IEG conducted evaluations on three major components of Bank assistance to the financial sectors of client countries during 1993–2005. This report synthesizes the reviews on lines of credit, financial sector reforms, and the Financial Sector Assessment Program. Among the many findings and lessons highlighted is the determination that there is scope to improve the overall coherence of Bank work within a country as well as across countries.

• Findings and Lessons
• Selected Figures
• Download the Synthesis Report

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Executive Summary Chapter 1: Introduction  Chapter 2: Trends in Lending and Nonlending Assistance to the Financial Sector  Chapter 3: Quality of Bank Assistance to the Financial Sector  Chapter 4: Outcome Ratings of Bank Lending in Finance  Chapter 5: Outcomes and Impact at the Country Level  Chapter 6: Bank Assistance to Countries Experiencing Crisis  Chapter 7: Findings and Lessons

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Trends
Between fiscal years 1993 and 2003, Bank assistance for financial sector reforms was supported by some $56 billion, or 24 percent of total Bank commitments. Most of this lending was embedded in multisector loans. The trend during this period has been downward, owing mainly to the sharp drop in lines of credit (LOC). Apart from LOC, support for financial sector reforms has declined only slightly. Lending for all LOC, including those outside the financial sector, accounted for another $13.4 billion. Following the financial crises of the late 1990s, however, the Bank and the International Monetary Fund (IMF) initiated the Financial Sector Assessment Program (FSAP) to carry out in-depth diagnoses of the vulnerabilities and development challenges of financial sectors in client countries. As of late 2005, some 109 country assessments and 18 updates had been completed or were ongoing, and had involved substantial Bank resources.

• Bank assistance to the financial sector, both in its lending and nonlending, has contributed to the development of the financial sectors in client countries.
  
  
• The Bank was ill-prepared to respond quickly in the earlier crises in Mexico (1994); and in Thailand, Korea, and Indonesia (1997); but was better prepared in Argentina, Russia, and Turkey.
  
  
• The FSAP advanced dialogue with client governments and provided useful advice and recommendations.
  
  
• Lending has helped to bring about positive changes in governance, regulatory framework, market structure, and efficiency.
  
  
• Financial sector outcomes in countries that borrowed from the Bank for financial sector reforms are generally significantly better than in countries that did not.
  
  
• Financial sectors remain shallow, with narrow access to credit in many, if not most, Bank client countries, and there is room for improvement in the quality and impact of Bank assistance.
  
  
• The Bank has focused its lending and diagnostic work more on banking issues than on other financial sector issues (capital markets, insurance, nonbank financial intermediaries, access to credit of nontraditional customers).
  
  
• While retaining its core business of institutional reforms in banking, the Bank needs to increase its expertise to focus more on the nonbanking sector, and on identifying constraints to credit access through a range of activities, including lending and diagnostic work such as investment climate surveys, poverty assessments, and other economic work, which could include assessments of access to various types of financial services.
  
  
• The Financial Sector Network should play a stronger role in preparing and managing financial sector assistance, and should provide more guidance to Bank staff working in the financial sector.
  
  
• Implementation of the Bank's guidelines for LOC has been very poor, with many LOC approved under conditions and with characteristics that are contrary to the letter and spirit of the Bank's guidelines.
  
  
• The Bank should capitalize on its tremendous repository of experience in a range of topics to help Bank staff to develop consistent approaches to analytic work as well as to supporting reforms. Best practices should also include development of sequencing and implementation plans.
  
  
• There is scope to improve the overall coherence of Bank work in the financial sector within a country as well as across countries 

Bank Loans with Financial Sector Reforms, by Number of Loans, FY93-FY03

Disbursements as a Percentage of Commitments, by Region

International Rescue Efforts and Bank Response to Crisis

IEG Review of World Bank Assistance for Financial Sector Reform

World Bank Lending for Lines of Credit             

Financial Sector Assessment Program: IEG Review of the Joint World Bank and IMF Initiative