Financial and Banking Sector

With the rapidly increasing globalization of the financial and banking systems and massive capital flows across countries, financial and banking sectors are receiving much more attention in almost all emerging markets economies (EMCs). Financial sector and banking reforms and restructuring have become a central focus of the policy making and economic reforms in the EMCs. Our practice in these related areas helps governments, multilateral institutions and private financial houses respond to the opportunities, challenges and risks posed by these developments.

Economic policy makers and experts, both private and public, increasingly recognize that an understanding of financial system vulnerabilities and financial policy developments is the key to assessing economic prospects, both overall and sectoral. This calls for a systematic approach to assessments of current financial sector practices and policies, as well as a well sequenced strategy for the effective implementation of financial sector reforms in a safe and sound manner. They also call for a systematic integration of financial stability considerations in macroeconomic analysis and forecasting.

The worldwide focus on financial sector stability, and development issues is reflected in a range of recent developments: the wide acceptance of World Bank –International Monetary Fund Financial Sector Assessment Program (FSAP), and the related Reports on Observance of Standards and Codes (ROSC), as tools to prevent crisis and promote development in the context of increasing globalization of financial flows; the intensified attention to financial sector governance issues in the aftermath of recent financial and corporate crises; and the spate of various official sector initiatives to expand access to foreign capital in Africa, ASEAN, and elsewhere and promote regional financial integration and trade in financial services.

The Centennial Group is well positioned to support these efforts. It offers world class expertise to public sector policy makers in the analysis, assessments and technical assistance in promoting institutional and policy development in the financial sector. It provides expert analysis to private sector decision makers on implications of key regulatory and institutional developments in the financial sector, and on financial policy environment, and financial sector risks and vulnerabilities in key countries. The Group practice emphasizes that the development of financial systems and markets, requires an orderly, well sequenced and well coordinated implementation strategy that would ensure financial stability, and that financial stability is key to supporting sustained economic growth.

The Group principals and associates provide unparalleled and top-level expertise in assisting central banks, supervisory agencies, governments, and the private sector, in:

• Identification and analysis of financial sector risks, vulnerabilities, the sector's overall stability, and development needs;
• Authoritative analysis of the regulatory and institutional environment through the assessments of observance of International Standards, Codes and Guidelines, on financial system supervision, market practices, and infrastructure;
• Design and implementation of well sequenced strategies for domestic financial system development and its integration with global financial markets.

In order to deliver on these tasks, the Group provides specialized expertise, advisory support, and technical assistance to central banks and other governmental bodies as well as expert analysis of financial policy environment and risks to the private sector decision makers in a range of monetary and financial system stability and development topics. These include:

• Independent and authoritative assessments including assisted self assessments, and pre-assessments of the observance of international standards, codes, guidelines and best practices in financial sector supervision (banking, insurance, and securities markets); financial market infrastructure (legal and institutional framework, anti-money laundering and countering, terrorism finance, payment systems, insolvency regimes, safety nets, and systemic liquidity arrangements); and financial sector governance (Transparency, and accounting and auditing regimes); and developing action plans to meet international standards and best practices.
• Central Banking policies, including monetary and exchange policy and operations (e.g. Inflation Targeting, monetary union issues, development of market based instruments, etc.), payment settlement systems, central bank accounting and auditing.
• Development of Financial Stability Analysis capabilities of central banks and supervisory agencies.
• Islamic Banking and finance-Risk Management, Supervision, and Product Design.
• Micro-finance and access to financial services by Small and Medium industries.
• Advice and technical assistance in development of Domestic Capital Markets and contractual saving institutions (Pension systems, Insurance, collective investment vehicles etc.)
• Advice and technical assistance in Financial Sector Governance issues, including Transparency, Accounting and disclosure, and institutional structures (e.g., demutualization, unification of supervision) for effective governance.
• Advice and technical assistance in Accessing Foreign Finance, including Capital Account Opening and the related financial policy sequencing issues.
• Analysis of regulatory and institutional developments and its impact on the private sector, and assessments of financial policy environment and financial system risks and vulnerabilities in key countries to support private sector decision making.

While the focus of the group is on analysis and assessments to support public and private sector decision making, and technical assistance to support orderly development of the sector with stability, the Group also offers deep expertise in crisis management issues, including:

• Bank and Corporate Restructuring Strategies;
• Anticipation and Resolution of Financial Crisis designed to minimize costs and dislocation due to the crisis

The principals of the Centennial Group have extensive experience in the design of assessment methodologies and analysis of financial system stability and development issues, and in conducting assessments and implementing reforms and restructuring programs in over 60 industrial, emerging markets, and developing countries. One of the principals—Roberto de Ocampo—oversaw financial reform program in his own country, (the Philippines), and also chaired the APEC finance Minister's meeting in the aftermath of the financial crisis. Another principal—V.Sundararajan—managed the Bank-Fund Financial Sector Assessment Program in the Fund, co-chaired the Bank-Fund Financial sector Liaison Committee, led the FSAP missions to United Kingdom and Canada, and oversaw the FSAP work on over 30 countries. In addition to developing the Fund's financial sector surveillance work in individual countries he also led the Fund's technical assistance program in modernizing central banks in the central and eastern Europe, and former Soviet Union; Principals also have the intimate and current knowledge of the political, social and economic policy environment and the institutional setup of the emerging markets in general, and of key individual countries. A third member–Manu Bhaskaran–is a well known authority on Asian financial markets with a long experience in private sector and investment banking. They and other members of the Group are also well aware of the policies and programs of the multilateral financial institutions.

Some of the projects that the Centennial Group and its principals have been involved in recently include:

• Leadership of the Asian Development Bank Program to assess the vulnerabilities of and formulate longer term development strategies for the financial systems of India, Nepal, and Vietnam as well as preparation of a framework for further ADB assistance to other countries in the West Asia region.
• Assessment of the financial systems in a number of Asian economies after the currency crisis, and as well as direct policy advice to senior policy makers, including heads of state, finance misters, and governors, in Korea, Thailand, China, Singapore, India, and Indonesia; Development of financial sector strategies (for the World Bank) for China, Korea and Indonesia as part of the next phase of economic reforms after the crisis resolution.
• Preparation of policy papers (for the World Bank), issues, and strategies for the reform of small financial systems.
• Assistance in self assessments of observance of supervisory and payment-system standards, and financial stbility assessments in preparation for formal Bank-Fund FSAP assessments.
• Leading and participating in FSAP assessments, and preparation of the related Reports on Observance of Standards and Codes, and Financial System Stability Assessments.
• Preparation of policy papers and provision of technical assistance in the areas of risk management, supervision, and monetary management under Islamic banking.
• Updating the FSAP assessments in selected areas in light of current policy developments, and preparation of new reform programs in supervision, monetary management, and market development.
• Preparation of Financial Sector Asessment—A Handbook (A joint World Bank– IMF project, published by the World Bank on September 2005) as an authoritative and comprehensive source on techniques, methodologies, and procedures for assessing stability and development of financial systems, drawing on the experience with the FSAP assessment process.
• Projects (including a joint Asian Development Bank–Islamic Development Bank project, and several IMF projects) to develop and implement international prudential standards for Islamic Finance, covering accounting and disclosure, supervisory review, legal framework, risk measurement, and capital adequacy in Islamic finance.
• A project (for the Asian Development Bank) to assess pension reforms and analyze global experience in expanding pension access to informal sector workers.
• Demutualization of stock exchanges and capital market reforms in India (an ADB project).