BWC Blog

The Bretton Woods Institutions in a Changing World: A Call for Increased EMDC Involvement in Global Crypto Governance

The world has changed dramatically since the Bretton Woods institutions were created in the wake of WWII to promote international cooperation and multilateralism in a bid to ward off future conflicts.  The institutions created at this historic gathering ushered in an era of unprecedented peace and security, and global economic growth for 60+ years.  They have adapted well over the decades to meet ever more complex challenges, including launching annual G20 meetings with significant emerging markets participation, following the 2008 financial crisis.  

The Failure of Silicon Valley Bank – Are There Lessons for the Basel Regulatory Framework?

The collapse of Silicon Valley Bank (SVB) on March 10 was a failure that should not have occurred. A confluence of factors involving regulators, SVB management, and its depositors came together in an adverse way to bring down the bank.

SVB and Stablecoins—Time to Tighten Regulation

The collapse of Silicon Valley Bank and subsequent jitters at USDC shall serve as a reminder that stablecoin regulation remains far too lax. Circle, the U.S. company and issuer of USDC, a stablecoin denominated in U.S. dollar, is mostly regulated in the U.S. as a money transmitter. This is grossly insufficient for a company with US$40 billion in stablecoins outstanding. Regulation and supervision need to impose sufficient obligations for stablecoin issuers to adopt best industry practices. 

Crypto Regulation: From Crisis to Opportunity

In 2022 the global financial markets were rattled by a series of adverse developments in the crypto segment, which culminated in the FTX meltdown and the multiple ripple effects the markets are likely to continue to grapple with in the course of this year. The implications of the crypto debacle, while clearly negative in the near term, also concern the longer-term trajectories of market development and regulation.

Lessons of the FTX Collapse

The collapse of FTX in many ways is an example of the problems associated with a weakly regulated financial enterprise, as much as it is a demonstration of the problems associated with crypto finance in its current state. 

As a financial enterprise, the bankruptcy of FTX shows the major failings that can arise in an organization with an exceptionally weak governance structure as regards internal financial controls, record-keeping and the oversight of an independent board of directors. There also appear to have been shortcomings in the scope and scrutiny of its outside auditors.

Africa Sovereign Debt Spiral Foments Frustration

This past year, a decade-long Africa commercial borrowing binge with $30bn worth of bonds outstanding came to a screeching halt amid outright or near defaults, with distressed spreads as a measure of risk of over 1,000 basis points to US Treasuries for the sovereign benchmark index cross-section.

Debt topped the agenda at the US-Africa Leaders Summit in Washington, DC in December.

Ways to Nudge Equitable Climate Finance Forward

Last month COP27 came to a close with a historic announcement to establish a loss and damage fund, where rich countries pledge financial support to countries most vulnerable to the climate crisis.  

Emerging Markets Catharsis Recasts Investor Slate

Emerging market asset managers are eager to put this year behind them after double-digit stock and bond index losses and net outflows from their funds. Core and frontier equities though October were down 30%, external sovereign/corporate and local government bonds from 15% to 25%, and currencies, not quite as battered as developed market counterparts by the almighty dollar, off 10%.

MDBs Loans: a New Asset Class Collateralized Loan Obligations

Multilateral Development Bank balance sheet management with structured financings is still in its infancy but a number of path-breaking deals show the way. Two are by the African Development Bank (AfDB) and one by  International Finance Corporation (IFC) though there have also been some others. These  MDB transactions involve about $13 billion in public and private sector MDB loans. The two from the African Development Bank are both synthetic.

Perceived Versus Real Risk In African Credit Ratings

The ratings of African governments have allowed a robust Eurobond market for African sovereign bonds with over $300 billion issued in the last couple of decades. Maintaining access to this market has persuaded many African countries not to seek debt relief under the misconceived G-20 Common Framework (CF) which only three countries have filed to use – Zambia, Ethiopia and Chad -- and none of them has an agreement yet two years after the CF was announced.