DO GLOBAL STANDARDS AND CODES PREVENT FINANCIAL CRISES? SOME PROPOSALS ON MODIFYING THE STANDARDS-BASED APPROACH

After the crises in emerging market economies beginning with that of Mexico in the mid-1990s, the adoption of internationally recognized standards and codes (S&C) of financial best practices came to be seen as a way to strengthen the international financial system. The S&C initiative was launched as such in 1999 but included within its scope work on standards for the different subjects included which had often already been under way for some time. This paper evaluates the progress made so far and considers some of the basic assumptions of the S&C initiative. In particular it examines how far S&C can be instrumental in preventing financial crises, and focuses on issues raised by the initiative from a developing-country perspective. It devotes special attention to both the process of surveillance of S&C by the Bretton Woods institutions (BWI) and to the information which this process generates. In this context it appraises the use of this information by the private sector whose increased engagement with emerging markets is a major part of the rationale of the exercise.