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:. A SUCCESSFUL PUBLIC BANK IN LATIN AMERICA. José Mena V. BID Seminar on Public Banks February 2005. CONTENT INSTITUTIONAL AND MACRO FRAMEWORK MICROECONOMIC SETTING VISION & MISSION OF BANCOESTADO RECENT PERFORMANCE CONCLUSIONS. I. INSTITUTIONAL AND MACRO FRAMEWORK.
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: A SUCCESSFUL PUBLIC BANK IN LATIN AMERICA José Mena V. BID Seminar on Public Banks February 2005
CONTENT • INSTITUTIONAL AND MACRO FRAMEWORK • MICROECONOMIC SETTING • VISION & MISSION OF BANCOESTADO • RECENT PERFORMANCE • CONCLUSIONS
I. INSTITUTIONAL AND MACRO FRAMEWORK • A relatively stable and growing economy • A comparatively adequate financial development, but still large sectors without access to financial services • Pro-market financial regulation and supervision in place • A relatively concentrated banking industry with a large participation of foreign banks • A “leveled playing field” where BancoEstado plays by the same rules than private banks
II. MICROECONOMIC SETTING (Underlying Bank’s conditions) • BancoEstado’s Profile: (Consolidated)* • Total Assets US$ 15 billions • Net worth US$ 816 millions • N° of branches 311 • N° of employees 8,500 • N° of clients 10 millions • N° transactions/month 20 millions *It includes its nine affiliates
It basically operates as a commercial bank, not as a development bank • Social responsibility (role) in the context of sound and competitive policies (no subsidies), intended to maximize social return • It is fully autonomous (from the government/Ministry of Finance or any other political influence) to define its loan and pricing policies
Strong corporate governance and full compliance • Capable and participative management • A permanent struggle for improving available factors’ productivity and efficiency (economies of scope and scale) to minimize costs and prices • Commercial policy focused on providing a full range of financial services, at the lowest possible cost, to people and businesses without access to private banks
III. VISION & MISSION OF BANCOESTADO • Vision => To become a world class institution and accomplish its social mission. • Mission => To offer competitive financial services that contribute to Chile’s development and facilitate the access of all Chilean to products and services that improve their welfare and economic security. • BancoEstado’s vision and mission are shared and decidedly supported by both workers union and management through their solid long-lasting strategic alliance.
IV. RECENT PERFORMANCE (Trajectory/Evolution of main indicators)
Growing menu of new financial services offered mainly to low-income clients and small businesses
Resource (Savings) Mobilization for Development • Leader in the market for family (passbook) savings
Invaluable Contributions to public confidence and financial stability through sound policies and solvency
“Lender of last resort” in critical financial episodes • It provided a large amount of capital to bankrupt banks in the severe and generalized 1982-83 private banking crisis • It supplied liquidity to the financial system, with the proper safeguards, during the recent “Inverlink affair”
V. CONCLUSIONS (Final comments) • A dynamic institutional and macro framework and a correspondingly efficient microeconomic (business) setting are both critical factors for a public bank’s success in emerging economies • A rock solid compromise from workers and management with a clear Bank’s vision and mission has also been a precondition for success
A public bank’s social role or development contribution must be realized by systematically applying sound and competitive policies (no subsidies), and without interference from any political influence • The long term experience of BancoEstado is a clear (irrefutable) evidence that a financially and socially efficient operation of a public bank may render a significant support to the development of a small open economy