Agreement to advance standardization of bank prudence criteria

On 16th, 17th and 18th of this month a meeting of banking experts and superintendents was held in the headquarters of the Secretariat of the Andean Community of Nations in Lima, Peru on the standardization project for bank prudence criteria, developed by the CAF.

This project aims to harmonize the basic prudence standards for the region’s financial systems, including capital adequacy, criteria for evaluation and rating of credit and investment; determination of NPL ratio; provisions for possible losses and asset and liability management.

This project was developed in response to a CAF initiative, and to a later mandate from the Advisory Council of Finance Ministers, central bank presidents and national planning official in the five countries of the Andean Community of Nations.

After a review and evaluation of the CAF Proposal at a meeting of experts held in Quito, Ecuador in October last year, based on an in-depth comparative study of the financial legislation and regulations of each country, the national regulatory agencies submitted their comments and recommendations on the points under analysis.

The Lima meeting discussed the recommended changes and reached preliminary agreements on harmonization of bank prudence criteria in the region.

The advantages for the region of adopting harmonious standards include: Facilitate the comparative analysis and evaluation of the region by financial analysts and investors. Harmonize systems of financial and management information in trans-border institutions. Facilitate effective implementation of consolidated supervision. Strengthen systems of supervision in the region. Improve the exchange of financial services among the countries of the Andean Community. Minimize the possibility of regulatory arbitrage.

The meeting of the representatives of the region’s Banking Superintendencies was also attended by representatives of the central banks and finance ministries of the Andean countries.