More than a year after the beginning of the current financial crisis, the causes that originated the crisis are quite clear. The evolution of the crisis, contrary to the somewhat naïve perspective that was dominant, confirmed that financial markets suffer from severe limitations that prevent their self regulation. Latin America has suffered several financial crises during the last 30 years and the social consequences, in terms of output losses, and unemployment and poverty increases, have been very costly. Although many countries have improved their financial regulation and supervision, the ongoing crisis, although not originated in the LAC region, highlights some key shortcomings that are also present in the region’s financial systems.
In order to obtain lessons that are relevant for the Latin American financial systems, the original paper (in Spanish) analyzes in detail the antecedents and first causes of the current crisis, the serious deterioration in the credit origination and distribution process, the role played by derivatives, and presents statistical information that supports such analysis.
The lessons for Latin America and the Caribbean that can be learned from the current crisis up to now, refer to internal regulatory aspects and may be grouped into four major areas: i) the need for a macro-prudential framework complementing the present regulatory scope which focuses entirely on individual banks; ii) the reduction of the pro-cyclicality of the financial systems; iii) the extension of the financial regulation and supervision to all financial institutions that generate systemic risk; and iv) aspects concerning the relationship of the risk rating agencies, external auditing companies and financial institutions which lead to a poor treatment and disclosure of the risks.
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