The Financial and Private Sector Development Vice Presidency of the World Bank Group is actively engaged in assisting developing countries that are coping with the consequences of the global financial crisis. Our work on the crisis focuses on assistance to the financial sector in the following areas: - Crisis preparedness workshops and simulation exercises for client countries (PDF);
- Technical assistance to financial sectors under stress in crisis-affected countries; and,
- Policy leadership on financial sector development in the crisis through an ongoing series of policy notes.
| Crisis Response Policy Briefs and Reports | | » | Financial Stability Issues in Emerging Market and Developing Economies (EMDEs)
The FSB, IMF and the World Bank report was prepared in response to a request by G20 Leaders at the November 2010 Seoul Summit. It focuses on five key financial stability issues in EMDEs. 1. Application of international financial standards. 2. Promoting cross-border supervisory cooperation. 3. Expanding the regulatory and supervisory perimeter. 4. Managing foreign exchange risks. 5. Developing domestic capital markets. The report makes a number of recommendations on policy measures by national authorities in EMDEs to address these issues and on ways that the international community can support them in their efforts. | | | | | » | Countercyclical Financial Regulation (PDF, 3 MB)
The global financial crisis has focused much attention on procyclicality, particularly in the context of a macroprudential framework. This paper reviews a set of prudential measures that can be adopted by national authorities to deal with procyclicality and discusses issues in designing and implementing such measures. These include the balance between financial stability and financial development objectives, selection and calibration of policy instruments according to national circumstances and taking into account data limitations and capacity constraints as well as other practical challenges, and continued efforts to improve supervisory independence, supervisory powers and analytical capacity and to ensure adequate resources in order to perform the required tasks. | | | | | » | Simple Tools to Assist in the Resolution of Troubled Banks
This Toolkit is designed to assist authorities in resolving troubled banks. It provides generic forms that can be adapted for use in planning supervisory actions or implementing resolution processes. | | | | | » | Jobs and the Crisis (PDF, 300 KB)
In response to the financial and economic crisis, many countries sought to stimulate labor demand, facilitate job search and preserve skills, and protect income. While little information is available about the impact of these interventions, there is some evidence that they involved a substantial number of people despite limited budgets. At the same time, there are concerns about the effectiveness of programs, particularly in low- and middle- income countries. The challenge now is to revise the policy mix to maximize the impact of the recovery on employment creation. | | | | | » | Mortgage Lending in Korea : An Example of a Countercyclical Macroprudential Approach.(PDF, 2 MB)
The paper discuses the Korean countercyclical macroprudential approach to prevent the overheating of mortgage lending and to minimize the risk of loan default. The Korean financial supervisory authority made adjustments in response to both the condition of the housing market and trends in mortgage loans. | | | | | » | A Framework for Assessing Systemic Risk (PDF, 474 KB)
This note sets out the main characteristics of a systemic risk assessment framework: a simple analytical framework that can be used by authorities with financial crisis management responsibilities in times of financial crisis to assess the extent to which that particular crisis situation poses systemic risk. | | | | | » | Bank Governance -- Lessons from the Financial Crisis (PDF, 412KB)
Principles of good governance have been a major component of international financial standards and are seen as es sential to the stability and integrity of financial systems. Over the past 10 years much energy and attention have gone to improving the ability of company boards, managers, and owners to prudently navigate rapidly changing and volatile market conditions. | | | | | » | State Financial Institutions: Can They Be Relied on to Kick-Start Lending? (PDF, 405KB)
The need to kick-start lending to the real sector in response to the global financial crisis is leading many countries to expand the role of state-owned financial institutions. The effectiveness of the support by these institutions depends in large part on the nature of the shock, on their ability to leverage private commercial banks to scale up their impact, and on the existence of a sound institutional framework. | | | | | » | The Leverage Ratio -- A New Binding Limit on Banks (PDF, 107KB)
Excessive leverage by banks is widely believed to have contributed to the financial crisis. To address this, the international community has proposed the adoption of a non-risk-based capital measure, the leverage ratio, as an additional prudential tool. | | | | | | |
| » | Financial Paradigms -- What Do They Suggest about Regulatory Reform? (PDF)
What market and regulatory issues led to the subprime crisis? How should prudential regulation be fixed? The answers depend on the interpretative lenses - or “paradigms” - through which one sees finance. | | | | | » | Banks in Crisis -- When Governments Take Temporary Ownership (PDF)
In most of the developed countries affected by the financial crisis, governments initially improvised solutions that eventually led to substantial investments in systemically important banks. Lessons from earlier crises show that governments acting as temporary owners can minimize costs to taxpayers. Quickly developing the exit strategy is also important. | | | | | » | Credit Rating Agencies -- No Easy Regulatory Solutions (PDF)
In the U.S. and Europe faulty credit ratings and flawed rating processes are widely perceived as being among the key contributors to the financial crisis. That has brought them under intense scrutiny and ongoing debate on reforms will influence policy choices in emerging economies. | | | | | » | Dynamic Provisioning -- The Experience of Spain (PDF)
Dynamic loan loss provisions can help deal with procyclicality in banking. By allowing earlier detection and coverage of credit losses in loan portfolios, they enable banks to build up a buffer in good times that can be used in bad times. | | | | | » | Macro-Prudential Regulation: Fixing Fundamental Market (and Regulatory) Failures (PDF)
This policy brief discusses why having more macro-prudential regulation that catches the systemic consequences of all institutions acting in a similar manner can make crises fewer and milder. | | | | | » | Trust Less, Verify More: Financial Supervision in the Wake of the Crisis (PDF)
This policy brief reviews how financial supervision will need to change in response to the causes of the financial crisis and the regulatory proposals arising from it. | | | | | » | Blanket Guarantees: Necessary during the Crisis, but What Next? (PDF)
This policy brief describes how the expansion of deposit insurance and introduction of debt guarantees and have played a crucial role in containing the crisis while giving governments time to develop suitable policy responses. | | | | | » | Smaller but Safer? The Shape of Financial Systems to Come (PDF)
This policy brief describes how global trends taken for granted in recent decades may reverse over the foreseeable future. In addition, the structure of financial systems, particularly in developed countries, will likely become oriented less toward capital markets and more toward traditional (and simpler) banking activities. The impact on economic growth and overall welfare is likely to be negative -- perhaps the price we have to pay for living in a brave new (and presumably safer) financial world. | | | | | » | The Reform Agenda: Charting the Future of Financial Regulation (PDF)
This policy brief reviews the crisis-induced shift toward a tighter and more macro-prudential approach to financial regulation. But the reform agenda still needs to address the role of supervisory (rather than regulatory) failures, while the institutional arrangements needed to implement the new framework remain to be worked out. For most emerging economies, the existing reform agenda -- developing institutional and legal underpinnings for the financial system and promoting financial access -- remains valid. | | | | | » | Dealing with the Crisis: Taking Stock of the Global Policy Response (PDF)
The first in a new series of Crisis Response Policy Briefs, this paper provides an overview of the immediate financial sector policy responses to the financial crisis. While these immediate responses have succeeded in stemming widespread panic, the effort has generally been ad hoc and insufficient. Issues that remain include the resolution of problem assets, the restructuring of troubled, systemically important financial institutions, and the development of credible exit strategies. | | | | | » | Bankruptcy Regimes During Financial Distress
This paper describes what bankruptcy regimes aim to achieve (section 2), how they achieve their goals in normal times (section 3), and what options policy makers have resorted to in previous systemic crises (section 4). | | | |
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