Why Basel III matters for Latin American and Caribbean financial markets

Speech by Mr Jaime Caruana, General Manager of the BIS, at the ASBA-FSI High-Level Meeting on "The emerging framework to strengthen financial stability and regulatory priorities in the Americas", Antigua, 19 November 2010.

The efforts to enhance the quality of banking regulation and supervision in Latin America and the Caribbean contributed substantially to their resiliency during the recent financial crisis. The Basel III regulatory response to this crisis provides a good opportunity to further improve the regional banking sector's ability to absorb shocks due to the new rules' focus on improving risk management, disclosure and supervisory approaches; strengthening the quality and level of capital and liquidity practices; adopting an effective macroprudential overlay; and reducing opportunities for regulatory arbitrage. However, the success of Basel III in improving financial stability requires the active engagement of national supervisors in implementing and enforcing the new regulatory standards. This implementation and oversight process will require a clear and well structured Basel III strategy; a reinforced on- and offsite supervisory framework; strengthened domestic arrangements for financial stability; and a renewed commitment to regional and international cooperation among financial sector authorities.