Private Enterprise and Financial Markets > Infrastructure and Financial Markets > Financial Markets
Financial Market Strategy
By SDS/IFM (05/00, IFM-120, En, Es)
This Strategy (GN-1948-3) was favorably considered by the Bank's Board of Directors on September 8, 1999.
The Financial Market Strategy has been prepared to assist IDB staff in supporting the orderly development of financial markets in the Latin American and Caribbean region. While significant advances have clearly been made over the past decade, much remains to be done. Not all countries have advanced at the same pace, and there are elements of financial market development that need to be supported in each country. This strategy specifically aims at establishing a better balance in the region?s financial markets. To that end, it identifies dual goals; building upon existing reforms (and consolidating these as necessary) and developing the new instruments, institutions and markets needed to meet the savings, investment and risk management/risk transfer requirements of individuals and firms in the region.
The strategy proposes that primary emphasis continue to be placed on the banking system; due to its critical role in facilitating payments, providing liquidity and credit, and in the transmission of monetary policy, the banking system will continue to be the backbone of the financial sector. Nevertheless, increasing attention must also be placed on the development of capital markets and risk management systems to support financing needs where bank loans and guarantees are not appropriate. The expansion of financial markets is aimed at facilitating investment that may not otherwise take place while reducing the cost of capital. Continued efforts will also be placed on supporting institutions and markets that meet the financial needs of those individuals and firms that have been excluded in the past from participation in formal financial markets, whether for reasons of size or geographic location. In both instances, market-based reform efforts will be needed to assure that the proper incentives are in place and that programs are financially sustainable. Specific support is also aimed at continuing the rationalization of the role of the state in financial markets moving away from the direct provision of financial services to ensuring the existence of appropriate enabling environments.
In the implementation of the Financial Market Strategy, consideration must be given to the differences among IDB member countries in terms of financial market needs and the development of their financial sectors. The individual country programs will differ significantly. The instruments used will likewise depend on the structure and depth of existing financial markets. The strategy should therefore be viewed as an overview, indicating general trends and areas of concentration and not as a specific work program for any country.
The Inter-American Development Bank, must accelerate its efforts to develop enabling environments, encouraging the creation of stable macroeconomic conditions, supportive legal and regulatory environments, adoption of financial standards, and the institutional structure that will allow prudentially managed, competitive and innovative, private financial institutions and markets to flourish. The IDB has an extensive arsenal of tools that can be used. To be fully successful it must use these systematically. The strategy thus encourages the regional operating departments and the central departments to work together to produce a combination of issue specific and country specific financial market strategies to meet the countries? needs. The challenges are great, but with a commitment of financial and human resources, the Inter-American Development Bank will be a key catalyst for change. While the strategy does not propose a specific allocation of resources for dealing with financial sector issues, it does provide guidance that can be used by the Bank's Senior Management and Board in setting priorities for allocating resources.
Last updated: 06/01/07
