XII Meeting of Heads of Financial Stability

The meeting was held in hybrid format on September 07-08, 2022, in Mexico-City and was attended by 26 in-person and 62 virtual representatives from 32 institutions and associates of CEMLA, representing 22 Latin-American and Caribbean countries, United States and Canada, and 4 European countries.

The meeting was focused on the following topics: the economic and financial impacts of the Covid-19 crisis around the world, the consequences of shifts in international capital flows for financial stability in emerging economies, the potential impact of cyber risks on financial stability, and the implications of an uncertain geo-political and economic environment for financial stability policies. The agenda included a keynote session by Prof. Allen N. Berger, Carolina Distinguished Professor of Banking and Finance at the University of South Carolina, Prof. Mustafa Karakaplan, University of South Carolina and Raluca A. Roman, Senior Financial Economist at the Federal Reserve Bank Philadelphia. The meeting ended with an open roundtable with brief speeches from in-person participants to discuss central banks' perspectives on the current most important threats to financial stability.

A recurrent theme of the meeting was the “known unknowns” of financial stability risks. Some of these unknowns result from changing economic conditions which put into question if known remedies still apply. The opening remarks from Dr Ramos Francia summarized these conditions as a new world of high inflation, high interest rates, and low potential growth. Another part of the unknows are due to a lack of data and forecasts about developments that grow in importance of the global and domestic financial landscape, for instance the dependence of the real economy on non-bank financial intermediaries (NBFIs) or the interconnection of the traditional financial system with crypto markets.

Some of the main takeaways include the following ones:

• The conference emphasized the importance of considering how the NBFI's growing market share may threaten financial stability. Increasing accountability and transparency in global financial markets is a key factor in ensuring financial stability.
• The interconnectedness between banks and open-ended investment funds constitutes an important transmission channel of shocks to the economy in some countries of the LAC region.
• Protection for the demand side (consumers and investors), as well as compliance with anti-money laundering rules by cryptoasset exchanges are some of the regulatory concerns facing cryptoassets.
• Data collection is important to assess the risk that new technology poses to financial stability.
• During the Covid-19 crisis, the special role of banks as relationship lenders in times of distress became apparent.