other policies to encourage hedging<sup>by banks andcorporationsand tostrengthen the</sup> domestic financial system, which<sup>is atime-consuming,laboriousprocess'2.Cooperative</sup> efforts among countries in the establishment<sup>of standards andreform criteria can</sup> considerably alleviate the burden<sup>of this processon individual countries.</sup> Such cooperative efforts could occur<sup>on aglobalor regional basis.Itcould be</sup> argued that an international approach<sup>is warrantedbecause the causesof present-day</sup> crises have global ingredients and<sup>spillover effects.An exampleis theelemental capital</sup> inflows of the Asian crisis, which were<sup>largely fromoutside the region.Asian policies</sup> that reduced restrictions on borrowing<sup>abroadcoincided with structuraland</sup> macroeconomic changes elsewhere<sup>in the world (e.g.,lowerborrowingratesin the U.S.</sup> encouraged foreign investment in<sup>Asia).'30The Asian crisisalsoprovidesan example of</sup> spillover effects where repercussions<sup>of the crisis spread quicklytoother regionsof the</sup> world (i.e., to Russia, Latin America<sup>and eventually even to the U.S.via theLong-Term</sup> Capital Management (LTCM) hedge<sup>fund which ended up being bailed out by the U.S.</sup> Federal Reserve.) In the. years immediately following<sup>the Asian crisis, therewere innumerablecalls</sup> to reform the "international financial<sup>architecture"(i.e.,the internationalmonetaryand</sup> financial system). There were proposals<sup>by national governments,byinternational</sup> financial institutions (IFIs) and other<sup>internationalorganizations,and by the private</sup> sector. They included the creation of<sup>apermanentStandingCommitteeforGlobal</sup> Financial Regulation bringing together<sup>the IMF,the World Bank, the BasleCommittee,</sup> and other regulatory groups (Brown,<sup>1998),creationof a publiccorporationto insure</sup> investors against debt defaults (Soros,<sup>1997and1998),andenactmentof legislationby</sup> countries receiving IMF assistance<sup>toimposean automaticreductionof the principal of</sup> interbank deposits extended to banks<sup>in their countries (Litan et al, 1998). "'Somerecent</sup> initiatives for improving the intemational<sup>financialarchitectureareoutlinedin Table</sup> 5.4 132 Table 5.4

||**GlobalInitiativestoImprovetheInternational**<sup>**FinancialSystem**</sup><br>|
|---|---|
|*<br>|Informationandtransparency:The World<sup>Bank andIvIFamongothershavebeenworking on</sup><br>newstandardsfordisseminating data<sup>onreservesandextemal debtandonnewcodesofgood</sup><br>practicesinfiscal, monetary,and<sup>financialdisclosure.</sup><br>|
|*<br>|Banking andsupervision:Workis ongoing<sup>tostrengthenBaslecoreprinciples.TheWorld</sup><br>BankandIMFare conductingjoint<sup>assessmentsoffinancialsystemstoascertaincompliance</sup><br>withnewinternationalnormsand<sup>detectextantweaknesses.</sup><br>|
|*<br>|Securities markets:TheIntemational<sup>OrganizationofSecuritiesCommissionshasprepared</sup><br>principlesandstandardsfor disclosure.<br>|
|*<br>|Accountingandauditing:TheIntemational<sup>AccountingStandardsCommitteeisreviewing</sup><br>principles with theobjectiveofhaving<sup>uniformstandardsby2002.</sup><br>|
|*<br>|Bankruptcyand govemance:TheU.N.<sup>CommissiononIntemationalTradeLawhas</sup><br>disseminatedanewmodelawofcross-border<sup>insolvency,andtheOrganizationforEconomic</sup><br>CooperationandDevelopment Task<sup>Forceisworkingonintemationallyapplicable principles</sup><br>ofcorporategovernance.<br>|
|*|Private sector involvement: The<sup>IMFanditsBoard,amongothers, havebeenworking</sup><br>ongeneralprinciplestoelicit<sup>greater privateparticipationinfinancingpackages,in</sup><br>partbecauseIMFresourcesare<sup>limitedandinparttodiscouragethe"moral hazard"</sup>|

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