Financial Systems

The Financial Systems Unit reflects the World Bank Group's strategic emphasis on identifying and addressing financial systems' inefficiencies while promoting their developmental impact across the developing world. The Unit focuses on 3 key areas:

Diagnostic programs that help authorities determine key vulnerabilities in their financial systems; Implementation facilities that help countries find the resources and technical advice to prioritize and address development challenges; Policy development programs that aim to expand the frontier on policy thinking about critical issues faced by financial policymakers across the world.

Diagnostic programs

• Financial Sector Assessment Program (FSAP) - This system of international benchmarks developed jointly with the International Monetary Fund helps countries recognize vulnerabilities in their financial systems and determine appropriate reforms and benchmark their systems against international practices.
• Reports on the Observance of Standards and Codes (ROSCs) - These provide an opportunity for countries to evaluate the strength of their insolvency and creditor rights systems in the context of their legal and institutional frameworks, the relative rights, and the opportunities for alternatives to liquidation.
• Supervisory Frameworks and Practices - The World Bank conducts assessments of various aspects of risk-based supervisory frameworks and supervisory practices over the financial sector in developing countries and in countries which decided to implement Basel II.
• Bank Assessment Model (BAM) - This tool advocates the use of financial simulation as part of systemic surveillance and post-examination follow up activities. The World Bank assists countries in adopting BAM in order to address the challenges of building sound and efficient banking systems.

Implementation facilities

• Financial Sector Reform and Strengthening Initiative (FIRST) - This program supports activities and interventions mainly in the public sector by providing technical assistance grants to policymakers and regulatory bodies. It also supports private sector activities, when organized through institutions, such as stock exchanges, self-regulatory organizations and industry associations. Key objectives are facilitating preparation for and systematic follow-up of recommendations from the FSAPs and ROSCs.
• Supervision of Financial Institutions - The World Bank provides technical advisory services that support country authorities in improving the regulatory and supervisory frameworks under which they conduct supervision, including supervision of financial and industrial conglomerates, supervision of problem banks, as well as supervision of financial institutions involved in small and medium enterprise (SME) lending.
• Bank Resolution and Insolvency - The World Bank helps country authorities adopt a holistic approach towards bank resolution and insolvency by providing advice on design and implementation of an appropriately legal framework.
• Financial Infrastructure - The World Bank works with country clients on building strong financial sector infrastructure, i.e. payment systems, credit information, supervisory development plans, credit bureaus, collateral registries, and corporate governance.