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From Watchdogs To Change Agents


Cover Story: Finance Stars: Regulators

FROM WATCHDOGS TO CHANGE AGENTS

The job description for market regulator has undergone a dramatic rewrite. Far from being eagle-eyed guards who block experimentation, regulators earn high marks for spurring innovations that keep currencies stable and technologies cutting-edge.Return to top

GUSTAVO FRANCO

President, Central Bank of Brazil

Gustavo Franco is the public persona of Brazilian financial policy. Boyish-faced but combative, the 41-year-old central bank president is largely responsible for the day-to-day management of Latin America's largest economy. Franco's gradual devaluation of the currency and careful hoarding of $62 billion in reserves make him confident he can avoid an Asia-style run on the real, despite a growing trade deficit. "Speculative attacks occur only in countries whose fundamentals aren't good," he crows.

With a PhD in economics from Harvard, Franco favors some government intervention in markets, but says he has an "overall orientation to opening the country to foreign competition." If he can maintain a steady hand, Franco's legacy as guarantor of Brazil's stability will be set.By Ian Katz in Sao PauloReturn to top

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ANDREI KOZLOV

First Deputy Chmn., Russian Central Bank

In 1992, Russia's economy was in chaos. Inflation was 2,000%. Industrial output was falling. Trust in Boris N. Yeltsin's radical reformers was nil.

But in the bowels of the Central Bank of Russia, Andrei A. Kozlov, 32, saw a way out. A staffer in the securities department, he heard a group of American bankers, including then New York Federal Reserve Bank President Gerald E. Corrigan, describe how the U.S. government finances its operations by borrowing money on capital markets. Kozlov vowed to develop Russia's own government securities program. Says Kozlov: "The attitude of the majority of higher-level government officials was, `Let these young guys play with their toys."'

Five years later, Kozlov, is First Deputy Chairman of the Central Bank, and his "toys" are bringing billions of dollars to the Russian budget. Using Corrigan's advice, he created Russia's most liquid, clean, and efficient securities market. Now, Russian and foreign investors feel confident enough to put over $50 billion in Russian Treasury bonds. Russia qualified for an international rating in September, 1996. Since then, Russians have sold more than $6.5 billion in Eurobonds. Says David Boren, Salomon Brothers' emerging- markets research president: "Kozlov was there early, he's going to stay around a long time, and he's clean."By Patricia Kranz in MoscowReturn to top

MARY SCHAPIRO

President, NASD Regulation Inc.

Only 42, Mary L. Schapiro has spent a long time in the trenches: commissioner at the Securities & Exchange Commission, chair of the Commodity Futures Trading Commission, and point person in untangling the 1996 Sumitomo Corp. copper market scandal.

Now, Schapiro, a lawyer by training, is president of NASD Regulation Inc., the regulatory unit of NASD. She supervises 5,400 member firms, 500,000 traders and brokers, and the NASDAQ stock market. The NASD has been wrenched by scandal and controversy, and her job is to restore its reputation while pursuing her effort to combat Internet fraud. Says Schapiro: "Technology is the challenge and the answer to the challenge."By Paula Dwyer in WashingtonReturn to top


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