Barbados' Central Bank Governor has suggested greater participation by developing countries in the design and implementation of international financial standards.
Speaking at the Commonwealth Secretariat's Symposium on Banking and Financial Services earlier this year, Barbados' Central Bank Governor, Dr Marion Williams, observed that the current `across the board approach' to crafting and implementing codes and standards could be to the disadvantage of developing nations.
The Governor, who was speaking specifically on financial standards and codes and their implications for countries from the perspective of a central banker, argued that since the adoption of codes and standards was critical to financial stability in developing countries, they should have a greater involvement in their formulation.
"In an increasingly international environment, predictability has become an essential quality in conducting cross-border transactions and to that extent if developing countries wish to be part of the mainstream of international finance, the adoption of reliable codes and standards is important," Dr Williams told the symposium. "A high degree of transparency in a number of areas, including data dissemination, payment systems, monetary and financial policies and banking supervision should serve to enhance the stability of the financial system," he added.
She said she believed, however, that developing countries - much to their detriment - could find implementation overruns for several reasons. Some codes and standards were not always applicable to countries where institutional development was at an embryonic stage, where the cost associated with the implementation process was prohibitive and where there was a genuine shortage of the necessary personnel.
In putting the case for greater involvement by developing states and the abandonment of a `one size fits all' approach, Dr Williams cited the International Organisation of Securities Commission rule on securities regulation, which states that regulation should facilitate capital formation and economic growth. In her view, excessive regulation could stymie growth and what is perceived as `excessive' might differ in the developing and developed world.
Dr Williams therefore suggested that the implementation of the codes and standards should reflect each country's unique development and reform priorities. "Governments should be able to publicly articulate their commitment to adopt key standards and, as appropriate, announce action plans for their implementation, including targets, timetables, resource allocations and technical assistance," she said. "It must be acknowledged that different standards have different priorities for different countries, and that these priorities are likely to change over time... Standards and codes need to be applied flexibly, in a manner that allows for country differences and conditions. Like some conditionality requirements, once standards and codes become too extensive and too detailed, they may overburden the implementation capacity of many member countries and also blur the real priorities or benefits."
Dr Williams identified the current Basle Core Principles of Effective Bank Supervision as the model to follow, since in her view, they are the "most universal and the most appropriate to any circumstance". She hoped that the New Accord would also exhibit these qualities. On the issue of cost, the Governor intimated that financial assistance might be necessary because the technology-related expenses associated with implementing the standards were high.
Speaking specifically about Barbados' adherence to international financial codes and standards, Dr. Williams reported that the country had made "good progress" in this area. She disclosed that Barbados had been following the Basle Core Principles, as well as guidelines issued by the Financial Action Task Force and the Caribbean Action Task Force for several years.
In addition, Governor Williams also told the delegates that in spite of the cost, Barbados had instituted several other measures to safeguard its financial system: an automated clearing house and a real-time gross settlement system were being implemented, and although there are only 20-odd listed companies so far, a regulatory authority - the Securities Exchange of Barbados - had been established.
The Governor reiterated that these measures had to be implemented because they were simply too critical to the island's financial stability and economic growth and development. "The cost of not (setting up these systems) is not a domestic cost; it is a cost which relates to the perception by the international community and is not a cost we can afford to avoid," she stated.
The Central Bank head advised developing countries to do likewise, saying: "While developing countries should continue to try to influence the process, in the absence of any likelihood of modification to take account of our special circumstances, I urge all developing countries to implement them