WSBI/ESBG

1
Reform Experiences in Public Sector Banks 9 April
2003 World Bank
2
ESBG Membership
26 Members from 26 Countries
Key Figures (1 January 2002) Total Assets
2,890 billion EUR Non-Banker
Deposits 1,708 billion EUR Non-Banker Loans
1,623 billion EUR Branches
65,813 Staff 734,359 Institutions
represented 955
3
WSBI Membership
109 Members from 92 Countries
Key Figures (1 January 2002) Total Assets
6,414 billion EUR Non-Banker Deposits 4,602
billion EUR Non-Banker Loans 2,152 billion
EUR Branches 201,136 Staff 2,421,148
Institutions Represented 1,118
4
Outline

• Features of a well functioning Retail Bank
• Reform approaches
• Common factors frustrating reform
• Example of a successful transformation
• Conclusions

5
What is a Savings Bank?

• Retail Bank
• Market focus
• Private Individuals
• Households
• SMEs
• Local Authorities
• Broad distribution network
• Acts in a socially responsible manner

6
Examples of Savings Banks

• State-owned banks
• Cooperative banks
• Private Foundations
• Joint-stock banks

(Banque et Caisse dEpargne de lEtat, Luxembourg)
(Caisse Nationale des Caisses dEpargne, France)
(Cajas de Ahorros, Spain)
(Lloyds TSB Bank, UK)
7
Examples of Savings Banks

• NB. A successful bank is not determined by its
  ownership structure

8
Features of a well-functioning savings bank
Sound Corporate Governance

• High quality management
• Sound business plan
• Good financial management
• Well trained and motivated workforce

• Appropriate products and services
• Optimum size and combination of branch networks
  and distribution channels
• Streamlined internal processes

• Independent legal and management structure
• Confidence of all stakeholders
• Transparency towards owners and customers

9
Instruments used in the Reform Process

• Technical Assistance
• Bank Twinning
• Management Contracts
• Selling of strategic stakes

Must be appropriate to the beneficiarys
needs Management commitment essential
Caution amongst some Western banks - Concern re
beneficiarys desire for most favoured status -
High demand for study tours
Caution amongst some Western banks -
Reputational risk from problems outside
contractors control - Care re contractual
liability
A foreign bank rarely wishes to remain a minority
investor for very long
10
The process of managementof change
If unable to say this, the change process will
fail
11
Common factors frustrating reform

• Political interference in internal affairs
• Corporate inertia
• General resistance to change
• Low level of skills

12
A successful transformation Nova Ljubljanska
Banka

• Full service bank active in retail, corporate and
  investment banking

13
Nova Ljubljanska Banka
14
Nova Ljubljanska Banka
15
Nova Ljubljanska Banka
16
Nova Ljubljanska Banka Reasons for success

• Slovenian authorities created an environment
  conducive to reform
• Capable leadership of a strong President and
  management team
• Clear business and strategic objectives
• Redesign of its business processes and
  introduction of new IT
• Ongoing process of investment in management and
  staff education and development

17
Conclusions

1. Ownership per se is not the determining factor in
   whether or not a bank is successful
2. Good corporate governance is key to a
   well-functioning public sector retail bank
3. Common factors that frustrate reform are
   political interference, corporate inertia,
   resistance to change, and low skill levels

18
Conclusions

• The key to a successful reform process is PEOPLE
• International aid projects facilitate the process
  of reform

19
For further information about us www.savings-bank
s.com
e-mail info_at_savings-banks.com