NEW YORK--(BUSINESS WIRE)--After a review of the current status of the implementation of BIS III recommendations in Latin America, Fitch has concluded that unlike Europe and to a certain extent, the U.S., most Latin American (LATAM) bank regulators have not followed the Bank of International Settlements guidance on bank supervision (BIS III).
Adherence to BIS regulatory principles varies, with Brazil and Mexico at the forefront. A second group of countries is migrating toward these principles and is in the process of implementing recently approved revisions to their regulatory frameworks (Argentina, Colombia, Peru, Panama and Uruguay). The remaining LATAM countries monitored by Fitch continue to operate under older frameworks.
More robust regulatory capital frameworks across the region have enhanced banking system strength and paved the way toward increased bank penetration. However, varied regulatory capital definitions reduce comparability of capital positions among the region's banks and limit investors' ability to quickly compare issuers. So far, just a few banks in Brazil and Mexico have issued new BIS III-compliant securities (Tier 1 and Tier 2).
Given LATAM banks' active regional expansion and the high level of foreign bank participation in these markets, different regulatory approaches are creating an uneven playing field for banks in many countries. Subsidiaries of foreign or regional banks operating in countries with less advanced regulatory principles may be at a disadvantage compared to pure local players.
Despite the significant concentration levels in almost every country in the region, the discussion about additional requirements for D-SIBs remains on the backburner. Thus far, only Argentina, Brazil, Chile, Uruguay and Peru have additional D-SIB requirements in place. The largest five banks in each country of the region manage more than 70% of system assets in their respective countries, while at least 35 Latin American banks manage more than 10% of their system's deposits.
LATAM regulators have prioritized the implementation of new capital rules and liquidity ratios per BIS III guidance. However, enhancement of regulatory frameworks to allow an effective and independent regulator has thus far received less attention. To date, only very few Latin American countries have made significant advances with respect to improving transparency and corporate governance as recommended under either Basel II or III.
The full report "BIS III Status in Latin America: Different Paths and Speeds" is available at www.fitchratings.com or by clicking on the link above.
Additional information is available on www.fitchratings.com
Colombian Banks' Road to BIS III (June 2015)
Understanding Latin America Capital Ratios (September 2014)
Fitch's Approach for Basel III Hybrids in Brazil (March 2014)
BIS III Status in Latin America (Different Paths and Speeds)
Colombian Banks' Road to BIS III
Fitch's Approach for Basel III Hybrids in Brazil (Recent Regulatory Changes Lead to Wider Notching, but also to Some Equity Content)
Understanding Latin American Capital Ratios