Why ending bank secrecy would aid troubled sovereigns

Author: | Published: 1 Apr 2005

The Argentine financial crisis in 2000, and the collapse of the country's economy in 2001 and 2002, have shaken the international financial community and raised questions about the architecture of the international financial system.

As a result of the crisis, some foreign banks with branches, subsidiaries or affiliates in Argentina have been forced to make substantial write-offs. Foreign holders of Argentine sovereign debt have also been forced to accept write-offs as the government has in effect imposed a low (about 34%) net present value exchange offer on more than $100 billion in debt, the largest such exchange in history. Foreign creditors of other governments also fear that the Argentine rescheduling sets a dangerous precedent, and the role of the International Monetary Fund (IMF) in Argentina, both before and after the crisis, has been questioned.

One issue that has received little attention is the capital flight from Argentina in recent years, which...