Latin American Capital Markets

498 KENROY DOWERS, RUBEN LEE, AND ANTONIO VIVESStandardsFollowing the Asian crisis, a wide consensus has grown that the creation and adoptionof international standards covering a range of aspects related to capital marketdevelopment are critically important (box 16-1). It is, however, both extremely difficultand still relatively early to make a full assessment of the extent to which the adoptionof international standards does in fact facilitate the development of capital markets.Further research on this issue is required. Nevertheless, some preliminarylessons have been suggested.The following benefits of adopting and implementing international standardshave been identified (Kohler 2001):• National authorities have an increased ability to identify relatively rapidly thesources of vulnerability in their financial systems and to select their prioritiesfor institutional and capital market development.• There is a reduced likelihood of financial crises and their contagious effectsacross countries.• International investors are better able to compare the regulatory environmentsof different regimes, and thus international standards may be useful forattracting foreign capital. It is likely that international investors are more willingto invest in countries that have policies and practices that are closer toBox 16-1 IStandards for Securities Market DevelopmentThe key international standards relevant for the development of securities markets include theprinciples and objectives of securities regulation established by the International Organization ofSecurities Commissions (IOSCO), the international accounting standards established by the InternationalAccounting Standards Board (IASB),the international auditing standards established bythe International Federation of Accountants (IFAC), the corporate governance principles establishedby the Organisation for Economic Co-operation and Development (OECD), and the principlesfor clearance and settlement systems established by the Committee on Payment and SettlementSystems (CPSS) and the Technical Committee of the IOSCO task force.The assessment of these standards for countries around the world has been systematized viathe World Bank's Financial Sector Assessment Programs and the International Monetary Fund'sFinancial System Stability Assessments (FSSAs), and the Reports on the Observance of Standardsand Codes (ROSCs). Each ROSC module provides a description of country practice in an areathat is then benchmarked against the relevant standard.Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub