The FIRST Lessons Learned Series is a collection of FIRST's technical and functional insights gained from FIRST funded engagements. This knowledge note shares valuable lessons from FIRST-funded DIS projects led by the Finance and Markets Global Practice at the World Bank.
... See More + The paper addresses some of the most important lessons learned and some of the key challenges faced in building effective deposit insurance systems (DIS) in developing countries.
See Less -
This paper presents a model of bank risk taking and government guarantees. Levered banks take excessive risk, as their actions are not fully priced at the margin by debt holders.
... See More + The impact of government guarantees on bank risk taking depends critically on the portion of bank investors that can observe bank behavior and hence price debt at the margin. Greater guarantees increase risk taking (moral hazard) when informed investors hold a sufficiently large fraction of liabilities. Otherwise, greater guarantees reduce risk taking by increasing the profits of the bank (franchise value effect). The results extend to the case in which information disclosure, and thus the portion of informed investors, is endogenous but costly. The model also shows that when bank capital is endogenous, public guarantees lead unequivocally to an increase in bank leverage and an associated increase in risk taking. The analysis points to a complex relationship between prudential policy and the institutional framework governing bank resolution and bailouts.
See Less -
Policy Research Working Paper WPS7971 FEB 15, 2017
This Technical Note (TN) examines the current state of NPLs in Montenegro, assesses the regulatory and supervisory framework as well as the insolvency and creditor rights regime, and makes recommendations for strengthening the framework.
... See More + The analysis was carried out as part of the 2015 Financial Sector Assessment Program (FSAP), and was based on the legal and regulatory framework in place, the supervisory practices employed, and other conditions as they existed as of September 2015. The TN evaluates the legal, regulatory, and supervisory regimes in four key areas: (i) creditor rights and enforcement systems (for secured and unsecured credit); (ii) debt recovery and informal enterprise workout practices; (iii) formal insolvency system (liquidation and reorganization proceedings); and (iv) effectiveness of the relevant institutional, regulatory and supervisory frameworks in implementing laws, regulations, and supervisory requirements in this area. In addition, the TN assesses recent efforts at NPL resolution, including the implementation of a newly enacted law on voluntary out-of-court restructuring, and the role of special purpose vehicles.
See Less -
Financial Sector Assessment Program (FSAP) 104769 MAR 01, 2016
The development objective of the Deposit Insurance Strengthening Project for Bulgaria is to strengthen the financial and institutional capacity of the Bulgarian deposit insurance fund (BDIF) so as to enable it to meet its deposit insurance and bank resolution obligations.
... See More + The project will have a single component, DIF. Such expenditure meets the productive use requirements as financing of a deposit insurance scheme helps increase confidence in the financial system. This is likely to lead to increased deposits in the banking sector, which can be utilized for financing investment lending and other forms of productive economic activity. The Bank has financed deposit insurance schemes through investment project financing (IPF) instruments in the past and the eligibility under operational policies (OP) and bank procedures (BP) 10.00 has already been established.
See Less -
The absence of sovereign bond issuances with World Bank guarantee support for almost 15 years and the customized application of the WB guarantee instrument led potential investors in the Ghana bond to ponder the best way to value the instrument.
... See More + This paper provides guidance on this subject by presenting four ways to assess the value of a World Bank guarantee for debt capital market issues. The methodologies presented are: nominal weighted average yield; rolling nominal weighted average yield; discounted cash flow; and recovery analysis. The paper presents the methodologies by applying them to a fictional bond issuance by the government of Emergistan, a fictional low income country. Background information on the country and bond issuance has been kept to the minimum as the sole purpose of this example is to illustrate the results of each of the methodologies. It should be noted that World Bank guarantees can be structured in a number of ways depending on the issuer’s objectives as well as country and market circumstances. For instance, guarantees could cover interest and/or principal payments of bonds. Coverage could be on a first loss or back-ended basis. Therefore, the most appropriate valuation method would depend on the specific features of the guarantee being considered.
See Less -
The absence of sovereign bond issuances with World Bank guarantee support for almost 15 years and the customized application of the WB guarantee instrument led potential investors in the Ghana bond to ponder the best way to value the instrument.
... See More + This paper provides guidance on this subject by presenting four ways to assess the value of a World Bank guarantee for debt capital market issues. The methodologies presented are: nominal weighted average yield; rolling nominal weighted average yield; discounted cash flow; and recovery analysis. The paper presents the methodologies by applying them to a fictional bond issuance by the government of Emergistan, a fictional low income country. Background information on the country and bond issuance has been kept to the minimum as the sole purpose of this example is to illustrate the results of each of the methodologies. It should be noted that World Bank guarantees can be structured in a number of ways depending on the issuer’s objectives as well as country and market circumstances. For instance, guarantees could cover interest and/or principal payments of bonds. Coverage could be on a first loss or back-ended basis. Therefore, the most appropriate valuation method would depend on the specific features of the guarantee being considered.
See Less -
During September 1-15, 2015 an assessment under the IMF/World Bank Financial Sector Assessment Program (FSAP) was conducted for Montenegro. The mission assessed financial sector risks and vulnerabilities, assessed the quality of financial sector supervision, and evaluated financial safety-net arrangements.
... See More + As part of the FSAP, the deposit insurance system was assessed against the BCBS-IADI Core Principles for Effective Deposit Insurance Systems (CP) from 2009. The revised IADI CP from 2014, which still have to be adopted by the IMF and the World Bank, have been used as a reference in this assessment. The assessment was conducted by a team of experts from the World Bank and IMF. The assessment has the following main findings: The deposit insurance system in Montenegro is relatively well developed. DPF was established in 2006 and operates under the narrow mandate of a pay-box. It is financed by annual premiums from member banks, supported by a standby credit line with the EBRD and a statutory provision for back-up funding from the government. The current level of funding is sufficient to cover the insured deposits in all small banks. The coverage level is EUR 50,000 per depositor per bank and covers natural and legal persons. With this level, DPF insures 99.26 percent of depositors and 36.38 percent of deposits fully. Since its establishment, DPF has developed much of the infrastructure required to ensure prompt payout of deposits, including payout software to reimburse depositors within fifteen working days after a bank failure and a MoU to support information exchange and coordination with CBM. The deposit insurance system has never been triggered.
See Less -
Financial Sector Assessment Program (FSAP) 104581 JAN 01, 2016
International Debt Statistics 2016 focuses on financial flows, trends in external debt, and other major financial indicators for low, middle, and high-income countries.
... See More + The report includes more than 200 time series indicators from 1970 to 2014 for most reporting countries. This edition of International Debt Statistics (IDS) has been reconfigured to offer a more condensed presentation of the principal indicators, along with additional tables showcasing quarterly external debt statistics and public sector debt.
See Less -
Some of the headings included in this issue of the Development Economics Prospects Group (DECPG) global daily economic news are as follows: financial markets; high income economies and developing economies in East Asia and Pacific, Latin America and the Caribbean, and Sub-Saharan Africa.
... See More +See Less -
