Financial Services Volunteer Corps

Financing for Development Initiative

Financial Governance & Capacity Building: Can a Global Corps of Financial Experts Help??

Elizabeth M. Wood

New York Meeting

June 22-23, 2005

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FSVC’s Mission

To help build the sound financial infrastructure required by countries seeking to develop transparent, market-oriented economies.

• A functioning banking system is a prerequisite for a successful market economy

• Strong and healthy banking systems are essential to fostering sustained economic growth and creating jobs

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Our Approach

• Private-public sector partnership

• US registered Not-for-profit (501 (c) 3) organization

• Our model uses active, senior level financial, legal and regulatory professionals serving as volunteers

• Both Public and private sector counterparts are served in the emerging markets: regulators and market practitioners

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Our Track Record • Founded 15 years ago at U.S. presidential

initiative

• Initially focused on US volunteers, now global

• Private sector voluntary expert advice Over 5,500 experts from the financial, legal and regulatory communities have gone on over 1,500 programs since inception

• Leveraging the development dollars by using pro-bono professional service hours Value of assistance provided is more than double the amount of government and private grants awarded to FSVC

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Current FSVC Operations• During 2004, FSVC delivered 149

programs in 20 countries

• Current offices in 12 countries: -Afghanistan

-Albania-Bosnia and Herzegovina-Croatia-Egypt-India-Indonesia-Jordan-Macedonia

-Morocco-Russia-United States

• Full-time staff of 55: -32 in New York & Washington

-23 Overseas

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What can a private Global Corps ofFinancial Experts Help with?

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Benefits of Independent Short Term or Voluntary Experts

• Bring current market practitioner perspectives on governance and specialized financial issues

• Very fast response times

• Unbiased expert advice

• Bring broader information and global benchmarking to help alleviate roadblocks or political tensions arising out of one institution’s specific policy advice

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Enhancing Country Capabilities in Financial Governance

• Goal #1 : Institutional creation and development

– Specialist training for bank and non-bank regulators in international best practices

• CBR examiners to certify bank compliance with new depository insurance (Russia)

• Special assessments of counterpart as prelude to designing effective technical assistance (Egypt)

– Creating specialist units inside existing government organizations• New Internal Audit group at MOF (Afghanistan)

– Creating Banking & capital market associations • Private Bankers Association of Iraq (Iraq) • Croatia Stock Exchange governance code (Croatia)

– Specialty education in partnership with private sector associations• Risk management and compliance education on Basel II (Indonesia)

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Enhancing Country Capabilities in Financial Governance

• Goal #2: Design and Evaluate Frameworks for Business Promotion and Risk Mitigation

– Legislation and regulatory framework reviews

– Compliance with international documentary, statistical and reporting frameworks

– Critiques of incentives offered from market practitioner vantagepoint

– Broad financial governance training, at both public sector and private sector counterparts

– Cost effective public education on best practices in securities markets, housing finance and other structured or securitized projects

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Issues Today for Country Counterparts

• Accounting and Legal Standards organizations are an after-thought in much of the emerging markets, usually only driven by crisis

• Half- finished financial sector architecture reforms (see Asia)

• Under or Unfunded Local Counterparts for critical training or governance reforms

• Most training from Multilaterals is still aimed at the small pool of government counterparts, not broader financial market participants.

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Roadblocks Today for Private NGOs

Speed to Market

• Competitive Bid process requirements are onerous if using volunteers or short term consultants

• Panels have tended to qualify either very big organizations or individuals only, not smaller or specialized NGO’s (MCC)

Sustainable Funding

• Internationally oriented funding largely geographically constrained from major donors

• Short term funding (1-2 years)

• No core funding support; all program specific

• Very costly to bid for multi-laterals (preparation and evaluation times often exceed a year)

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Potential Solutions

• Set clear country benchmarks for financial sector governance issues in pre-agreed fashion with governments, focused on implementation plans and timeframes for new domestic watchdogs or institutions

• Design jointly funded programs for governance reforms to include elements of both residential advisors and short term private sector market practitioners

• Consider longer periods of core funding to allow private NGOs to become specialist intermediaries for supervising the implementation of key reform areas

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Potential Solutions

• Alliances with established reputable training centers in emerging markets • Bahrain Institute of Banking and Finance (for Afghanistan)

• Set up Pre-qualified panels of private and governmental experts in key areas:• Risk Certification and training design• Public audit bodies and financial transparency agencies • Internal & Forensic Audit • Public market corporate governance standards (Securities and Ombudsman roles)

• Agree transparent, easy methods for selecting consultants with more emphasis on pre-qualified contractor postings & final selection by counterparty users