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Reform Experiences in Public Sector Banks 9 April 2003 World Bank. ESBG Membership. 2 6 Members from 2 6 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
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Reform Experiences in Public Sector Banks 9 April 2003 World Bank
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
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
Features of a well functioning Retail Bank Reform approaches Common factors frustrating reform Example of a successful transformation Conclusions Outline
Retail Bank Market focus: Private Individuals Households SMEs Local Authorities Broad distribution network Acts in a socially responsible manner What is a Savings Bank?
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)
Examples of Savings Banks NB. A successful bank is not determined by its ownership structure
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
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
I Know I Can I Will The process of managementof change If unable to say this, the change process will fail
Common factors frustrating reform • Political interference in internal affairs • Corporate inertia • General resistance to change • Low level of skills
A successful transformation Nova Ljubljanska Banka Full service bank active in retail, corporate and investment banking
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
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
Conclusions • The key to a successful reform process is PEOPLE • International aid projects facilitate the process of reform
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