Banking Auditing
From the perspective of the regulatory institutions market discipline can exist only under the supervision of efficient regulatory bodies. One of the changes that occurred in the institutional environment of the financial system was the separation of the supervision and regulatory functions of the Central Bank of Argentina by re-creating the Superintendency as a semi-autonomous unit within the Central Bank
The availability of the information is not the only important factor determining the efficiency of market principles. The quality of information determines the quality of market reaction on changes in the financial environment and behavior of institutions. To ensure reliable and qualitative information, in Argentina was introduced the system of compulsory auditing of financial institutions and their rating. Auditing ensures the validity of the published information. To have reliable auditing procedures, the Central Bank of Argentina has set guidelines for minimum auditing requirements. The Superintendency adopted a system similar to CAMEL banking rating used mainly for capital requirement regulations. According to this system, the banks with a lower rating were subject to higher capital requirements. Market participants used this information as a signal about the sanity of the financial institutions. Besides institutional rating system Argentina introduced Credit Rating requirements. This measure meant to allow less sophisticated investors to have access to decision-making reliable information. Credit rating was a good measure to ensure market-discipline. The problem is that it did not function too well for Argentina. Credit rating system was criticized because different financial institutions were rated by different agencies, and there was no comparability between them. Economists argue that some credit rating institutions gave higher rates then others did and because of this it could lead to false signals for the market.
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