slide1 n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
IMf/WB Annual Meetings Seminars From Banking Stability to Banking Performance : An Analysis of the Banking Sector in su PowerPoint Presentation
Download Presentation
IMf/WB Annual Meetings Seminars From Banking Stability to Banking Performance : An Analysis of the Banking Sector in su

Loading in 2 Seconds...

play fullscreen
1 / 32

IMf/WB Annual Meetings Seminars From Banking Stability to Banking Performance : An Analysis of the Banking Sector in su - PowerPoint PPT Presentation


  • 197 Views
  • Uploaded on

IMf/WB Annual Meetings Seminars From Banking Stability to Banking Performance : An Analysis of the Banking Sector in sub-Saharan Africa. François Leroux Oct. 1. 2004 francois.leroux@hec.ca. Outline. Preliminary remarks The Structures-Conduct-Performance paradigm

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'IMf/WB Annual Meetings Seminars From Banking Stability to Banking Performance : An Analysis of the Banking Sector in su' - colum


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.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
slide1

IMf/WB Annual MeetingsSeminarsFrom Banking Stability to Banking Performance : An Analysis of the Banking Sector in sub-Saharan Africa

François Leroux

Oct. 1. 2004

francois.leroux@hec.ca

outline
Outline
  • Preliminary remarks
  • The Structures-Conduct-Performance paradigm
  • Analysis of the banking sector
  • General assessment
  • Remarks and policy implications
  • Contribution of cooperative institutions
  • Performance of banking regulation and supervision
  • Banks as partners of institutional development
  • Conclusion
1 preliminary remarks
1.Preliminary Remarks
  • Stability a priority
  • Financial stability progresses
  • There is not a single model for a financial system
  • Present assessment and recommendations are limited to sub-Saharan Africa
2 the structures conduct performance paradigm
2.The Structures-Conduct- Performance Paradigm
  • A classical framework
  • Adaptations for the banking sector
  • Adaptations for developing economies
3 analysis of the banking sector
3. Analysis of the Banking Sector
  • Selecting the main components for analysis
analysis of the banking sector economic and institutional environment
Macroeconomic environment

Degree of diversification of the economy

The cyclical aspect of the economy

Size of the informal sector

Degree of confidence in the financial institutions

Financial market completeness

Legal environment

Judicial environment

Credit culture

Analysis of the Banking SectorEconomic and Institutional environment
analysis of the banking sector structures
Analysis of the Banking SectorStructures
  • Banking concentration
  • Type of Bank ownership
  • Presence of state-owned banks
  • Place of sectorial banks
  • Place of foreign banks
  • Interaction with NBFIs and cooperatives
analysis of the banking sector conduct
Analysis of the Banking SectorConduct
  • Degree of effective competition
  • Credit policy
  • Credit concentration
  • General liquidity of the banking system
  • Banking density and marketing strategies
  • Specific practices of foreign banks
analysis of the banking sector financial performance
Analysis of the Banking SectorFinancial performance
  • Financial performance of the banking sector is adequately monitored by the Financial Soundness Indicator (FSI) and the Financial Sector Assessment Program (FSAP)
  • cf IMF occasional paper 212
analysis of the banking sector economic performance
Analysis of the Banking SectorEconomic performance
  • Performance is a qualitative concept
  • Performance is a relative concept
  • The traditional meaning of economic performance in I.O.
      • Allocative efficiency
      • Progress
      • Employment
      • Equity (« Fairness »)
analysis of the banking sector economic performance1
Analysis of the Banking SectorEconomic performance
  • Security of transactions
  • Durability of the banks
  • Allocative efficiency
  • Technical efficiency
  • Contribution to modernization of the economy
  • Role in savings mobilization
analysis of the banking sector economic performance cont d
Analysis of the Banking SectorEconomic performance(cont’d)
  • Fairness in geographical coverage
  • Potential depositors’access to the banking system
  • Contribution to reduction of the informal sector
  • Contribution to development of the financial sector
  • Contribution to financial education
economic and institutional environment
High sensitivity to external shocks

Poor diversification of the economy

Substantial needs for seasonal financing

Large informal sector

Lack of confidence in the institutions

Incompleteness of the financial markets

Reform of the legal environment

Problematic judicial environment

Embryonic credit culture

Economic and Institutional environment
structures
Structures
  • Limited number of banks
  • Tight control of bank ownership
  • State-owned banks: toward a reduced role
  • Shrinking or disappearance of the sectorial banks
  • Over-presence of foreign banks
  • Segmentation of banking and non-banking activities (a dilemma)
conduct
Conduct
  • Partial competition (conscious parallelism)
  • Credit rationing
  • Credit concentration
  • Over-liquidity of the banking system
  • Insufficient number of branches
  • Niche marketing and low banking density
  • Skimming practices by foreign banks
  • Limited effort of financial innovation
economic performance
Economic performance
  • Improved but still questionable security of transactions
  • Relatively short banking history
  • Allocative efficiency : SME financing problem
  • Technical efficiency
  • Insufficient contribution to savings mobilization
  • Geographical discrimination
  • Restricted depositors’ access to the banking system
  • Limited contribution to the reduction of the informal sector
  • Banks as vectors of financial sector development
  • Limited contribution to financial education
remarks
Remarks
  • Sub performance in terms of structures or conduct is a traditional problem of small economies and not specific to developing economies.
  • In absolute or relative terms, numerous African countries could be classified as small economies
  • Allocative inefficiencies are not restricted to or typical of developing economies
  • Formulating regulations etc. easier than ensuring their implementation
  • Resistance to change
  • Real challenge is behavior modification
policy implications economic and institutional environment
Policy Implications Economic and institutional environment
  • Regional definition of banking space is the logical result of the small size of African economies
  • Authorities must contribute to confidence in the banking system
    • By implementing an adequate scheme of deposit insurance
    • By respecting banking confidentiality at all times
    • By making banking protection a priority in times of social unrest
slide22

Policy Implications

Economic and institutional environment(cont’d)

  • Complete and implement the reform of legal practices where necessary
  • Promote the role of professional associations and the mobility of banking personnel
  • Ensure that civil servants at all levels understand banking practices
  • Promote institutional investors
policy implications structures
Policy Implications Structures
  • Encourage the shrinking of development banks , where necessary
  • Limit market share of state-owned banks
  • Determine, beforehand, maximum market share allocated to foreign banks
  • Promote cooperative and mutualist-type institutions
  • Maintain the segmentation between banks and NBFIs
  • Envisage NBFi access to the payment system
  • Regularly determine whether conditions for entry are not too restrictive
policy implications conduct
Policy implicationsConduct
  • Conscious parallelism is not collusion
  • Competition laws are a luxury of developed countries
  • Incitative tax treatment for opening of new branches
  • Professional banking associations must file annual reports on the financing of SMEs
  • Banking-sector practices must not harm the development of the cooperative sector
6 contribution of cooperative institutions
6.Contribution of Cooperative Institutions
  • Given the under-banking situation in Africa, cooperative structures must be encouraged
  • Their strentghs:
    • They collect widely dispersed savings
    • They represent an effective competitor to the informal sector
    • They promote development of local economic elites
    • They promote development of the mortgage market
6 contribution of cooperative institutions cont d
6.Contribution of Cooperative Institutions (cont’d)
  • They familiarize clients with responsible consumer credit
  • They play a major role in building financial awarness
slide27
But…
  • Cooperative institutions face major problems of internal governance when they embark on credit for commerce and industry
  • Savings cooperatives can only marginally participate in the development of financial markets
moreover
Moreover
  • Organization of the cooperative sector must be confederal, to ensure support of institutions in difficulty
  • Regulation of cooperative institutions can be harmonized on a regional basis, but supervision must be strictly national
7 performance of banking regulation and supervision
7. Performance of Banking Regulation and Supervision
  • Significant modernization of regulation and supervision
  • General acceptance of international codes and standards
  • Harmonization and cooperation on a regional basis
regulation and supervision cont d
Regulation and Supervision (cont’d)
  • Avantages of segmentation
  • Specialized or integrated supervision ?
  • Preference for institutional regulation and supervision
  • Transparency or limited opacity ?
  • Inapplicability of the market discipline concept
  • Seeking an optimal level of regulation
8 banks as partners of institutional development
8.Banks as Partners of Institutional Development
  • A positive attitude towards banks
  • The conservative nature of banks is a factor of stability
  • Tax treatment should be adequate
  • Promote, where possible, bank listings on local stock exchanges
9 conclusion
9. Conclusion
  • Banking sector performance assesment as a complementary exercise to financial stability assessment
  • A need for economic performance indicators of the banking sector
    • Performance is essentially a qualitative concept
    • Performance is a relative concept
    • Indicators should be specific to Africa to facilitate useful comparisons within the region