditions, prudential regulation, as well as the regulatory agenda of the different jurisdictions and international organizations, has undergone important adjustments, such as relaxations, extensions and, in its minor cases, updates. The role of financial authorities is crucial to cope with this new post-covid reality. A strong and comprehensive policy response is needed to boost growth, strengthen macroeconomic frameworks, reduce financial vulnerabilities and support vulnerable groups.

In this context, the 68th edition of the Journal of the Banking Supervisor presents relevant texts on advances in regulatory issues that have been made in the region. Two documents published by the Association are highlighted: (i) General Considerations for Cross-Border Memoranda of Understanding between Supervisory Authorities and (ii) the Report on the Implementation of Regulatory and Supervisory Standards 2022. The economic outlook section contains current views on the most important challenges and risks for the second half of 2022. The research and analysis section highlights the topics of regulation and supervision of financial technologies, and the latest developments in cryptoasset regulation. Finally, the latest financial regulations of our Associate Members are included, as well as research papers and reports on topics of interest for our Members that were published in the second quarter of the year.

Global financial markets performed relatively well in 2021, despite some volatility leaps linked not only to the pandemic, but also to the increasing uncertainty about the inflation outlook and the likely reduction monetary stimulus worldwide.

However, according to the IMF’s World Economic Outlook, the world enters 2022 with global baseline risks tilted to the downside. Elevated inflation is expected to persist for longer than anticipated with ongoing supply chain disruptions. Furthermore, the conflict in Eastern Europe put important pressures to the world and to the region. Particularly, high commodity prices might spur inflation in Latin America and the Caribbean, which already faces an 8 percent average annual rate across five of the largest economies: Brazil, Mexico, Chile, Colombia, and Peru.

Moreover, the combination of global circumstances have raised important regulatory interest in terms of technology adoption in the financial sector. While the pandemic accelerated the adoption of digital financial technologies, the raise of novel instruments such as cryptoassets, and the appearance of new players, they also have increased the attention in the operational risk of entities and the systemic risks of the financial system, in general. What is more, as the conflict in Eastern Europe advances, there are heightened concerns about the cybersecurity risks and their spillovers throughout the globe.

In this context, the 67th edition of the Journal of the Banking Supervisor presents some relevant texts on adjustments, guidelines and concerns in banking regulation. The first section highlights some guidelines and principles recently published by ASBA that provide an overview of the lessons learned from the regulatory facilities implemented in the region's financial sector to address Covid-19 and a reference for the Association members on general considerations for cross-border memoranda of understanding. The second section, on the economic outlook for the region, includes some references to the topics of economic performance expectations for 2022 and progress in the implementation of international standards.

The research and analysis section shares documents on regulation and analysis of the payment infrastructures of some countries in the region, as well as the incorporation of technological issues in the central supervisory activities. Finally, in the last section, associate members share news and information on prudential and non-prudential financial regulation issued in their jurisdictions during the first quarter of the year. This compilation is an effort to broaden communication and understanding among the countries of the Americas on the approaches used to address different issues of joint interest in the area of financial regulation.

Moreover, headline inflation rates have risen rapidly in the United States and some emerging markets. There is considerable uncertainty surrounding the inflation outlook, mainly due to the uncertainty of the pandemic's trajectory and the duration of disruptions to supply chains.

The COVID-19 pandemic has affected Latin American and Caribbean countries the most because of their levels of inequality and informality, particularly among vulnerable populations. These characteristics also put the region at a disadvantage in the face of increasingly frequent and aggressive extreme weather events. Challenges for the future include an economic recovery with an inclusive approach and greater attention to managing social and environmental risks.

Against this background, the 66th edition of the Journal of the Banking Supervisor presents a set of documents that may be helpful to regulators and supervisors. The first section highlights some recently published guidelines and principles by international bodies on outsourcing risks in securities markets, as well as recommendations on sustainability and remuneration. In addition, it includes the Core Principles for the Development of Effective Bank Supervision Capacity Building Programs prepared by an expert working group of ASBA members.

The Economic and Market Outlook section includes some texts on the global economic outlook and for the region. Also, papers discussing possible scenarios regarding unemployment and inequality levels and recommendations on how fiscal policies could contribute to the recovery of the countries in the region.

Finally, the Research and Analysis section shares papers on financial resilience and stability; some considerations on the adoption of technology, mainly artificial intelligence tools in the financial sector; the progress of some central banks in the development and implementation of digital currencies for cross-border use; and socio-environmental risks, among others.

The global economic crisis caused by COVID-19 interrupted a period of sustained growth in Latin America and the Caribbean that had not been observed for decades. However, unlike other crises experienced in the past, the region is much better prepared to face it. Banking is seen as an important part of the solution, and not as part of the problem. Today the banking sector is not the center of the problems, neither its solvency is compromised, nor its risk levels are at high levels. It is in a position to be a positive protagonist and the Financial Authorities have opted to use the banks as a key tool to channel their measures towards a recovery with immediate effects and that lays the foundations for sustained long-term growth.

Financial Authorities have the double task of stabilizing economic growth in countries with countercyclical measures and devising instruments to protect the most vulnerable population from negative distributional impacts. However, regulators and supervisors are aware that, even with the measures that have been implemented, there are potential risks for the following years and the economic recovery, especially in the worst affected poverty deciles, will take time.

In this context, the 65th edition of the Journal of the Banking Supervisor analyzes some relevant texts on adjustments, guidelines, and concerns in banking regulation. The guides referring to the technical modifications on the reduction of operations in securities financing, good practices on procedures and disclosure on the sustainability of asset management are highlighted.

The section on Market Outlooks and Reviews includes documents related to the difficult and heterogeneous economic recovery in the world. The documents from BIS, OECD and the World Bank stand out where they broaden the issue of inequality in the recovery, the macroeconomic situation that is expected for the second half of 2021 and some risks that are beginning to take relevance in the world. In the Research and Analysis section, documents focused on issues of Financial Stability, Financial Inclusion, Sustainability and Climate Change were included.

Finally, Associate Members were asked for information on prudential and non-prudential financial regulations issued in their countries during the second quarter of the year. This compilation is an effort to broaden communication and understanding among the countries of the Americas on the approaches used to address different issues that are of joint interest in the area of financial regulation.

On the one hand, the effects and duration of the pandemic depends to a large extent on progress in vaccination processes around the world and on its effectiveness in the face of new strains of the virus. On the other hand, recovery expectations can be compromised if financial policies fail to lay the groundwork for strong long-term growth and development.

In addition, the region's regulatory and supervisory authorities also note some particular risks for the financial systems, including an increase in the overdue portfolio of credits granted to SMEs and individuals as a result of lower sales, higher unemployment and losses in real income. It is expected that, with the deadline of payment deferral programmes, 2021 will show the actual delinquency effect of those accredited, which may imply significant restrictions on the supply of credits in certain countries. In any case, those who establish public policy play a crucial role in containing and mitigating potential impacts.

In this context, the Bank Supervisor Journal No. 64 presents a set of documents that may be useful to regulators and supervisors. The first section highlights some recent guidelines and principles issued by international agencies on operational and climate change risks. On the other hand, the market perspectives section includes some texts on the global and region economic outlook.

Additionally, the research and analysis section include documents on the impact of covid-19 on the financial sector, on the use of financial technologies, climate change risks and other documents recently published by ASBA's associate members regarding capital requirement calculation methodologies and a set of supervisory tools for correspondent banking relationships.

Finally, in the last section associate members share news and information on prudential and non-prudential financial regulation issued in their jurisdictions during the first quarter of the year. This compilation is an effort to expand communication and understanding among the countries of the Americas on the approaches used to address various issues that are of joint interest in financial regulation.

The pandemic has made it clear that financial authorities face formidable challenges, in debt management, budget policies, central banking and structural reforms, as they try to ensure that this global recovery gains traction and lays the foundation for strong growth and development. in the long term, while protecting the most vulnerable. This will require successful policies that allow capital, labor, skills, and innovation to be translated into new purposes to build a greener, more innovative, and robust post-COVID economic environment.

In this context, the 63rd edition of the Journal of Banking Supervision presents some relevant texts on adjustments and guides in banking regulation, mainly the guides focused on external auditing for banks and on consolidated supervision stand out. In addition, this edition contains the most recent publications and updates of the economic, risk and digital perspectives that are expected for the region and the world. Finally, on this occasion, a series of recommended readings on topics focused on fintech, digital economy, cybersecurity and financial stability are included.

The disruption caused by the recent and rapid spread of the Covid-19 virus has completely changed the outlook for 2020 and has prompted financial authorities around the world to rethink their priorities and agendas. Even the Basel Committee on Banking Supervision has announced the extension of the term for the implementation of the Basel III framework until January 2023.

In this sense, the economic perspectives can only be examined through different alternative scenarios, since there are no historical records with which to compare events and current data are still insufficient to provide reliable forecasts.

On the other hand, there are risks for financial systems that must not be lost sight of and that must even be reinforced during this crisis, as in the case of technological and cybersecurity risks. In addition to others related to climate change, despite the fact that its progress is slow and silent, they have the potential to cause major disruptions at their critical point.

In this context, edition 60 of the Journal of the Banking Supervisor takes stock between some economic perspectives that can be glimpsed during this health crisis, without losing sight of other risks relevant to the present and the medium and long-term future. In addition, as in each edition, ASBA members shared relevant prudential and non-prudential financial regulations issued in their countries during the first quarter of 2020.

​The 62 edition of the Journal of Banking Supervisor presents some relevant texts on the adoption of new support technologies for banking supervision and regulation, from those related to the supervision and regulation of Fintech companies, to topics related to Suptech and digital transformation. The texts show that financial authorities have adapted to the new normality by adjusting their supervision schemes with the introduction of new support technologies, generating a climate conducive to technological innovation that will be more beneficial than ever in the post-COVID-19 world.

In addition, a compilation of market perspectives in the region and in the world for 2021 is presented by different international organizations. Although some documents mention that growth forecasts have improved slightly, they also maintain that there is uncertainty driven mainly by the evolution of the global health crisis. Likewise, the section on banking regulation and supervision includes a series of guides prepared by international organizations on issues of conflicts of interest and risks of market conduct, as well as a report on the supervisory problems associated with the transition rate LIBOR.

As in previous editions, ASBA members shared relevant prudential and non-prudential financial regulations issued in their countries during the second and third quarters of 2020. Through this exercise, the aim is to expand communication among the countries of the Americas on the approaches used to address different issues in financial regulation. Finally, the catalog of ASBA events for the last quarter of 2020 is shown.

The economic and financial perspectives that were taken at the beginning of the COVID-19 outbreak were completely different from what is being observed today. The measures that were implemented between March and April assumed that the economic shock would be temporary and a recovery in the form of a "V" could be expected. However, the speed and degree of simultaneity at which the crisis has evolved is unprecedented.

Due to the imminent deterioration of economic conditions, prudential regulation, as well as the regulatory agenda of different jurisdictions and international organizations, has undergone important adjustments, such as flexibilities, extensions and, in its minor cases, updates. The role of financial authorities is crucial in dealing with what is likely to be the worst contraction in economic activity since records are in place.

In this context, the edition 61 of the Journal of Banking Supervisor Journal proposes some relevant texts on adjustments and flexibilities in banking regulation, in addition to including a new section that includes relevant recommended readings on the actions taken by different organizations and institutions to mitigate the economic effects that the Covid-19 has brought. Finally, on this occasion, a series of guides on Fintech made by ASBA are included. The guidelines presented here should provide an adequate analytical framework for systematically evaluating the most significant topics in the regulation and supervision of Fintech, based on principles of risk sensitivity, proportionality, financial stability, transparency and adequate consumer protection.