Financial globalisation, the crisis and Latin America

Speech by Mr Jaime Caruana, General Manager of the BIS, at the XLVI Meeting of Central Bank Governors of the American Continent and LXXXVII Meeting of Central Bank Governors of Latin America and Spain, Punta Cana, Dominican Republic, 14 May 2009.

Abstract

The crisis has given financial globalisation a bad name. The recent contraction in international bank lending has caused some strain in Latin America. However, because many years of reform have made balance sheets more resilient to currency depreciation, policymakers have been better placed to respond to a financial crisis than in previous decades. Foreign-owned local banks lending in local currency with local funding can continue to be a source of growth with stability. But the crisis has created economic and political pressures to roll back the internationalisation of the banking industry. Such pressures should be resisted.