Global Bank Group

1

• Global Bank Group
• Restructuring of the Financial Services Sector of
  Xanadu

2
Reforming the Regulatory Structure

• Country Specific Considerations
• Choice of Regulatory Structure
• Implementation Plan

3
Country Specific Considerations

• Complex regulatory structure (many regulators)
• A number of important, high growth sectors not
  currently regulated or poorly regulated (pension
  funds, credit unions, mutual funds)
• Regulation and supervision evolving in a
  piecemeal fashion needs rationalization (i.e.
  deposit taking institutions regulated
  differently)
• Diversity in regulatory standards
• Bureaucratic tensions (problems passing
  legislation)
• Inadequate level of skilled supervisory resources
• Central Bank was the strongest regulatory agency
  with a good reputation (limited monetary policy
  role)
• Government had a direct involvement in the sector
  (ownership and participation)

4
The Xanadu Model

• Need to move from the status quo Urgently!
• Two pillar model
• Central Bank (monetary policy)
• Financial Services Commission (deposit taking,
  securities, insurance, etc)
• Administrative linkages between the Central Bank
  and the FSC

5
Advantages of the Xanadu Model

• Economies of scale and scope
• Strong linkage with CB allowed use of existing
  skills/expertise and institutional knowledge
• Better co-ordination for financial
  stability-regulation (information sharing)
• Combined regulator more cost effective than
  separate regulators
• Change provided an opportunity to enhance
  regulatory standards across all sectors and to
  ensure consistency in standards
• More balanced than a mega regulator under the
  Central Bank perhaps more palatable to
  government than the Singapore model

6
Challenges

• Needs government support and backing to establish
• Change management issues for industry and staff
• There is a financial cost to changing the system
• Concentration of power in an non-elected body
  (independence etc)
• Looked at other models thought they were better
  than existing structure but did not go far enough!

7
The Implementation Plan THE HARD PART

• Develop Purpose, Objectives and Goals for the new
  body and transition plan for the new structure
  taking into consideration historical, cultural,
  political economy factors and international
  standards.
• Seek technical assistance if appropriate
• Legislative change should be priority for
  government
• Single act laying out objectives, powers,
  independence, right to make Regulations,
  accountabilities to parliament, funding (fees,
  CB)
• Incorporate the FSC under Companies Act
• Appointment of Chairman, senior management and
  transition advisory team (ensure balance with
  MoF/Regulator powers and independence)
• Begin public awareness campaigns and talks with
  industry and staff
• Select location and recruit, compensate and TRAIN
  staff (significant portion of budget)
• Functional organization (authorization, policy
  etc cross training/ career path opportunities

8
The Hard Work Continues

• Be prepared to make adjustments
• 2 year transition process
• Explain clearly to staff and industry for buy
  in Continuous dialogue
• Train staff training institute, external
  sources of training, development of manuals
• Work out soft issues (these can cause problems
  job titles, work culture etc)
• Confront and plan for the hard unpleasant issues
  (separations, effective demotions etc)
• Introduce user fees

9
Funding Budget

• Funding
• User fees, CB, aid
• Budget
• Training
• Competitive Salaries Pension Plan
• IT resources
• Severance Packages
• Consultants Fees!

10
The Result A happy ending!

• An integrated financial services regulator
  focused on prudential regulation, market conduct
  supervision and consumer protection to maintain a
  stable financial services sector in collaboration
  with The Central Bank.

11

• Thank You