IMF-FED-WB Seminar for Senior Bank Supervisors from Emerging Market Economies October 17-28, José de Luna Martínez Carlos Leonardo Vicente

Transcription

1 IMF-FED-WB Seminar for Senior Bank Supervisors from Emerging Market Economies October 17-28, 2011 José de Luna Martínez Carlos Leonardo Vicente

2 1. State-Owned Financial Institutions 2. WB Survey on Development Financial Institutions 3. Regulation and Supervision Issues 4. Conclusions and Discussion

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4 Commercial banks Development banks Agriculture Infrastructure Export SME Housing Low-income households, etc Other financial institutions: life and non-life insurance companies brokerage firms leasing companies, etc.

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6 Survey contains 72-questions on: size ownership funding business models corporate governance regulation and supervision, and challenges faced by DFIs Excel-based questionnaire sent to DFIs ( 30% of shares owned by state + policy objectives) Joint initiative of the World Bank and the World Federation of Development Finance Institutions (WFDFI). Regional associations of development banks also helped to distribute the survey among its members

7 Africa Asia Europe and Central Asia 1. Angola 2. Cote d Ivoire 3. Democratic Republic of Congo 4. Ghana 5. Kenya 6. Nigeria 7. Rwanda 8. South Africa 9. Sudan 10. Tanzania 11. Uganda 1. Bangladesh 2. Bhutan 3. Cambodia 4. Cook Islands 5. Micronesia 6. Fiji 7. India 8. Malaysia 9. Mongolia 10. Nepal 11. Niue Island 12. Pakistan 13. Palau 14. Philippines 15. Republic of Vanuatu 16. Samoa 17. Sri Lanka 18. Thailand 19. Tonga 20. Vietnam 1. Bulgaria 2. Croatia 3. Finland 4. Germany 5. Hungary 6. Norway 7. North Cyprus 8. Poland 9. Slovakia 10. Slovenia 11. Turkey Americas 1. Antigua and Barbuda 2. Argentina 3. Bolivia 4. Brazil 5. Canada 6. Colombia 7. Costa Rica 8. Curacao 9. Dominican Republic 10. Ecuador 11. Guatemala 12. Mexico 13. Paraguay 14. Peru 15. Uruguay 16. Venezuela Middle East and North Africa 1. Egypt 2. Oman

8 100% 90% 80% 70% 60% DFIs by Assets in 2009 (Percent of all DFIs) 5% 11% 33% More than US $100 billion dollars US$10 to $99 billion Market Share of Select DFIs in 2009 (% of total assets in their markets) DFIs Market Share 1. Agriculture Bank of Turkey 15% 2. Rwanda Development Bank 12% 50% 40% 30% 20% 10% 51% US$1 to $9.9 billion Less than US$1 billion 3. Fiji Development Bank 11% 4. Brazil National Development Bank 10% 5. Land Bank of Philippines 9% 0% At the end of 2009, assets held by DFIs responding to the survey amounted to US $1.4 trillion dollars.

9 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 47% 36% 17% Before Some DFIs have been able to resist the waves of privatizations and are likely to stay with us for some time. 36% of DFIs have been established just in the past 21 years. Even in the UK and USA, plans to establish new development banks have been recently announced.

10 US $ Billion dollars Loan Portfolio of DFIs ( ) $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 22% 18%

11 Not all DFIs are fully-owned by the State State Ownership in DFIs (percent of all institutions) 4% 24% 72% State owns 100% State owns 50% to 99% State owns less than 50% 72% of DFIs are fully owned by the State. Private sector and foreign states are the minority shareholders in 24% of DFIs. In 4% of cases, the State is a minority shareholder.

12 Education Mining Health Energy Infrastructure Housing/Construction Agriculture/Rural Industry/Manufacturing Services/Trade Economic Sectors Served by DFIs % of all DFIs serving the sector: 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Other financial institutions Other state-owned enterprises Individuals and households Large private corporations Target Clients of DFIs (% of all DFIs) SMEs 0% 20% 40% 60% 80% 100%

13 Number of Economic Sectors Served by DFIs (% of all DFIs) 70% 60% 50% 40% 30% 20% 10% 0% 11% Narrow (Up to 2 sectors) 26% 63% 3 and 5 sectors Broad (6 and 9 sectors) Almost two thirds of DFIs tend to adopt broad mandates, operating in more than 6 economic sectors. Institutions with narrow mandates usually have laws that restrict their activities (in terms of sectors, activities, regions or market failure they are expected to address)

14 Only wholesale 10% Both retail and wholesale 55% Only retail 35%

15 DFIs that Provide Some Lending Products at Subsidized Interest Rates No 50% Yes 50% 66% of DFIs that provide loans at subsidized interest rates cover the cost the subsidies through government transfers. 26% finance them through cross-subsidization (profits from profitable business lines). 38% finance through other means (mainly cheaper credit lines from IFIs)

16 Funding - Deposit-taking Percentage of DFIs that take deposits from the public Yes 44% No 56% 56% of DFIs do not take deposits from the public. 90% of DFIs can borrow from other institutions to finance their operations.

17 Budget transfers and government guarantees Does the DFI receive direct budget transfers from Government? Does the government guarantee the DFIs debt? No 60% Yes 40% No 39% Yes 61% 40% of DFIs receive direct government budget transfers for the funding of their operations. 61% of all DFIs enjoy the government guarantee when they issue debt and other liabilities.

18 Distribution of DFIs by level of NPLs 15% 5% 15% 56% Less than 5% 5% to 9.9% 10% to 19.9% 20% to 29.9% More than 30% 9% At the end of 2009, more than half of DFIs reported low levels of NPLs (less than 5%). However, 15% of all institutions reported more than 30% of NPLs; in few cases the NPL ratio reached more than 90%. In general, second-tier-only DFIs report lower NPLs than retail-only DFIs (100% vs. 27% in the less than 5% bracket)

19 Are DFIs Required by the State to Achieve a Minimum Return on Capital or Equity? Yes 22% No 78% For institutions that are required to achieve a minimum return on capital, targets include: Maintaining real capital constant (earn a return not lower than the inflation) Achieving a rate of return not lower than the governments' long-term borrowing cost Explicit return on capital (in the range of 7% to 11% per year).

20 Regulation and Supervision

21 Regulation and Supervision of DFIs Yes No Is the DFI supervised by the same institution that supervises private commercial banks 75% 25% Does the DFI comply with the same prudential rules (capital adequacy ratio, loan classification, loan provisioning, etc.) as commercial banks? 79% 21% Is the DFI rated by an international rating agency? 48% 52%

22 Boards of DFIs are dominated by government representatives: Average board size is 9 members with a wide range of government representatives (Ministries of Finance, Labor, Social Affairs, Housing, Trade, Industry, etc.) Although 79% of boards in DFIs have independent members, they are a minority in the board. By large, the government appoints all board members and CEOs of the DFIs. Transparency High disclosure of annual reports and audited financial statements (90%), but less disclosure in terms of regulatory capital and capital adequacy ratio (less than 60%).

23 What are the most important challenges facing your institution going forward? Percentage of DFIs Improve loan recovery ratio 83% Improve risk-management capacity 76% Become financially self-sustainable 71% Diversify business operations 63% Improve corporate governance and transparency 50% Acquire more flexibility to hire and retain highly qualified staff 45% Reduce undue political interference 38%

24 Whether we like it or not, DFIs are likely to stay with us for a long time. The group of DFIs is extremely diverse (size, funding, pricing of products, target sectors, corporate governance, etc.) A big challenge is how to transform the large group of DFIs that seems to be underperforming into welladministered and financially-sustainable institutions, able to better fulfill their goals. A key component to improve the performance of DFIs is better regulation and supervision.

25 Thank You! Questions? Please contact Mr. Jose de Luna Martinez or Mr. Carlos Leonardo Vicente