They are an innovation in the true sense of the term which will affect not only capital headings or financial statements but also business strategies, risk management, etc. Take, for example, the issue of transparency, both in Basel II and in IAS. This does not involve merely disclosing specific information to the market. The requirements in this area represent a far-reaching revision of the means of compiling financial information. That will not only affect financial statements; it will also influence banks’ decision-making arrangements. Undoubtedly, this revision will entail changes to information-gathering systems, both quantitatively and qualitatively. Banks must therefore be prepared for the consequences of greater public scrutiny of how they do business. This involves not only giving more information, but explaining decision-making, and addressing the consequences that greater transparency may have for relations between managers and current and potential investors, analysts, depositors, credit rating agencies, auditors and, also, supervisors. Turning to IAS, the Banco de España, as a supervisor with a legitimate interest in bank accounting, will continue to play an active role in shaping the accounting rules applicable to credit institutions. That said, it is vital that banking institutions should accept the qualitative changes imposed by the new accounting environment. Specifically, IAS impose greater responsibility - the corollary of their flexibility - on bank managers, which is in contrast to the current state of affairs, where the precision of accounting rules largely limits discretionality.
In late 2002 and early 2003, the economic outlook and the trend of financial variables in Latin America improved perceptibly, especially following the positive developments in Brazil and Argentina. The recent crises have highlighted deep-seated shortcomings in the legal and institutional workings of these countries. Emphasis has thus been placed not only on the need to pursue policies supportive of monetary, financial and fiscal stability, but also on how important an institutional framework respectful of property rights and private enterprise is for fostering growth in these countries. Factors of a more global nature have also been pivotal in the recent crises. These have been related to greater risk-aversion on international financial markets, which has caused capital flows to some of these emerging economies to shrink. International markets have, however, tended to be more selective, and there have been fewer episodes of crises spreading from one country to another, although contagion cannot be said to have disappeared completely. The recurrence of these crises has led to reflection on the so-called “architecture” of the international financial system. Numerous reforms have been proposed in this connection. And some have been adopted, and are generally in the initial stages of implementation. Much remains to be done in this area, although the acceptance of sovereign bonds incorporating the so-called collective action clauses, issued by Mexico, Brazil and Uruguay, offer grounds for hope.