Financial Regulation

Financial Regulation

Since the late 1980s, banks in Argentina are governed by the law of banks 1977. Argentina faced levels highest in the devaluation of the currency and inflation in history. The financial system was virtually destroyed, and the changes were immediate. In order to stop the hyperinflation and restore macroeconomic stability of the country, the Government of Argentina decided to impose the regime of convertibility from 1 April 1991, consecrated by the convertibility law. The aim of the cash conversion was to ensure the fixed parity against the U.S. dollar.UU, the Argentine peso was fixed one by one with the U.S.

dollar.UU. Each change in regulation has immediate and long-term consequences. In terms of the long-term effects, many analysts believe that the financial crisis of 2001 was generated in part by the policy pursued by the convertor box. The convertor box was the institution just below the early 1990s, but was ineffective in the circumstances of countries more developed. An important innovation in regulation following the crisis of 1991, was the enactment in 1992 of the new Charter of the Central Bank.

The new Charter is considered as the principle of market based on the system of regulation of banks in Argentina, since it enables the independence of the Central Bank for the first time after its creation since 1936. Argentina presented the capital requirements for credit risk, which means that the interest rate for loans represents a signal to the degree of risk faced by the institution. In addition to the requirements of capital, Argentina tried to issue the debt subordinated as a fraction of total assets, but was never able to apply this type of regulations. In accordance with the basic system of regulation of banks in Argentina he had to issue a liability subject to 2% of their deposits every year. Since banks in Argentina should issue debt in the market, this should provide information on the issuer to debtors and the supervisor mainly through price signals. This regulation was adopted in 1996 to be applied in 1998, but due to the regional financial crisis was never implemented. Critics of the subordinated debt define it as a mechanism of market discipline that is used with the argument that a market developed for this category of debt is not in emerging economies. In general, the secondary market of the subordinated debt is relatively underdeveloped, even in successful economies. The list of improvements for offshore banking regulations aimed at establishing a market discipline continued with the creation of a database of the main debtors of the financial system, banks of Panama for example are collaborate in the direction of offshore accounts and banking mechanism as such. Debtors have been considered by the entities, such as those who have loans higher than $200,000. How much more information has on the market of the financial system, can better control the risks and evolution of the financial system. The market monitoring is a crucial factor in a market-based system of regulation. The availability of the databases of the debt is proof of the positive evolution of the banks of Argentina regulatory changes.


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