by Eric S. Rosengren and John S. Jordan
November/December 2000

Numerous conferences organized in the aftermath of the financial crisis of 1997-98 offered analyses of what went wrong in the crisis countries and prompted a number of reform proposals directed toward reducing the risk of future crises. However, now that the crisis has abated, reform appears to be much lower on most political agendas and is rarely the topic of media reports or academic inquiries. The Federal Reserve Bank of Boston’s June 2000 conference “Building an Infrastructure for Financial Stability” attempted to address this deficiency.

As conference participants presented their analyses of the reform process in various countries, a common theme became apparent: Those recommending reform need to do a better job of recognizing political, economic, and social constraints facing individual countries. These constraints tend to be the true impediments to successfully implementing reform. Conference participants also made several general recommendations. First, countries should focus much more attention on improving the enforcement of existing laws, accounting requirements, investor protections, and bank supervisory practices. Second, where reform is needed, one must do a better job of molding the reform so that it fits the societal norms of the recipient country. And finally, specific reforms are likely to work differently in a country that bases its legal system on civil law than in one that bases its legal system on common law.

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