Reform Experiences in Public Sector Banks 9 April 2003 World Bank

1. Reform Experiences in Public Sector Banks 9 April 2003 World Bank

2. ESBG Membership 26 Members from 26 Countries Key Figures (1 January 2002) Total Assets:2,890 billion EUR Non-Banker Deposits:1,708 billion EUR Non-Banker Loans: 1,623 billion EUR Branches: 65,813 Staff: 734,359 Institutions represented: 955

3. WSBI Membership 109 Members from 92 Countries Key Figures (1 January 2002) Total Assets:6,414 billion EUR Non-Banker Deposits: 4,602 billion EUR Non-Banker Loans: 2,152 billion EUR Branches: 201,136 Staff: 2,421,148 Institutions Represented: 1,118

4. Features of a well functioning Retail Bank Reform approaches Common factors frustrating reform Example of a successful transformation Conclusions Outline

5. Retail Bank Market focus: Private Individuals Households SMEs Local Authorities Broad distribution network Acts in a socially responsible manner What is a Savings Bank?

6. Examples of Savings Banks • State-owned banks • Cooperative banks • Private Foundations • Joint-stock banks (Banque et Caisse d’Epargne de l’Etat, Luxembourg) (Caisse Nationale des Caisses d’Epargne, France) (Cajas de Ahorros, Spain) (Lloyds TSB Bank, UK)

7. Examples of Savings Banks NB. A successful bank is not determined by its ownership structure

8. Institutional Integrity Proficiency Efficiency Features of a well-functioning savings bank Sound Corporate Governance • High quality management • Sound business plan • Good financial management • Well trained and motivated workforce • Appropriate products and services • Optimum size and combination of branch networks and distribution channels • Streamlined internal processes • Independent legal and management structure • Confidence of all stakeholders • Transparency towards owners and customers

9. Instruments used in the Reform Process Must be appropriate to the beneficiary’s needs Management commitment essential • Technical Assistance • Bank Twinning • Management Contracts • Selling of strategic stakes Caution amongst some Western banks: - Concern re beneficiary’s desire for ‘most favoured status’ - High demand for study tours Caution amongst some Western banks: - Reputational risk from problems outside contractor’s control - Care re contractual liability A foreign bank rarely wishes to remain a minority investor for very long

10. I Know I Can I Will The process of managementof change If unable to say this, the change process will fail

11. Common factors frustrating reform • Political interference in internal affairs • Corporate inertia • General resistance to change • Low level of skills

12. A successful transformation Nova Ljubljanska Banka Full service bank active in retail, corporate and investment banking

13. Nova Ljubljanska Banka

14. Nova Ljubljanska Banka

15. Nova Ljubljanska Banka

16. Nova Ljubljanska Banka Reasons for success • Slovenian authorities created an environment conducive to reform • Capable leadership of a strong President and management team • Clear business and strategic objectives • Redesign of its business processes and introduction of new IT • Ongoing process of investment in management and staff education and development

17. Conclusions • Ownership per se is not the determining factor in whether or not a bank is successful • Good corporate governance is key to a well-functioning public sector retail bank • Common factors that frustrate reform are political interference, corporate inertia, resistance to change, and low skill levels

18. Conclusions • The key to a successful reform process is PEOPLE • International aid projects facilitate the process of reform

19. For further information about us: www.savings-banks.com e-mail: info@savings-banks.com