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In May 2015, the IFC Corporate Governance Group called together 40 experts in the field and members of the IFC Corporate Governance Private Sector Advisory Group. These participants explored key changes in international corporate governance standards and codes of best practice in the wake of the recent global financial crisis and how these changes have helped draw corporate attention to sustainability issues. The group found that many issues that became evident regarding banks in the financial crisis, and led to changes in the governance of banks, also have flowed through into broader corporate governance developments. This publication arises from the issues and information from these discussions. Specifically, part A discusses developments from global or regional groups involved in corporate governance. Part B addresses developments in corporate governance practice, and part C looks at developments in corporate governance codes and standards.

Correspondent banking services are essential to enabling companies and individuals to transact internationally and make cross-border payments. Recently there have been indications that certain large international banks have started terminating or severely limiting their correspondent banking relationships with smaller local and regional banks from jurisdictions around the world. To find out whether this is indeed happening, the World Bank, with support from the Financial Stability Board (FSB) and the Committee on Payments and Market Infrastructures (CPMI), surveyed banking authorities and banks worldwide to examine the extent of withdrawal from correspondent banking, its drivers, and its implications for financial exclusion/inclusion. In total, 110 banking authorities, 20 large banks, and 170 smaller local and regional banks participated in this exercise. This document includes finding of the survey, conclusions, and recommendations.

Corporate governance (CG) success stories in Vietnam are part of the International Finance Corporation’s ongoing efforts to raise greater awareness of the merits of CG. These success stories in Vietnam can serve as a guiding light for the immediate benefit and long-term value of CG to corporate development. The Law on Enterprise 2005, implemented in July 2006, marked the first introduction of a formal legal framework on CG in Vietnam. CG practice in Vietnam is expected to undergo sweeping changes when the revised Law on Enterprise (LOE) 2014 comes into effect on 1st July 2015. The revised LOE 2014 ensures independence of the Board of Directors, seeks to eliminate conflict of interest, and to improve accountability as part of Vietnamese government’s drive to ensure better CG.

This is a book about directorship. More precisely, it’s about nominee directors, who are nominated by IFC and other development finance institutions (DFIs) to the boards of investee companies to fulfill a dual mandate: first, they are expected to perform all the duties and tasks of a board member. Second, they are also charged with improving the corporate governance, sustainability, and ethical behavior of the investee company. This need exists because the empirical evidence indicates that in many developing countries it is nearly impossible to create long-term shareholder value without marked improvements in these areas. This book, based on sound research and real-life examples, offers not only a useful learning platform but also, the authors hope, an entertaining read. It focuses on directorship and leadership skills in the boardroom and does not attempt to cover the whole ‘waterfront’ on corporate governance issues. Many other publications (including some found on the IFC website) deal extensively with the structures, processes, and legal frameworks of corporate governance. The story emphasizes the learning and adapting that must go on for a nominee director to be effective in encouraging change and improvement on the board and in the company. It draws on specific situations to illustrate that IFC rules and instructions cannot always be perfectly followed: the nominee director is in the ‘heat of the battle,’ under time pressure, and confronted with dilemmas and uncertainty that only in hindsight can be structured and analyzed clearly. The target audience of the incredible adventures of Carla is nominee directors, especially those who are newly appointed or candidates who are considering taking on such a role. It aims to expose them to the challenges in the behavioral dimension of corporate governance and to help them learn, through Carla’s experience, the actions and communications that can help them, or not help them, achieve the goals they are committed to.

This assessment reviews the regulatory and supervisory developments in the insurance sector of Moldova. The current assessment is benchmarked against the insurance core principles (ICPs) issued by the International Association of Insurance Supervisors (IAIS) in October 2011 and revised in 2012. The ICPs apply to all insurers, whether private or state-owned. Specific principles apply to the supervision of intermediaries. The assessment covers the supervisory practices of the Comisa Nationala a Pietei Financiare (National Commission for Financial Markets (NCFM)) which began operations in 2007. The recent decision to move from a pure compliance approach to a more risk based methodology needs to be gradual and carefully staged given the technical capacity constraints in Moldova. Insurer risk management is not universally developed so insurers will only be able to effectively move toward a more risk based approach in a series of small and quite specific steps, supported by regulatory clarity. Many shortcomings in the observance of the ICPs will be addressed by a well-structured transition to risk-based supervision (RBS). Group supervision, particularly operational level cooperation and communication with other supervisors, is also an opportunity and a priority. Ensuring the credibility of the regulatory regime will rely on transparent and sustained enforcement.

The banking sector in Moldova is in the midst of structural changes with worrisome corporate governance issues at the core. Corporate governance is at the center of a stable and profitable banking sector which is essential to support economic growth and productivity. However, the banking system in Moldova suffers from critical governance weaknesses which the National Bank of Moldova (NBM) has been unable to effectively address. The illicit schemes used to gain control of the majority of the banking sector’s assets have involved raider attacks by unidentified individuals whose subsequent, de facto, related party transactions have caused the deterioration of bank balance sheets. The recent changes in controlling ownership have resulted in nontransparent appointments of board members and Chief Executive Officers (CEOs). This has led to substantial blurring of the roles and responsibilities of ownership, oversight (board), and management, resulting in no clear accountability. The legal and institutional corporate governance framework in Moldova is weak. Sound corporate governance is first and foremost dependent upon the motivations of owners and the resultant business culture they instill through their selection and appointment of board members. In Moldova, a few actors control the majority of the banking system. They demonstrate dubious motives by acting obscurely through others and through companies to own and control important banks. These actions create a system that is held captive to serve the needs and pleasures of a few at the expense of many: the depositors, general public, and ultimately, the taxpayer.

This note presents practical guidance on how to implement a framework for managing fiscal commitments from Public-Private Partnerships (PPPs). It draws on specific regional operational experience and on World Bank Institute (WBI)'s wider thematic engagement with different partners worldwide. The note provides practical advice on how to: consistently identify and assess fiscal commitments arising from PPPs during project preparation and implementation; incorporate these into the project approval process, including budgeting for these appropriately; and strengthen the monitoring and reporting of fiscal commitments over the lifetime of the project. It explains the fiscal commitments that can arise from PPP projects; why governments may find it difficult to assess and manage these fiscal commitments and incorporate them into project selection; and the key components of an institutional framework to manage fiscal commitments at both the development and implementation stages of a project, including the roles, responsibilities, and processes for managing PPP fiscal commitments.

Financial consumer protection regulation reflects the regulator's and policy makers' concerns with the relationship between financial institutions and their clients. Most emerging markets and developing economies (EMDEs) researched for this guide have regulated at least one financial consumer protection topic. Each detail in the regulatory requirements impacts how the supervisor enforces them in practice and which tools and techniques will work best. For example, a rule simply requiring disclosure of an item will be checked by the field supervisor differently than a rule requiring the item to be disclosed at a specific moment and in a specified format. Ignoring the time dimension of this rule can jeopardize its core goal. This guide is an attempt to help bank supervisors enforce such regulations. It is divided into following sections: section one gives introduction. Section two details guidance points in eight areas of interest for supervisory staff and agencies, while section three suggests a prioritization framework for supervisors - particularly those in low-income countries with resource and capacity constraints - that adopt a gradual approach when implementing the guidance.

This assessment focused on the supervision and regulation of the insurance sector and the role of the Financial Services Commission (FSC) in Mauritius. The FSC has responsibility for licensing and supervision of all players in the insurance market-insurance companies, distributors; loss adjusters; reinsurance companies; reinsurance brokers, and actuaries and auditors. This report relates to a dedicated assessment mission conducted in July 2011. The FSC maintains a fairly detailed website that contains copies of relevant laws and regulations applicable to insurance companies in Mauritius. Also available on the website are copies of guidelines of general application that have been issued to the insurance companies, statistics of the industry's performance, and copies of the annual reports issued by FSC. In addition to its discussions with FSC personnel, mission members met with representatives of the trade association and with executives of a representative sample of companies, both life and general insurance, operating in the market. Other contacts included brokers and auditors. The insurance sector in Mauritius is material although not fully developed in terms of size. Insurance premium stands at MUR 17.5 billion represented at 68 percent life and 32 percent non-life insurances. Life insurance growth has been more impressive than non-life insurance performance. Although both segments have shown healthy nominal growth rates, real growth has been less spectacular for the non-life sector. Interpreting non-life sector premium performance can be confused by global pricing cycles.

Movable assets tangible or intangible often account for most of firm's capital stock. Thus it is important for jurisdictions to develop adequate laws on secured transactions to allow borrowers and lenders to recognize movable assets as collateral, supporting financing secured with such assets. Though the legal and regulatory framework is essential to any secured transactions system, the efficacy of a secured transactions law also requires an effective registration mechanism for interests in movable property. This report focuses on analysis of such institutions, highlighting the importance of a publicly accessible registry where information on interests in movable assets can be registered. The main goals of collateral registries are to provide public notice of interests in movable assets and to establish priority in the assets described in the notice for secured creditors. This report also addresses the different registration mechanisms for security interests in movable property and their effectiveness in achieving the two goals stated above. It does so using the results of a 2010 World Bank Group survey on collateral registries. The report emphasizes the practices and features available in different registries and key characteristics of effective collateral registries. The experiences of jurisdictions that have instituted best practice registries show how technology can improve the efficiency of collateral registries.

Emerging market economies have been experiencing high credit growth and high delinquency rates amongst retail banking customers in recent years. However, collections practices have not always kept pace with this rapid growth; many collectors still rely on relatively unstructured processes and weak oversight frameworks. It is therefore important to consider how fair and ethical treatment of borrowers can be better promoted in these markets. To this end, International Finance Corporation (IFC) commissioned a study in 2009 to examine the question of what guiding principles should financial institutions follow to raise their responsible and ethical standards in collections. IFC has subsequently commissioned Oliver Wyman to study existing global retail debt collections practices and recommend tangible actions that lenders and collectors can take to promote responsible and ethical standards in the field. The conclusions of this study are based on field research conducted by IFC and Oliver Wyman, industry experts analysis and opinion, and a survey of institutions in 20 emerging markets.

This paper explores the relationship between two regimes for preventing corruption: the detection and monitoring of politically exposed persons (PEPs) for the purpose of combating money laundering, and asset disclosure requirements for public officials. These regimes are generally designed and implemented separately. Yet as this paper shows, an innovative use of asset disclosure tools could benefit PEP practitioners. The paper seeks to raise awareness of this potential and to connect asset disclosure and PEP practitioners.

Detailed Assessment of Observance This assessment is focused on the Superintendencia de Seguros de la Nacion (SSN) in Argentina. SSN has responsibility for regulation and supervision of all players in the insurance market. In addition to its role as a supervisor, SSN has powers to issue regulations, is responsible for advising the executive on issues related to insurance, and can propose draft bills. The laws are passed by the national legislative branch and enacted by the national executive branch. The assessment was performed using the 2007 version of the core principles for insurance supervision issued by the International Association of Insurance Supervisors (IAIS). This paper is structured into following four parts: part one is information and methodology used for the assessment; part two is institutional and macro prudential setting, part three gives summary assessment; and part four gives authorities' responses.

The approach taken in this report reflects the view of the collaborating international organizations that price volatility and its effects on food security is a complex issue with many dimensions, agricultural and non-agricultural, short and long-term, with highly differentiated impacts on consumers and producers in developed and developing countries. The report begins with a discussion of volatility and of the ways in which volatility affects countries, businesses, consumers and farmers. Lessons learned from recent experiences are briefly reviewed as well as the factors determining likely levels of volatility in future. This report offers suggestions for a systematic and internationally coordinated response building on the lessons learned as a result of the 2007-2008crisis. It is important to distinguish between policy options designed to prevent or reduce price volatility and those designed to mitigate its consequences. Both types of intervention are explored in detail. Scope is identified for actions at individual, national, regional and international level. Some would help to avert a threat; others are in the nature of contingency plans to improve readiness, while still others address long-term issues of resilience. Finally, the report explores mechanisms of international cooperation to implement this report's recommendations and to monitor progress.

Bank loans can become non-performing because of problems with the borrower s financial health, problems with the design or implementation of lender protection features, or both. In ascertaining how to deal with a problem loan, it is important to distinguish between a borrower s ability to pay and willingness to pay, Making this distinction is not always easy and requires effort. This manual was written as a guide for lending institution staff dealing with non-performing loans (NPLs) extended to corporations and small and medium enterprises (SMEs). It deals with both ad hoc and systemic financial distress and delves into how borrower problems may have arisen in the first place. It provides guidance to lending institutions staff responsible for handling individual problem loans and to senior managers responsible for organizing portfolio-wide asset resolution.

This assessment forms part of the joint International Monetary Fund (IMF) World Bank Indonesia Financial Sector Assessment Program (FSAP) which is being undertaken during 2009-2010. The assessment, which covers the private sector equity and corporate bonds securities system's observance of the Committee on Payment and Settlement Systems / International Organization of Securities Commissions (CPSS/IOSCO) recommendations for securities settlement systems, was conducted during an ad hoc mission. The assessment focuses on two types of trades. First the clearing and settlement process is assessed as regards equity transactions traded on the stock exchange Indonesian Stock Exchange (IDX), cleared through the Clearing and Guarantee Corporation (KPEI) clearing system (e-CLEARS) and settled through the Central Securities Depository for the Stock Exchange securities (KSEI) settlement system (C-BEST). In addition, the assessment focuses on corporate bond transactions, which are traded outside the exchange and settled through the KSEI settlement system (C-BEST).

Payment systems are a core part of all financial systems. The quality of payment systems determines the stability of the overall economy, the efficiency and reliability of financial intermediation, and the possibility for the private sector to innovate and provide new services to consumers. This technical note presents the results of the assessment of payments, remittances, and securities settlement processes in El Salvador, based on international standards and best practices. It includes several observations for the improvement of the National Payments System (NPS) in El Salvador. This note takes into account the peculiarities of the jurisdiction of El Salvador: namely, the relatively small size of the financial system and the dollarized nature of the economy. The central bank and other institutions are already planning appropriate actions on many of the issues discussed. In some cases, however, the team identified additional elements, which are discussed in this note.

This assessment forms part of the joint International Monetary Fund (IMF) and World Bank Indonesia Financial Sector Assessment Program (FSAP) which is being undertaken during 2009-2010. The assessment which covers the Bank Indonesia's real time gross settlement (BI-RTGS) system's observance of the Committee on Payment and Settlement Systems (CPSS) Core Principles for Systemically Important Payment Systems (SIPS) and the Central Bank's Responsibilities in applying the Core Principles was conducted during the first mission. The assessment which was conducted with the cooperation of the Bank Indonesia and other key players in the payment systems area was undertaken by Alice Zanza, Senior Payment Systems Specialist, World Bank with the assistance of Bruce Summers, Senior Payment Systems Advisor, World Bank. Although there are several systems in operation in Indonesia, BI considers the Bank Indonesia Real Time Gross Settlement (BI-RTGS) system to be the only systemically important payment system in the country. BI-RTGS is owned by BI and operated by the Payment Systems Department in the Directorate of Accounting and Payment Systems. To date, the assessment team does not have any information to expand the scope of systemically important payment systems in Indonesia and has conducted the assessment of the RTGS system, as the sole SIPS in the country.

The sales of goods and services are exposed to a significant number of risks, many of which are not within the control of the supplier. The highest of these risks and one that can have a catastrophic impact on the viability of a supplier, is the failure of a buyer to pay for the goods or services it has purchased. In today's challenged domestic and global economic climate, recognizing and managing future risks has become a priority for businesses. Losses attributed to non-payment of a trade debt or bankruptcy can and do occur regularly. Default rates vary by industry and country from year-to-year, and no industry or company is immune from trade credit risk. The essential value of trade credit insurance is that it provides not only peace of mind to the supplier, who can be assured that their trade is protected, but also valuable market intelligence on the financial viability of the supplier's customers, and, in the case of buyers in foreign countries, on any trading risks peculiar to those countries. As well as providing an insurance policy that matches the client's patterns of business, trade credit insurers will establish the level of cover that can reasonably be provided to the supplier for trade with each individual buyer, by analyzing the buyer's financial status, profitability, liquidity, size, sector, payment behavior and location.

This paper attempts to use network theory, drawn from recent work in sociology, engineering, and biological systems, to suggest that the current crisis should be viewed as a network crisis. The author surveys the concepts of networks, their defining characteristics, applications to financial markets, and the need for supervision and implications for national and global governance. Then, author briefly examines the current financial crisis in the light of the network analysis and surveys the recent reforms in financial regulation and architecture. The paper concludes with an analysis of the policy implications of network analysis.

An inspection is an official examination or review. The term 'onsite' means that the inspection takes place wherever the subject of the inspection happens to be located. In the insurance sector, supervisory authorities perform onsite inspections of insurers and intermediaries. Inspections sometimes extend to other entities that can affect the operations of insurers and intermediaries, such as affiliated companies and providers of outsourced services. A full-scale onsite inspection is a wide-ranging look at the finances and operations of an insurer. It can greatly assist the supervisory authority in arriving at a comprehensive assessment of the insurer's risk profile, viability, and compliance with requirements. Full-scale inspections can consume a lot of supervisory resources. A focused inspection looks at selected aspects of an insurer's finances or operations. They can often be performed more quickly and with fewer resources than a full-scale inspection, which is particular important if a specific supervisory concern has arisen and needs to be investigated. The flexibility to use both full-scale and focused inspections, as the situation may require, enables a supervisory authority to use available resources effectively and efficiently.

This note focuses on the deposit insurance scheme. An analysis of the Deposit Insurance Agency (DIA) is provided to the extent that it is relevant to the management of the deposit insurance scheme and no detail analysis of the other functions performed by the DIA, e.g. bank resolution, is included. Policy recommendations on the bank resolution are included in the Aide Memoire. DIA revenue sources are volatile and Deposit Insurance Fund (DIF) related revenues are used to subsidize non-DIF related activities. The legal framework is ambiguous as to whether DIF resources can be used to cover running costs of the DIA. To improve transparency and ensure sustainability of the DIF, the legal framework should be amended to clarify the use of DIF resources and cap use for operating costs. The authorities should develop a medium term strategy for the DIA, including a funding strategy for non-DIF related activities

In light of the outflow of deposits in Serbia in late 2008 and early 2009, a series of measures were introduced to urgently address stability concerns. These measures included increased deposit insurance coverage, shortened payout periods, introduction of regulations on lenders of last report (LoLR) and new liquidity lines, and the possibility for the Deposit Insurance Agency (DIA) to purchase shares of insolvent banks under instruction from the Government of Serbia (GoS). At the time, it was understood that, once stability returned, it will be prudent to have a crisis management framework in place to address systemic financial crises at all times, much like some countries have a framework to deal with natural disasters. The new framework will seek to minimize the need for ad hoc measures during crises and limit the need for the authorities to take measures that are technically illegal. Because of the lack of such crisis provisions, in several past crises, ministers and governors were forced by deteriorating events to take measures for which they had no authority, leaving the passage of appropriate regulation or laws to the aftermath of the crisis. This technical note has been prepared in the context of the initiative, primarily spearheaded by the National Bank of Serbia (NBS), to develop a contingency management framework. In particular, the note discusses the key elements of such a framework, explores how the NBS and other countries are tackling such contingency planning.

Good corporate governance ensures that companies use their resources more efficiently, protects minority shareholders, leads to better decision making, and improves relations with workers, creditors, and other stakeholders. It is an important prerequisite for attracting the patient capital needed for sustained long-term economic growth. This report provides an assessment of the Kingdom of Saudi Arabia (KSA) corporate governance policy framework. It highlights recent improvements in corporate governance regulation, makes policy recommendations, and provides investors with a benchmark against which to measure corporate governance in KSA. The corporate governance laws, regulations, and institutions that have been put in place generally reflect international good practice. In the wake of the market correction of 2006, market regulators focused on the need for better corporate governance via legal and institutional reforms. These included passing a Corporate Governance Regulation (CGR) for listed companies (2006), and further strengthening the supervisory functions across the financial sector. However, many of the laws and institutions are still relatively new and untested; awareness of the importance of good corporate governance is low, and implementation by companies in its early stages.

This report assesses Bulgaria's corporate governance policy framework for publicly traded companies. It highlights recent improvements to laws and regulation, makes policy recommendations, and provides investors with a benchmark against which to measure corporate governance in Bulgaria. This report updates the 2002 Corporate Governance ROSC (CG ROSC). As Bulgaria continues its dynamic pace of reforms, all key stakeholders involved in the reforms process may wish to focus on the following four reform priorities: first, the Financial Supervision Commission (FSC) should continue to strictly enforce existing laws and may wish to focus on how the following three groups "comply or explain" with the recently issued national code of corporate governance (NCGC): (i) holding companies, in which governance practices are considered insufficient; (ii) the largest ten issuers that make-up most of the trading and market capitalization; and (iii) principal issuers on the unofficial market that are driving much of the market's growth. Second, the task force that launched the NCGC may wish to eventually review the NCGC to offer more practical guidance on how to implement good practice. Third, the government and regulators may wish to make minor amendments to the legal and regulatory framework. Fourth and finally, the most important factor to improve corporate governance will be to train and thus, over time, build a cadre of qualified, experienced, and professional directors who are empowered to ensure that the "law on the books" translates into actual practice.