Imf Chief Calls On Latam To Avoid Banking Crises

Camdessus said the region could not afford financial collapses like the one that wiped out the equivalent of one fifth of Venezuela's economic output in 1994. Ladies and gentlemen: Nevermore! Nevermore! This just cannot be so! he exclaimed at a banking conference at the Inter-American Development Bank (IADB).

Camdessus said many Latin American countries have taken steps to strengthen their banking systems after last year's Mexican peso crisis.

But major gaps remain in those efforts, he warned. The fundamental causes of unsound banking systems persist, including poor internal governance and a lack of transparency about banks' operations and financial conditions, inadequate supervision and excessive official complacency about problem banks, he said.

 

Camdessus said banking standards were not as comprehensive as they should be and there was little agreement in crucial areas such as loan valuation or provisioning rules.

He singled out Chile and Argentina as two countries that have made strides towards building sound banking systems.

Chile strengthened supervision after suffering one of the worst banking crises on record in the early 1980s, which cost one third of its national economic output to clean up.

Now Chile is frequently cited as a model for reforms in the region.

Argentina, the country most affected by the slipover from the Mexican crisis, encouraged a wave of bank consolidations.

An IMF report released 10 days ago said Brazilian banks have been under pressure since Brazil launched a stabilisation programme in 1994 after many years of high inflation.

Since then its central bank has liquidated 19 banks and intervened in four others. In one of them inspectors found massive irregularities that had gone undetected for years.

Camdessus said that since the Mexico crisis, which required an international rescue package of nearly $50 billion, he is often asked where lightning will strike next.