Banking presentation (1)
- 1. BANKING IN EMERGING AND TRANSITION ECONOMIES
- 2. Emerging and transition countries Central and Eastern Europe Southern Europe and Central Asia South Asia East Asia and Pacific Latin America and the Caribbean Middle East and North Africa Sub-Saharan Africa
- 4. Table 17.2 Output growth and inflation Real GDP Inflation 95-2003 2004 2010 2011 95-2003 2004 2010 2011 Asia 6.6 7.8 9.7 7.8 4.2 4.4 5.7 6.5 China 8.5 9.5 10.4 9.2 3.0 3.9 3.3 6.5 India 5.9 7.1 10.6 7.2 5.2 6.7 3.3 5.4 Latin America 2.0 5.9 6.2 4.5 11.2 6.6 6.0 6.6 Brazil 2.1 5.2 7.5 2.7 9.3 7.5 5.0 6.6 Mexico 2.5 4.4 5.5 4.0 16.6 5.2 4.2 3.4 Central Europe 3.7 4.8 4.5 5.3 10.2 3.9 5.3 5.3 Russia 2.4 7.1 4.3 4.3 49.5 10.2 6.9 8.5 Turkey 3.7 8.9 9.2 8.5 64.9 10.6 8.6 6.5 Middle East 4.1 5.5 4.9 3.5 9.2 8.3 6.9 9.6 Africa 3.7 5.1 5.3 5.1 15.6 7.7 7.4 8.2
- 5. Banking in emerging markets ; --Government control --Restrictions on borrowing and lending rates
- 6. Financial repression Strong intervention of government in financial markets - Maintaining the monopoly - Restricting entry - Strictly controlling
- 7. FINANCIAL REPRESSION INCLUDES; Control over interest rate Controls over lending Directed landing High reserve requirements Restrictions on entry of banks and other financial intermediaries Restrictions on entry of foreign financial intermediaries Nationalisation of financial institutions
- 8. In 1990’s regulators forced by ; - Macroeceonomic pressures - Fast technological developments -Changes in global markets Several changes have forced structural changes, - Removal of ceilings on deposit rates - Removal of the prohibition on interest payments
- 9. Deregulation and financial liberalisation’ve long been considered a positive force ; -increasing efficiency by imposing competition -removing regulations that distort economic activity
- 10. Financial deregulation has certainly made it easier for intermediaries to cross industry and national boundaires. It has also fostered technological progress. Financial innovation includes the development of new instruments.
- 11. Owing to the recent technological changes,emerging economies’ banking markets are in a position to skip a stage of financial development.
- 12. Emerging markets see the development of new delivery channels as an important part of the development of their retail and commercial banking activities , both because of the growing avaibility of IT and telecommunication technologies and the relatively lower cost of delivery compared to bank branches.
- 13. PRIVATISATIONS Transfer of government services or assets to the private sector. State-owned assets may be sold to private owners, or statutory restrictions on competition between privately and publicly owned enterprises may be lifted.
- 14. ADVANTAGES OF PRIVATISATION -Private enterprise is more responsive to customer complaints and innovation. -Privatisation leads to lower prices and greater supply. -Competition in privatisation increases differentiation. DISADVANTAGES OF PRIVATISATION -Privatisation is expensive and genarates a lot of income in fees for specialist advisers such as banks -The privatised businesses have sold of or closed down unprofitable parts of business and so services eg transport in rural areas have got worse -Wider share ownership did not really happen as many small investors took their profits and didn’t buy anything else.
- 15. MERGERS AND ACQUİSİTİONS Merger is a financial tool that is used for enhancing long-term profitability by expanding their operations. Mergers occur when the merging companies have their mutual consent as different from acquisitions, which can take the form of a hostile takeover. Acquisitions or takeovers occur between the bidding and the target company. There may be either hostile or friendly takeovers. Reverse takeover occurs when the target firm is larger than the bidding firm.
- 16. FOREIGN BANKS
- 17. Foreign ownership of banks in selected emerging economies - BIS ( 2005 ) Assets owned by banks with 50 % or Assets owned by banks with more than Country more foreign ownership ( as ½ of total 10% but less than 50% foreign banking sector assets ) ownership ( as % of total banking sector assets ) 1990 2000 2002 1900 2000 2002 Hong Kong 45.7 87.2 88.6 3.7 7.2 6.2 India 21.0 42.7 40.0 - 4.0 5.0 Korea n.a 32.7 32.3 n.a. 7.5 14.4 Malaysia 22.3 24.9 25.2 34.1 30.5 38.7 Singapore 89.4 75.5 76.0 n.a. n.a. n.a. Thailand - 5.9 5.8 n.a 45.8 48.6 Argentina 17.0 48.1 41.6 n.a 13.4 12.7 Brazil n.a. 25.2 21.5 n.a 7.0 6.2 Chile 18.6 33.1 44.8 5.5 16.5 3.0 Colombia 3.7 18.0 16.4 6.6 13.7 13.6 Mexico 0.3 54.6 81.9 n.a. 0.3 0.6 Peru - 32.6 30.6 10.5 9.2 14.4 Venezuela n.a. 49.7 37.4 n.a. 7.7 0.8 Russia 7.2 9.5 8.1 5.5 3.1 2.3 2.9 3.6 3.3 0.8 - -
- 18. Participation of state , private and foreign banks in selected Latin American banking systems Country State Private Single largest banks Total EU USA Other foreign banks country Argentin 32.5 19.1 48.4 33.6 12.1 2.7 a Spain ( 17.9 %) Brazil 46.0 27.0 27.0 15.7 5.3 6.1 Spain ( 5.3 % ) Bolivia 18.2 56.5 25.3 10.4 4.5 10.4 Spain ( 10.4 % ) Chile 12.9 45.5 41.6 32.4 5.5 3.8 Spain ( 30.6 % ) Peru 10.8 43.2 46.0 34.8 5.6 5.6 Spain ( 17.1 % ) Mexico - 17.7 82.3 53.7 23.7 4.8 Spain ( 41.5 %
- 19. A NUMBER OF CONCERNS A large foreign banking presence can reduce the information available to host country supervisors A large foreign bank’s presence casn expose a country to shocks due purely to external events affecting the parent bank The issue of foreign currency-denominated lending Foreign banks ‘cherry pick’ the best firms, leaving the domestic banking sector with a weakened lending purtfolio Foreign banks concentrate on large and more profitable firms , leaving small and meduim-sized enterprises for domestic banks
- 20. FOREİGN OWNERSHİP AND REGULATORY REFORM
- 22. FOREİGN İNVESTMENT İN CHİNESE BANKS
- 23. DİTRİBUTİON
- 24. BANKİNG CRİSES NPLs was at least 10 percent of total assets • Cost of rescue operations was > 2 percent of GDP • Banking problems resulted in a large scale nationalization of banks • Emergency measures, such as deposit freeze, prolonged bank holidays, generalized deposit guarantees were introduced
- 25. Some Stylized Facts on Banking Crisis • Banking crises have become more frequent and severe - Three fourths of the IMF’s member countries, have experienced significant banking sector problems since the 1980s . • Most of the recent financial crises had banking sector weaknesses at the core: Mexico (1994), Turkey (2000), Korea (1997) etc.
- 26. • Banking crises often preceded by financial liberalization. • Banking crises are more severe in developing countries • Severity depends on reversal of capital flows • More of banking crises are Twin Crises
- 27. IDENTFIYING THE CAUSES OF BANKING CRISES Several bank specific factors and macro- economic shocks micro-economic may cause a banking crisis: – Bank specific characteristics • Inefficient management • Imprudent lending decisions
- 28. – Macroeconomic factors • Growth slowdown • Terms of trade • Currency Crises • Appreciation of the real exchange rate • Stock market and property prices crash • Capital outflows
- 29. -Microeconomic factors -poor banking practise -principal-agent incentive problems -overstaffing -restrictive labour practices
- 31. Five types of loan performance categories are recommended by the IMF for external reporting purposes and these include: 1) Standard.Credit is sound and payments current. 2) Watch.Subject to conditions that if uncorrected,could raise corcerns about full repayment. 3) Substandard.Full repayment is in doubt due to inadequate protection.Interest or principal overdue (90 days +). 4) Doubtful.Assets for which collection is considered improbable.Interest cipal overdue(180 days +). 5) Loss.Virtually uncollectible.Interest or principal overdue (1 year +).