The X edition of the Meeting of Heads of Financial Stability was held in digital format, on September 9-11, 2020. It was attended by 75 representatives from 25 institutions CEMLA’s members and associates (Argentina, Bahamas, Belize, Board of Governors of the Federal Reserve System, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Dominican Republic, ECCB, Ecuador, El Salvador, Guatemala, Guyana, Honduras, Jamaica, Mexico, Nicaragua, Peru, Spain, Suriname, Trinidad & Tobago, Uruguay, and Venezuela). The Meeting was aimed at exchanging experiences on topical issues related to financial stability, among others: the COVID-19 and financial stability, macroprudential stress testing, and financial stability monitoring.

The Latin American Journal of Central Banking, with open access, has published a new paper on debt limit and the fiscal space for Colombia and other Latin America emerging economies. The paper, by Banco de la República’s (Central Bank of Colombia) researchers, uses a fiscal fatigue approach to estimate the government’s reaction function and the sovereign risk premium endogenous to the country's indebtedness.

The Latin American Journal of Central Banking releases a new -freely available- article from James McAndrews, former Executive Vice President at Fed NY. The article “The Case for Cash” discusses two drawbacks of high-denomination cash which have recently been debated by Kenneth Rogoff, who calls for phasing-out high denomination cash. The author argues that the use of cash is preferable to the alternative, which would entail a worsening in the types of crimes committed in the absence of cash.

Tito Cordella, from the World Bank, and Member of the Advisory Board of the Latin American Journal of Central Banking, in collaboration with Samuel Pienknagura, from the International Monetary Fund authored the article: “Macroprudential Policies from a Microprudential Angle: A Note”. This paper explicitly models individual banks' risk choices and shows that different prudential instruments affect banks' risk-taking incentives differently. The paper contributes to the literature by showing that conflicts may arise between the micro- and macroprudential stance, taking into account banks’ behavior.

The note highlights that in the months of May, June and July, employment in the United States of Mexican immigrant workers increased cumulatively by 281 thousand occupations, while their unemployment rate fell from 17.1% in April to 12.5% in July. Likewise, it is mentioned that the percentage of their income that such migrants sent as remittances to their relatives in Mexico increased from 12.7% in 2019 to 15.8% in the first semester of 2020. An update of the income from remittances as a proportion of GDP is also presented, which went from 2.9 percentage points in 2019 to 3.8 points in the first half of 2020.

The Latin American Journal of Central Banking released a new -freely available- article, entitled “Bank capital, lending booms, and busts: Evidence from Spain over the last 150 years”. The authors analyze the role bank capital played in crises and in the credit cycle in Spain. They find that higher levels of capital reduce the probability of a crisis and that increasing the bank capital before loan expansions reduces credit growth and reduces the credit's decline if a systemic crisis materializes. The paper is particularly useful for supporting the credit cycle smoothing role of recently implemented macroprudential policies (countercyclical capital buffer).

The Latin American Journal of Central Banking announces that a new article has been published and is freely available. The article “Resilience of Canadian banks to funding liquidity shocks” by Grzegorz Halaj, Director of the Financial Institutions Division at the Bank of Canada, proposes an agent-based model to describe the propagation of funding shocks in the Canadian interbank market.

The Latin American Journal of Central Banking is pleased to announce the publication of its first paper: “Detecting anomalous payment networks: A dimensionality-reduction approach” by Carlos León, senior researcher at Banco de la República (Central Bank of Colombia). This paper contributes to the literature on Financial Market Infrastructures by proposing an easy-to-implement, low-computational-cost approach to monitor interactions among financial institutions in a payments system.

CEMLA’s Board of Governors decided to grant the 2019 Central Bank Award Rodrigo Gómez to Frederico A. Mourad, Rafael F. Schiozer and Toni R. E. dos Santos for their study entitled: “Bank loan forbearance: evidence from a million restructured loans”. In their paper, the authors analyze why and when delinquent bank loans are renegotiated due to a deterioration in the debtor’s financial condition (forbearance).