1 / 20

IMF Survey of Supervision of State-owned Enterprises in the Financial Sector

IMF Survey of Supervision of State-owned Enterprises in the Financial Sector. David Marston International Monetary Fund April 26, 2004. Survey Objectives. Context Accept the landscape-manage the risks Ensure that IMF recommendations reflect “good practice” in supervision

jewel
Download Presentation

IMF Survey of Supervision of State-owned Enterprises in the Financial Sector

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. IMF Survey of Supervision of State-owned Enterprises in the Financial Sector David Marston International Monetary Fund April 26, 2004

  2. Survey Objectives • Context • Accept the landscape-manage the risks • Ensure that IMF recommendations reflect “good practice” in supervision • Initiate a research agenda aimed at developing “good practice” guidelines for the operation, oversight, and transparency of state owned financial enterprises.

  3. Survey Coverage • All ‘state owned’ financial institutions • commercial and specialized/ development banks and non-banks, insurance/guarantee cos., mutual, investment, provident and pension funds etc. • ‘State owned’ • any shareholding arrangement by which the state (central, state or local or other elected body) or any entity of the state has a controlling ownership interest or a minority that allows the state to exercise management control

  4. Survey Design • Types of institutions and activities • Ownership structures • Policy goals • Funding arrangements • Supervision and oversight • Governance arrangements

  5. Caveats • Work in progress – responses still coming • Default sample • Incomplete responses • Factors inhibiting response • Apprehension of privatization agenda • Touchy subject • No single agency has this information • Lack of clarity

  6. Survey Response • 25 countries ( 10 developed, 3 transition and 13 developing) reported 683 SOFIs. 2 nil responses. • Individual data provided for 101 institutions, aggregate data for the rest. • SOFIs • are prevalent in many areas of financial activity, though commercial banking is dominant • are present in both the developed and developing countries • can have a significant size

  7. State financial institutions are set up to meet policy goals • Nationalization or takeover of private institutions is not common. • In most cases, SOFIs set up with the intention of • benefit of a particular region, particular trade or activity (SME, artisan, tradesmen) or agriculture, trade, encouragement of thrift, housing, collection of judicial deposits, (banks), • infrastructure, general economic development, middle and low income housing, international trade, (development banks) • health insurance, retirement schemes (funds).

  8. Banks dominate the SOFI landscape

  9. The state tends to have a majority ownership in SOFIs

  10. State ownership in the financial sector can be significant

  11. State Institutions Receive Funding from a Variety of Sources • Retail and wholesale deposits • Direct government grants • Government deposits • Long term borrowings • Explicit liability guarantees • Inclusion in the budget

  12. State Institutions Typically Operate at a Loss • Most institutions are ‘for profit’ • A few operate on a ‘zero-cost’ basis. • However, • 1/3rd reported a loss in 1 of 3 years • Capital injections into these institutions are not uncommon

  13. Most “for Profit” & “Zero Cost” Institutions Operate at a Loss

  14. Does moral hazard of access to deep pockets cause higher NPLs ?

  15. Issues in competition • Legal requirement for continuing with govt ownership is rare • Most institutions receive direct policy targets from government which are monitored regularly • Lending to government is not very significant

  16. Most institutions are supervised... • Most institutions are subject to some form of third party supervision • Loose convergence of supervisory approaches - development banks subject to supervision / regulation similar to commercial banks. • However, compliance with regulations is monitored by the administrative ministry in some cases.

  17. But supervision may not be effective. • Further, supervisory standards could differ between state owned enterprises and their private sector counterparts. • Corrective action is not available in the case of certain supervised institutions. • Where available, supervisors may have to ‘consult’ with the government before taking corrective action.

  18. Issues in governance • Composition of the Board • Appointment and term of chief executives • Compensation of employees • Audit policies and procedures

  19. Regulatory paradigms Public – Private Commercial bank – Policy bank Deposit taker– non Deposit taker Bank – Non bank Financing institution – Refinancing institution

  20. Thank you

More Related