In this context, the ASBA Technical Committee considered it to be appropriate to develop a series of principles and recommendations that could serve as a reference for ASBA members when updating their “memoranda of understanding” (MoU) or signing new ones with other jurisdictions with which they have not yet done so.

To this end, a specific working group was convened to identify the core elements that should be considered for inclusion in an arrangement between financial supervisory agencies, in line with the latest developments and needs of ASBA members. The purpose is to procure that ASBA members consider the use and/or adaptation of these guidelines in accordance with their legal frameworks and particular circumstances for the negotiation of bilateral or multilateral agreements.

The document covers the following topics: information sharing, confidentiality, and data protection; licensing and authorizations; ongoing supervision; on-site inspections; and cooperation during crisis situations. Additionally, depending on the scope and mandates, the participating authorities may evaluate including the supplemental principles and recommendations that address specific elements regarding cybersecurity, anti-money laundering and countering the financing of terrorism, and resolution planning and resolvability assessment.

The Knowledge and Skills Training Curriculum is based on the document entitled: “Core Principles for the Development of Effective Bank Supervision Capacity Building Programs,” as well as on the best practices observed in training areas within banking supervision agencies that comprise the Association of Supervisors of Banks of the Americas. This document defines the tools and the ways in which inspectors will acquire this knowledge (training, experience, and practical application.

The document is divided into three sections. The first section outlines nine core principles that can act as a reference tool for bank supervisory institutions seeking to develop new or strengthen existing training programs. The second mentions the organizational pre-requirements that the banking supervisory agencies must observe to implement the principles successfully. Furthermore, the third section presents a description of these core principles’ characteristics.

This report establishes relevant information on the different approaches and initiatives of Financial Education (FE) in Latin America and the Caribbean and provides an overview on the relationship between FE with banking regulation and supervision issues. Also, the document seeks to support Regulatory and Supervisory Authorities (RSA) in the identification and analysis of their own FE activities and exercises, following the best international practices.

Based on the review of the information collected and the experience identified in other jurisdictions, enriched with the advice ASBA and the German Sparkassenstiftung, the document includes recommendations that could guide RSA and the financial institutions in the region when designing financial education programs and policies, their implementation and evaluation. 

The COVID-19 crisis will likely have a transformative impact on the way societies conduct business and interact. There is potential for governments and private sector to leverage momentum and foster inclusion, innovation and resilience of the financial sector.

Our work provides a collection of recommendations based on discussions with relevant stakeholders across the region of both the public and private sector.

On the theme of Promoting electronic payments and banking services:

• Facilitating verification of identity and customer onboarding through simplified / digital KYC – KYC regulatory requirements can become a significant barrier preventing lower-income segment to access financial services.
• Promoting competition and reducing entry barriers across payments value-chain - The payment industry exhibits several characteristics that can result in anticompetitive practices and market structures, Increasing competition in payments value chain can contribute to greater innovation, lower costs, increased access and enhanced stability of the payment system
• Easing adoption of mobile wallets / e-payments infrastructure: Development of robust and efficient payment systems is key to drive financial inclusion, as payments are the gateway to other financial services (e.g. savings, credit, insurance). Mobile money services are a powerful tool for deepening financial inclusion in emerging markets and moving away from cash

On the theme on Fostering access to credit:

• Preserving and expanding access to funding for micro-finance lending - Microfinance institutions (MFIs) specialize in providing access to capital and financial services to micro/small enterprises and low-income households. They play a key role in financial inclusion and are often constrained by access to funding.  
• Ensuring quality of and access to credit risk assessment data - Insufficient and asymmetrical information on borrowers is a key obstacle for the provision of credit, as it prevents lenders from adequately assessing creditworthiness of borrowers
• Leveraging suite of tools available to development banks to facilitate access to credit - Government intervention in credit markets through Development Banks can play an important role in fostering economic development and promoting financial inclusion in the presence of market failures

On the theme of Leveraging digitalization:

• Developing digital infrastructure and fostering digitalization of internal processes - Digital infrastructure and technology is a critical enabler for the functioning and adoption of digital financial services and digitalization of internal processes can improve operational efficiency enabling scale-up and outreach to lower-income segments. Governments and regulators should champion the development of digital infrastructure, while at the same time ensure policy actions are suitable to the country’s current technological reality
• Foster innovation in financial technology (Fintech) sector - Financial technology (Fintech) has the potential to provide greater financial inclusion, higher efficiency and safety, and enhanced transparency. Regulators and policy makers need to be proactive in responding to this fast-moving environment and actively promote activities around innovation and adoption of innovative technology

These recommendations, and corresponding policy options, should not be seen as isolated or mutually exclusive – on the contrary, they often complement each other and can be jointly implemented.

The financial sector plays a major role in navigating the Covid-19 crisis, not only as a contributor to countries’ gross domestic product, but also as an enabler of economic activity.

The Association of Supervisors of Banks of the Americas (ASBA), IDB Lab and the Governance and Financial Inclusion (GIF) project, in collaboration with Oliver Wyman, worked on three reports to identify lines of actions and measures that could limit the impact of COVID-19 on the wider economy.

01 Safeguarding critical functions of the financial system

Identifies financial and banking services that are critical for the functioning of the economy and financial stability and then puts forward action plans to increase the resilience and preparedness of the financial system.

  Read more

02 Building up immunity of the financial system

Outlines policy actions to address rising credit risk and preserve financial stability, considering the particularities of the COVID-19 crisis and introduces recommendations to deal with an overleveraged economy.

  Read more

03 Unlocking financial inclusion

Analyses a selection of medium-term recommendations based on conversations with relevant stakeholders, both the public and private sector across the region and outlines policy options and provides case studies for each recommendation to illustrate best practices and shortfalls.

As the COVID-19 crisis evolves, deterioration of credit portfolio is becoming a concern for banking supervisors and requires a holistic approach from a public policy perspective. Governments should engage in actions covering:

1. 1. Monitoring the vulnerability of economic agents: The magnitude and asymmetric impact of the COVID-19 crisis renders existing ‘model infrastructure’ impractical. Consequently, both public and private entities will have to upgrade analytical capabilities to account for higher granularity in forecasting liquidity demand of real economy.

2. 2. Assessing solvency and liquidity of financial sector: The marked recession caused by COVID-19 crisis will almost certainly leave heavy traces on bank balance sheets and profitability prospects. Severity of impact will be driven by balance sheet structure and lending portfolio, less than by its size and complexity. Hence, it is relevant for regulators to quickly obtain an overview of the health of the entire banking system, not only covering specific groups of institutions.

3. 3. Responding to bank failures: Broad impact of the recession might hamper operations of numerous banks and ultimately lead to failure. Such a scenario constitutes a systemic issue even if each bank at an individual level is far from being systemic. Traditional solutions to deal with idiosyncratic failures of small banks might not be available, requiring supervisors to have a clear view on escalation paths and a strategy to address them consistently.

4. 4. Promoting active management of Non-performing loans (NPLs): Experience shows that a large increase in volume of distressed assets requires banks to take a systematic approach to NPL management. Transparency on asset quality and volume of NPLs is crucial to enable a swift response of both financial institutions and supervisors, in particular in context of recent policy action such as moratoria, suspension of recognition rules and relaxation of buffer requirements.

5. 5. Supporting deleveraging with systemic solutions: If high NPL volumes hinder economic recovery, Systemic solutions can position as options to manage NPLs and foster front-book lending. Supervisors could consider the implications of solutions such as Asset Management Companies.

Fortunately, many banks today are in better shape than in previous crises, in part due to the regulatory reforms of recent years. The financial sector is positioned to play an important part in the solution instead of being the problem. Banking supervisors and the private sector both have a role to play to ensure financial stability is not put at stake.

The financial system plays a major role in navigating the COVID-19 crisis, not only as a contributor to countries’ gross domestic product, but also as an enabler of economic activity.

Supervisors will have to identify critical functions provided by the financial sector and define measures to safeguard them in the short term. Our work intends to provide guidance not only applicable to the current situation, but also to future events that could hamper normal functioning of the financial sector, such as natural disasters.

Based on a top-down assessment of demand and supply under stress, critical functions identified in Latin America and the Caribbean include cash services, retail payment services, remittances, and short-term business lending, alongside to securities clearing & settlement and wholesale payments.

• Cash services: Continue to meet elevated demand for cash, ensuring uninterrupted access and distribution.
• Payment services:Ensure functioning of e-payment services, reduce hurdles to access, and establish alternative to cash for redundancy and efficiency considerations.
• Remittances:Safeguard flow of funds to the underbanked.
• Short term business lending:Safeguard availability of short-term credit in the economy, support implementation of government support programs and proactively manage credit risk
• Securities clearing & settlement:Ensure adequacy of contingency plans and sufficient liquidity in the system
• Wholesale payments:Ensure adequacy of contingency plans and fulfilment of critical operations.

The report sets the ground for discussion on medium term actions that could foster resilience, inclusion and innovation of the financial sector in Latin America and the Caribbean.

During the first phase of our collaboration, we focused on developing a crisis playbook to preserve financial and banking services that are critical for the functioning of the economy and financial stability. The work revealed several medium-term initiatives that could improve the resilience of the financial systems concerned, increase their level of development and strengthen financial inclusion. Following this line, we prepared a series of workshops to focus on the issue of rising credit risk and risks to bank health, as well as related supervisory policy and measures.

As the COVID-19 crisis evolves, deterioration of credit portfolio is becoming a concern for banking supervisors and requires a holistic approach from a public policy perspective, covering:

1. 1. Monitoring the vulnerability of economic agents to assess liquidity demand of real economy is critical due to the particularities of the COVID-19 crisis.
2. 2. Assessing solvency and liquidity of financial sector as the marked recession caused by COVID-19 crisis will almost certainly leave heavy traces on bank balance sheets and profitability prospects.
   
   
3. 3. Responding to bank failures as a broad impact of the recession might cause a larger number of banks to get in trouble and ultimately fail. Such a scenario constitutes a systemic issue even if each bank for itself is far from being systemic.
   
   
4. 4. Promoting active NPL management as experience shows that a large increase in volume of distressed assets requires banks to take more systematic approaches.
   
   
5. 5. Supporting deleveraging with systemic solutions in cases where high NPL volumes are hindering economic recovery.

Fortunately, also due to the regulatory reforms during recent years, many banks today are in better shape than in previous crises – allowing the financial sector to play an important part in the solution instead of being the problem. Banking supervisors and the private sector both have a role to play to ensure financial stability is not put at stake

Under this new unprecedented disruptive scheme, ASBA, with support from the IDB-Lab, formed a Working Group with the objective of establishing minimum guidelines and regulatory recommendations for the incorporation of innovative technologies in the financial sector in a responsible, transparent and competitive manner.

This document focuses on the non-prudential analysis of fintech’s regulation and supervision initiatives that are applicable to fintech products and services in the region. Based on the analysis conducted, the document establishes minimum guidelines and recommendations based on common regulatory and supervisory initiatives and trends for consumer protection.

Regulators and supervisors worldwide have reacted, developing novel approaches and tools tailored to their legal and market contexts. With the support of IDB-Lab, ASBA developed this document which aims to be a useful tool for financial authorities in a rapidly evolving landscape.

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.

The financial sector plays a major role in navigating the Covid-19 crisis, not only as a contributor to countries’ gross domestic product, but also as an enabler of economic activity.

Oliver Wyman, in collaboration with the Association of Supervisors of Banks of the Americas (ASBA), has focused on identifying critical functions provided by the financial sector and defining measures to safeguard them in the short term. Our work intends to provide guidance not only applicable to the current situation, but also to future events that could hamper normal functioning of the financial sector, such as natural disasters.

(Text in Spanish) 

(Text in Spanish)