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Eurasia Regional
>> Regional Overview >> Eurasia Regional Overview Activity Data Sheet
PROGRAM: Eurasia Regional
TITLE AND NUMBER: A More Competitive and Market-Responsive Private Financial Sector, 110-014
STATUS: Continuing
PROPOSED FY 2001 OBLIGATION AND FUNDING SOURCE: $1,392,065 FSA
PROPOSED FY 2002 OBLIGATION AND FUNDING SOURCE: $1,253,000 FSA
INITIAL OBLIGATION: FY 1997 ESTIMATED COMPLETION DATE: FY 2005Summary: The Regional Financial Markets Program provides intellectual and technical leadership for USAID's work across the transition countries of Eurasia. Only a limited amount of regional funds are utilized for this purpose. The bulk of USAID funding for financial market development is used for bilateral programs. Cumulative financial markets activities (both banking and capital markets) in the region exceeded $200 million over the past decade. The technical leadership provided under the regional program consists of U.S.-based experts who are responsible for designing, supporting and measuring the success of these programs.
Program Categories include Banking Reform, Non-Bank Financial Institutions Development and Program Development Support.
Key Results: The results of the Regional Financial Markets Program are centered on promoting financial intermediation - the flow of capital between institutions and individuals. Results include the financial architecture that facilitates the transfer of assets from the public to the private sector as well as all non-deposit taking financial institutions such as insurance, mutual funds, mortgages, leasing and other non-bank activities including stock exchanges. In the banking sector, results are focused on developing the infrastructure for a market-based banking system, including bank supervision, the legal and regulatory structure, training, and the generation of financial information at international standards.
Performance and Prospects: The FY 2001 regional financial markets program is a continuation of intensive efforts over the last decade, with planned obligations as follows: $150,000 for banking reform, $50,000 for non-bank financial institutions, and $1,192,065 for technical and administrative support for all program categories across the region.
Program accomplishments to date include: bringing (in coordination with USAID missions, other donors and host countries) the bank supervisory capacity of central banks in Eurasia, more in line with international standards; introducing a diagnostic financial and regulatory audit methodology for determining the stability of individual banks and the collective banking system in transitional countries; developing a regional graduation threshold report (2000) and stocktaking report (1999) which analyze and compare relative financial markets development by country and sub-regionally, and assess their performance against international standards; conducting ten diagnostics of banking systems in the Europe and Eurasia (E&E) region; supporting five annual regional Bank Supervision Conferences on technical issues impacting the financial sector, including high-level counterparts from participating countries; releasing a public domain computer-based software package containing all the systems necessary to start an exchange (e.g., trading, registrar, depository, clearance and settlement), thereby promoting regional harmonization of capital markets; and establishing automated stock exchange systems in seven countries to facilitate their privatization programs.
Regional experts and partners provide highly specialized technical assistance to individual client missions to design and implement bilateral activities. These activities include rapid banking advisory service at times of crisis, long and short-term banking supervision assignments with central banks in the region, and advisory programs to national stock exchanges and their regulatory authorities. Additional assistance includes establishing problem loan/bank units and developing liquidation manuals, communications policy and licensing procedures. Assistance on financial intermediation outside the banking system centers on licensing, disclosure rules and related regulations. The program also assesses the financial sector's impact on the overall international competitiveness of these economies.
Intermittent technical assistance to client missions and in non-presence (graduated) countries for strengthening of the financial sector will continue in FY 2001. A principal focus of the regional program will be the promotion of financial intermediation outside the banking sector. The regional program also includes continued support to financial markets, including cost-sharing arrangements under a cooperative agreement with the Financial Services Volunteer Corps. It also includes inter-agency agreements with the Federal Deposit Insurance Corporation and the U.S. Securities and Exchange Commission.
In FY 2002, additional funding is required to assist the second stage of financial markets development (institution building) in the NIS region. The role of non-bank financial institutions (NBFIs) will be explored and expanded in promoting financial intermediation outside the banking sector. This includes an additional funding for a partnership with the World Bank Institute to stimulate regional decision makers to facilitate the growth and efficiency of NBFIs in such areas as insurance, leasing, mortgage lending, pension and mutual funds, credit unions, and other non-bank intermediaries. A single financial sector workshop for the entire region will be funded merging individual banking and capital markets conferences. The funding of strategic allegiances with other U.S. Government Agencies, through interagency agreements (IAA), will continue. Sharing lessons learned regionally will be accomplished by assessments and evaluations of our past and current activities. Additional funding to standardize USAID financed capital markets software is programmed, thereby enabling substantial bilateral savings as client missions and counterparts will benefit from the use of this public domain software.
Beneficiaries: Individuals and enterprises in assisted transition countries will benefit from a functioning private financial sector. Increased confidence in banks and non-bank financial institutions will stabilize deposits, increase access to credit and strengthen small and medium enterprises. The immediate beneficiaries are the Central Banks, Securities and Exchange Commissions, and other government entities charged with regulating the financial markets.
Possible Adjustments to Plans: There has been some early consideration of an activity designed to support resolution of problem banks in the region, preparatory to privatization, consolidation or liquidation. This is increasingly understood as a necessary step to the restructuring of the financial sector in most countries in the region. Such an activity would be undertaken in conjunction with other development partners, including the international financial institutions.
Other Donor Programs: The USAID financial markets program is carried out in coordination with the International Monetary Fund, the World Bank, and the Federal Deposit Insurance Corporation in the banking sector. USAID assistance in the non-bank sector is coordinated with private sector partners, the U.S. Securities and Exchange Commission, and the World Bank.
Principal Contractors, Grantees, Agencies: This regional program employs up to nine full-time personal services contractors. These contractors are hired as bank and/or non-bank specialists using competitive procurement procedures. There is also a regional cooperative agreement, on a cost-sharing basis, with the World Bank Institute.
Selected Performance Measures: Common indicators and annual performance measures, using international standards for financial markets development in each transition country, are utilized. Individual country performance measures include private bank capital as a percentage of total bank capital, credit to the non-financial private sector, and non-performing loans, among others. For each category of financial sector work, a mix of qualitative and quantitative indicators are used to measure the progress of the central banks, securities and exchange commissions, self-regulatory organizations and other entities in building sustainable partnerships and institutions. These indicators are used to help identify areas requiring special attention and continued support, and to determine when USAID assistance is no longer required. While trends are improving for the majority of the 12 countries in the region, no country is expected to graduate from USAID financial markets assistance in the near term.
U.S. Financing
(In thousands of dollars)
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Last Updated on: May 29, 2002 |
