KNOWLEDGE: RESEARCH, LEARNING, AND DISSEMINATION

In collaboration with outside groups the Bank produces cutting-edge contributions on financial sector topics to help practitioners and governments make better policy decisions. The vast majority of this research (publications and data) is downloadable from our Web site: www.worldbank.org/finance.

This year the World Bank has been at the forefront of analysis on an emerging issue of our time—electronic finance and electronic security. Electronic finance, which is becoming key to financial infrastructure, presents great opportunities to reduce the costs of financial and commercial transactions. It also presents new electronic security risks. Careful development of information technology infrastructure within the financial sector will be increasingly needed to address the electronic and related operational risks associated with e-finance. A thorough discussion of this topic is presented in the Bank’s paper, “E-Security: Risk Mitigation in Financial Transactions,” available with other useful material at www.worldbank.org/finance (click on E-security).

The Bank actively disseminates research and knowledge in a variety of ways. The Financial Sector Knowledge and Information Services, a dedicated team of analysts, serves as a hub of communications, research, and resources on financial sector issues for World Bank staff, client-country authorities, and nongovernmental organizations.

The Financial Sector Learning Program, a well-developed unit of the World Bank Institute, emphasizes policy dialogue and collaborative problem solving by participants. These activities take the form of conferences, regional and global workshops, and distance learning through videoconferencing and the Internet. As an excellent example of using first-hand research and creative knowledge tools, the Learning Program has followed up the joint World Bank–International Monetary Fund publication, Developing Government Bond Markets: A Handbook, with a series of regional hands-on seminars both for senior officials responsible for developing government bond markets and for individuals responsible for operating the bond markets. To date, regional workshops have been held in Brazil, China, Tunisia, and Turkey, serving to deliver research and policy advice to our client-country authorities who can use it to strengthen their financial systems. (See www.worldbank.org/wbi/banking.)

LENDING AND TECHNICAL ASSISTANCE

The Bank shares the increased global concern over money laundering and the financing of terrorism, particularly as the devastating economic and social consequences are magnified for developing countries with fragile financial systems. In response, the Bank intensified its work in this area, establishing a strong, systematic program to help client countries build institutional capacity. Since September 2001 the Bank and the International Monetary Fund (IMF) have completed, initiated, or agreed to deliver 52 technical assistance programs to 40 countries and 12 regions. More than half of the country technical assistance projects involved advice or assistance in drafting legislation, with a small but increasing proportion involving laws to combat terrorist financing. In addition, with the IMF the Bank developed the Anti-Money-Laundering (AML)/Combating the Financing of Terrorism (CFT) Global Assistance Coordination Database. The database tracks technical assistance priorities or gaps in delivery among donors on these topics and enhances the information flow between international bodies by serving as a clearinghouse for all technical assistance services being provided. In a complementary effort, the Bank and IMF launched a pilot program of assessments using the AML/CFT methodology endorsed by the Bank and IMF Boards in September 2002. The assessments will be incorporated into the Financial Sector Assessment Program (FSAP) on a pilot basis.

Many Bank client countries lack access to financial services, which is a critical problem. In Cameroon, the Central African Republic, Chad, the Republic of Congo, Equatorial Guinea, and Gabon (representing a total population of more than 30 million people), less than 3 percent of the people have access to day-to-day bank and payment services, compared with more than 90 percent in developed countries. Regarding the clearing and settlement of payment transactions, in these Central African countries the average number of transactions exchanged among banks per inhabitant per year is less than 0.05, compared with approximately 0.10 in West Africa, 3.0 in Tunisia, and 200.0 in Europe.

To address these issues, the Bank has provided assistance to BEAC (the regional Central Bank of the above-cited Central African countries) in defining large payment infrastructure reform. Using a participatory approach, the Bank has supported a project that has involved all stakeholders and is supported by a credit of $14.4 million provided by IDA (total project cost is approximately $22 million). The Bank is widening access to financial services in this region, as well as in others where similar projects are carried out, by improving the efficiency of both country and regional payment infrastructures and by promoting the delivery of payment instruments and services to individuals and to small and medium enterprises.

FINANCIAL SECTOR POLICY ADVICE

The Bank’s partnerships are essential to its ability to offer financial sector policy advice. The joint World Bank–IMF Financial Sector Assessment Program, established in 1999, helps identify financial system strengths and vulnerabilities and helps reduce the potential for crisis. In fiscal 2003 20 FSAPs have been delivered. Over the past year, heavy focus has been put on follow-up technical assistance work. A new multidonor partnership, Financial Sector Reform and Strengthening, has been established as a mechanism to support technical assistance follow-up. (See box 4.8.)

The Bank continues its strong partnerships with international organizations and standard-setting bodies such as the Basel Committee, International Organization of Securities Commissions, and the International Association of Insurance Supervisors (IAIS). The Bank responded to a direct request from the IAIS for training targeted at midlevel supervisors in our client countries. Bank insurance experts were able to train 250 supervisors in 23 countries over the last two years through the use of videoconferencing, the Internet, video, and chat rooms. The Bank’s senior insurance experts cover topics such as risk-based approaches to supervision, the use of early warning tests, and the regulatory ladder. Exposing supervisors to international standards and skills helps strengthen the financial sector in client countries.