Financial Sector Paper Series

The Financial Sector Paper Series is designed as a vehicle for disseminating the World Bank's  extensive policy and research work as well as its operational experience in the financial sector. 

Finance in China: Removing Ambiguity over Government's Role, by Patrick Honohan, August 2004.
This note points out how three major emerging development problems of the Chinese financial system – regional misallocations, the equity overhang and the funding of infrastructure – each have their roots in an uncertain and increasingly dysfunctional ambiguity in the dividing lines between State and market-driven control. Drawing on both international experience and recent research findings specific to China, the paper illustrates the damaging effects showing how hitherto apparently unrelated problems may reflect an aspect of the same ambiguity. A reorientation and clarification of the dividing line between State and private thus offers wide-ranging benefits.

From Risk Assessment to Financial Instruments, Size and Pricing Considerations in Deposit Insurance, by Velimir Šonje, July 2006.
Discussions about the role of deposit insurance within financial stability architecture neglected an impact that the choice of deposit insurance fund's (DIF's) financial instruments may have on banks' incentives to take risks. This paper argues that DIF should borrow against a portion of its exposure which can be expected to recover in distress under reasonable assumptions.

Remittance Service Providers in the United States: How remittance firms operate and how they perceive their business environment, by Ole E. Andreassen, June 2006.
This paper presents the findings of a survey of 73 remittance firms in 6 U.S. states, where company executives were interviewed in person. The paper finds that the largest obstacles to doing business that remittance firms face are related to obtaining bank accounts, licensing and bond requirements, and competition from the informal sector.

Margin Purchases and Short Sales in Emerging Markets: Their Rationales and Design Variables, Tadashi Endo and S. Ghon Rhee, May 2006.
Emerging equity markets generally need an exogenous liquidity supply in order to accelerate their development.  Adequately regulated margin trading can induce relatively powerful and fast liquidity recoveries after market corrections or crashes.

Promoting Access to Primary Equity Market: A Legal and Regulary Approach, Felice B. Friedman and Claire Grose, May 2006.
This paper examines legal and regulatory measures that can be taken to promote access to the
primary market in emerging market economies. The authors propose some recommendations for a simple legal and regulatory framework that will help promote access to primary equity markets, via both the traditional exchange as well as other alternatives.

Government Cash Management: Good Practice and Capacity Building Framework, Yibin Mu, May 2006.
Results of the Debt TA assessment indicate that weak government cash management is a major impediment to public debt management and debt market development. In addition, the uncertainty and volatility in government’s cash position translates into uncertain and volatile reserve positions of the banking system. Poor government cash management also causes major difficulties in the implementation of monetary policy by the central bank.

Chile - An Empirical Analysis of the Annuity Rate, Roberto Rocha, Marco Morales, and Craig Thorburn, May 2006.
Empirical analyses of annuities markets have been limited to a few developed countries and restricted by data limitations. Chile provides excellent conditions for research on annuities due to the depth of its market and the availability of data.  The paper utilizes a panel of life insurance company data to examine econometrically the main determinants of the annuity rate, defined as the internal rate of return on annuities.

The Macro Financing of Natural Hazards in Developing Countries, by Olivier Mahul and Eugene Gurenko, January 2006.
Authors propose a financial model to address the design of efficient risk financing strategies against natural disasters at the country level. The proposed model captures and explains the main impacts of financial parameters (e.g., insurance premium, cost of capital) on efficient risk financing structures.

Czech Republic - Pilot Assessment of Governance of the Insurance Sector, Private and Financial Sector Development Department, January 2006.
In essence corporate governance of insurers concerns the management of risk. Risk management requires that: (1) sufficient capital be retained by the business given the insurer's risks and (2) the governance structure take into account the rights and interests of all stakeholders within the context of the way a particular country’s institutions and financial infrastructure are organized.

Government Securities, Money Market and Cash Management in Serbia, Yibin Mu and Michael Horgan, January 2006.
This paper presents the main issues and key recommendations relevant to the government securities market, money market and government cash management in Serbia.