Talking Points for Mr. Colin Bruce

Seminar on Financial Stability and Development

May 15 - 17, 2006

Nairobi, Kenya

SerenaHotel

Opening Remarks: Colin Bruch, Kenya Country Director, World Bank

Monday, May 15, 2006 (9:10-9:30 am)

A.Welcome to this Seminar on Financial Stability and Development, organized by the World Bank Africa Region and the World Bank Institute.

I am told you come from over 30 countries. Because you are senior and mid-level financial sector policy makers and senior technical staff working on financial sector issues around the world, we hope this seminar will make it possible for you to interact and learn from one another.

In addition, the World Bank values this opportunity to learn from you about possible ways to improve our approach to financial sector assessment and follow-up. As usual, we value your feedback and hope you give it generously.

B.Importance of the Financial Sector and Financial Sector Assessments

  • I know I am preaching to the choir when I say that extensive evidence confirms that creating the conditions for a deep and efficient financial system can contribute robustly to sustained economic growth and lower poverty. Similarly, it is also widely acknowledged that malfunctioning financial systems can be hugely expensive to current and future taxpayers in countries saddled with them.
  • So we are looking to: 1) detect financial sector problems early before they become crises and apply measures to mitigate vulnerabilities; and 2) identify key developmental needs of the sector, including structural problems and missing financial services so that, if addressed, the sector’s ability to contribute to economic growth and provide financial access to larger portions of productive society will be improved.

C.Importance of the program to the countries that participate

  • You are also aware of the FSAP, the Financial Sector Assessment Program; some of you are from countries that have been through the program. Others are in the pipeline.
  • Industrial and developing countries alike have participated. Nearly 70 countries have been assessed already. In total, one hundred and six countries have asked to participate or are being assessed.
  • The program has a broad agenda that is adapted to country circumstances with an overall aim of conducting assessments of countries’ financial systems, including the sensitivity of the financial system to macroeconomic shocks, the stability and efficiency of financial institutions and markets, adequacy of legal and financial infrastructure, as well as compliance with specific international standards and codes. The assessment covers the current provision of financial services, missing services and markets and identifies the obstacles to the extensive and efficient provision of a broad range of financial services.
  • In many countries, even before the final FSAP reports are delivered, officials in the country have begun to take action. The Bank has followed-up with relevant technical assistance projects, aimed at helping the authorities to implement relevant measures to improve the functioning of their financial systems and maximize the contribution to growth and poverty reduction. I know this happens with the IMF as well.
  • One of the vehicles through which technical assistance has been delivered is the Financial Sector Reform and Strengthening Initiative (FIRST), a multi-donor effort to develop robust and diverse financial sectors in low and middle-income countries.

D.Objectives of the Seminar

  • The FSAP program has made significant contributions in providing a diagnosis of financial systems. I am particularly interested in seeing that the next step is taken as well, namely that there is follow-up – sustainability of impact, if you will – so that those of you working in your financial sectors can continue improving your frameworks for monitoring the sector and begin conducting, if you do not already, regular self-assessments to keep yourselves abreast of needed changes.
  • The overarching goal of this seminar is to give you greater familiarity with key methodologies, techniques and data requirements for systematic assessments of financial stability and development. In the next three days, you will be exposed to practical approaches for assessing financial systems drawn from the wide-ranging experience accumulated from the FSAP program as well as that of other countries actively monitoring their own financial systems.
  • The Seminar covers several important topics on financial sector stability and development, including financial soundness indicators and stress-testing, the need for a sound financial sector infrastructure (legal, regulatory, credit information systems) to underpin financial transactions, and the role of banking and non-bank financial intermediaries in supporting real sector development. These issues are often intertwined, sometimes at odds, and policy makers confronted with the task of managing financial systems in an era of globalization have to deal with a range of issues simultaneously.
  • We hope this Seminar will help you address these issues effectively on a day-to-day basis. The Seminar offers a unique opportunity to bring together policy makers and technical staff working on similar issues on different continents. As you can see, the agenda is a mixture of presentations, case studies and breakout sessions.

E.Conclusions

  • In conclusion, let me reiterate that the job of mitigating financial vulnerabilities and stimulating financial sector development is a never-ending one, especially in an era of globalization. New challenges emerge every day. It is therefore imperative that all partners interested in financial sector development stay on top of the issues. Significant improvements in financial sector monitoring and assessment is a step in that direction.
  • I thank you for your interest in this seminar and hope you find the sessions useful and fruitful.

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