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World Bank

SEMINAR FOR SENIOR BANK SUPERVISORS

Robert LiuWorld Bank

Washington, DCOctober 27, 2008

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Table of Contents

1.1. What are FSAP and ROSC?What are FSAP and ROSC?

2.2. Background Information on FSAPBackground Information on FSAP

3.3. How are International Standards established?How are International Standards established?

4.4. What is FIRST Initiative?What is FIRST Initiative?

5.5. Main activities of FIRST InitiativeMain activities of FIRST Initiative

6.6. How to apply for FIRST technical assistance?How to apply for FIRST technical assistance?

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What are FSAP and ROSC?

FSAP stands for Financial Sector Assessment Program

ROSC stands for Reports on the Observance of Standards and Codes

They are jointly administered by World Bank and International Monetary Fund

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Financial Sector Assessment Program (FSAP)Financial Sector Assessment Program (FSAP)Background informationBackground information

Financial crises of Mexico (1994-95) Asia (1997-98), Ecuador (1999) and other countries have highlighted the importance of:

strong financial sectors,

enhanced supervision and regulation,

crisis prevention

FSAP is a response to calls by the international community to facilitate early detection of financial sector vulnerabilities and development needs.

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Financial Sector Assessment Program (FSAP)Background information

FSAP started in April 1999.

FSAP is a voluntary program

FSAP provides a comprehensive assessment of a country’s financial sector.

FSAP is jointly conducted by the IMF-World Bank

FSAP uses internal and external expertise

FSAP Updates

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Number of Assessments Completed

1999/2001 2002/2004 2005/2007 2008* TotAFR 4 11 9 6 30EAP - 3 3 - 6ECA 9 12 17 8 46LCR 6 9 10 3 28MNA 5 6 6 3 20SAR 1 3 1 1 6Other 2 9 7 2 20Total 27 53 53 23 156Total Updates 5 17 16 38*ProjectedAFR=Africa, EAP=East Asia, ECA=Europe & Central AsiaLCR=Latin America, MNA=Middle East, SAR=South AsiaOther=Part I countries

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Countries that Have Participated in an FSAPCountries that Have Participated in an FSAP

EgyptIranIsraelLebanonMoroccoTunisiaUAEYemenSyriaAlgeriaJordan

BarbadosBoliviaBrazilCanadaColombiaCosta RicaDominican

Rep.El SalvadorGuatemalaMexicoPeruJamaicaHaitiHondurasNicaragua

LithuaniaLuxembourgMaltaPolandRussiaSlovak Rep.SloveniaSwedenSwitzerlandUkraineUKMoldovaTurkeyMontenegroRomaniaBelarusCyprus

ArmeniaBulgariaCroatiaCzech Rep.EstoniaFinlandFranceGeorgiaGermanyHungaryIcelandIrelandItalyKazakhstanKyrgyz Rep.Latvia

Hong KongJapanKoreaPhilippinesSingaporeBangladeshIndiaSri LankaThailandFijiMongoliaPakistan

CameroonCote d'IvoireGabonGhanaMauritiusNigeriaSenegalSouth AfricaSudanUgandaZambiaBotswanaMalawiSierra LeoneDjiboutiBurkina FasoNiger

Middle East and North

AfricaAmericas

Europe andCentral AsiaAsiaAfrica

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FSAP - Areas of Assessment

Financial Markets

Rules andRegulations

Financial System

Macroeconomic Environment

Financial Intermediaries

How well the country’s financial institution would handle adversity?

Macro-prudential indicators to identify vulnerabilities.

Observance of internationally accepted standards and codes.

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Internationally Accepted Standards and Codesassessed under the FSAP

Code of Good Practices on Transparency in Monetary and FinancialPolicies (MFP)

Basel Core Principles for Effective Banking Supervision (BCP)

Core Principles for Systemically Important Payment Systems (SIPS)

IOSCO’s Objectives and Principles of Securities Regulation

Insurance Core Principles

Anti-money laundering

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Other Internationally Accepted Standards and Codes

Data Dissemination: IMF’s Special Data Dissemination Standard/General Data Dissemination System (SDDS/GDDS).Fiscal Transparency: IMF’s Code of Good Practices on Fiscal Transparency.Corporate Governance: OECD Principles of Corporate Governance.Accounting: International Accounting Standards Committee's International Accounting Standards.Auditing: International Federation of Accountants' International Standards on Auditing.Insolvency and creditor rights

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What is FIRST?What is FIRST

FIRST Stands for Financial Sector Reform and Strengthening. FIRST is a multi-donor grant facility that provides technical assistance (TA) to promote financial sector strengthening in low-and middle-income countries.

ObjectivesTo issue technical assistance grants for capacity building and policy developmentTo promote identification and dissemination of best practices infinancial sector reform.

Features A joint program of the Bank, the Fund and financed by five bilateral donors.Launched in 2002 as a $60 million fund, now extended with an additional $40 million in funding. Total Resources $100 million.Originally designed to provide resources for FSAP and ROSC follow-up.World Bank Executed Trust Fund.

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Main activitiesFinancial supervision, followed by insurance, banking and capital markets, altogether represent 60% of total FIRST activities.

Insurance16%

Pension6%

Anti Money Laundering

4%

Financial Strategy8%

Capital Markets13%

Collective Investment Schemes

3%

Corporate Governance

2%Debt Markets

3%

Financial Supervision

18%

Housing Finance4%

Insolvency1%

Payment Systems3%

Banking13%

Accounting & Auditing

6%

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Regional breakdown of FIRST ProjectsAs of September 16, 2008, FIRST has engaged in 328 projects with a total amount of US$58.2 Million.

# of Projects

7 14 21 2849 55

154

0

20

40

60

80

100

120

140

160

180

Globa l MNA S A EAP LAC ECA S S A

# of Projects

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Regional breakdown of FIRST Projects

% of Projects

2% 4% 6% 9%15% 17%

47%

0%

10%

20%

30%

40%

50%

Global MNA SA EAP LAC ECA SSA

% of Projects

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Project portfolio FSAP/non-FSAP30% of FIRST projects (79 projects) are FSAP-related.Suggests scope for increasing coordination with authorities around the FSAP program and also in supporting follow-up to recent FSAPs.

FSAP30%

Non FSAP70%

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Project portfolio – country typologyFIRST projects are heavily oriented towards low-income countries.

LIC55%

MIC32%

Blend13%

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Project portfolio – project generation42% of projects have been requested directly by the authorities in the client countries.

Country Clients42%

IMF14%

WB38%

Other Donors6%

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FIRST Phase II

New structure

FIRST was formally restructured in March 2007.FIRST is now a more “traditional” WB Trust Fund.The Project Management Unit is based in WashingtonLondon office has been closed.

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Goals of restructuring

Create a simple, unified management structure.Improve efficiency and reduce transaction costsImprove alignment with Bank, Fund, and other donor policiesFacilitate FSAP/ROSC follow-up

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Phase II: Objectives

FIRST has maintained its strategic goals, objectives, and overall approach in Phase II.

FIRST typically funds short/medium-term technical assistance projects to support:

Strengthening of supervisory institutionsPolicy advice of financial sector reformLegislative and regulatory reformTraining (when linked with capacity building) Seconding experts

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Phase II: How it will work

As in the past, FIRST projects will be executed by

Consultants (Firms and individuals)FIRST’s “panel” of consultants has been discontinued.All procurement to be done in accordance with AMS 15.

Bank and Fund staffTypically, staff contribute to project design, management and supervision. FIRST Charter restricts total amount that can be used to pay for Bank and Fund staff costs.

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How to apply for FIRST funding

Applicants must be: public policy makers regulatory bodies government agencies international financial institutions, and, under limited circumstances, quasi-public institutions (such as self-regulatory organizations and industry associations).

The Bank or IMF can be the applicant for global, regional, or multi-country projects.

Approval Process PMU reviews applicationDue diligence/ peer reviewSubmission of application to Project Approval Committee

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Project management

Project management PMU-managed projectsBank staff-managed projects (regionally or network managed)IMF-managed projectsType 1, 2, and 3 projects have been eliminated.

BudgetBudgets will be transferred to the region managing the projectTypically projects will receive a maximum of 7-10 percent to cover management costs.

Operational ProceduresFIRST has prepared Draft Operational Procedures. Feedback is welcomed on these procedures

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Project management, Continued

Roles and ResponsibilitiesFor each project a Technical Leader and Project Officer will be appointed.

Technical LeaderWill be responsible for overall technical quality and substance of the TA.

Project OfficerWill be responsible for managing and administering the project overall, procuring consultants, monitoring and reporting on project status.

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More information On FIRST Initiative

www.www.firstinitiativefirstinitiative.org.org

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World Bank

Thank YouQ&A

Robert LiuWorld Bank

Washington, DCOctober 27, 2008