spi platform toolkit

European Banking Federation/World Bank’s “Convergence” Programme

SPI Platform Toolkit ‐ 2009

SPI Platform Toolkit

How Can a Banking Association Promote

Financial Sector Modernization in Collaboration

with Authorities and Other Stakeholders


November 2009



Author and Editor of the SPI Platform Toolkit are respectively:

Ramona Bratu ‐ ([email protected]) and Luigi Passamonti ([email protected]) Summarizing professional contributions during 2006‐2009 by:

Mihai Bogza ‐ Elona Bollano ‐ Ramona Bratu ‐ Riccardo Brogi ‐ Shkelqim Cani ‐ Oana Nedelescu ‐ Luigi

Passamonti ‐ Anuela Ristani ‐ Endrita Xhaferaj

With support from: Rumyana Uzunova

Gained in the Context of: The World Bank’s Convergence Program ‐ www.convergence‐see.eu

European Banking Federation/World Bank ‘s “Convergence” Programme


3

WELCOME NOTE As part of the services that the European Banking Federation provides to its Associates, I am happy to

make available this Toolkit, based on experience of the World Bank’s Convergence Program, which will

help our Associates play an even more important role in stimulating financial modernization in their own

countries.

Through its structured public‐private cooperation focused on removing obstacles to fluid financial

intermediation, the SPI Platform initiative helps better align the banking industry activities with the needs

of the real economy – and contributes to a more balanced post‐crisis response. Tightening prudential

regulations, while necessary, can stifle the economy in the absence of measures to revitalize financial

intermediation.

Furthermore, the SPI Platform itself, which is based on the principles of transparent evidence‐based

professional dialogue and consensus‐driven recommendations, embodies the values that have been

informing the public engagement of the European Banking Federation with its public counterparts.

Therefore, helping its Associates promote SPI Platforms in their own countries is a small contribution that

the European Banking Federation makes to constructive and responsible public‐private dialogue for

sustainable economic prosperity in candidate and other countries in Eastern Europe.

Guido Ravoet

Secretary General

European Banking Federation

November 2009



5

FOREWORD The Chairman and Secretary‐General of a banking association occupy one of the most senior positions in

the society of a country.

The authorities and society look to her or him to exercise constructive leadership in the sector that

protects the country’s savings and builds future prosperity. Under their leadership, competitive activities

by individual financial institutions can converge, with positive impacts on the welfare of society; financial

institutions can enhance their cooperation to modernize standards and services that affect the entire

economy; and banks can launch initiatives that bring them closer to their clients.

This position of authority also carries special obligations. As Chairman and Secretary‐General help to

shape the collective views of the banking sector on actions by authorities and other stakeholders, they

have direct influence on how your country governs itself. Expertise, balanced judgment and a sense of the

collective good are therefore essential attributes: their position gives unique insights into how well banks

support the needs of the real economy, and into changes to the legal and regulatory environment that

would enable enhanced support.

Yet in many countries banking associations have not had many opportunities to equip themselves to carry

out such actions in support of the public good.

This SPI Platform Toolkit, which is a result of visionary work by the World Bank with financial support

from Italy’s Ministry of Economy and Finance, is intended as a guide for the senior leaders of banking

associations that are Associates of the European Banking Federation to increase their contribution to the

prosperity in their countries through financial sector modernization.

The SPI Platform catalyses collaboration among authorities, bank clients and financial institutions to

identify a modernization program that meets their collective interests and to work out together the

solutions that will enhance the contribution of finance to the economy.

The detailed, transparent step‐by‐step process of the SPI Platform Toolkit enables a banking association

to engage with the authorities and other stakeholders to launch a large financial modernization program,

leveraging the unique financial and intellectual resources of the banking sector. The SPI Platform itself

can become the instrument of choice for the banking community to make itself a champion for economic

prosperity – and raise the public profile and influence of its leadership.

I am grateful to the European Banking Federation for agreeing to publish this SPI Platform Toolkit to

contribute to the institutional growth of its Associates in Eastern Europe.

Luigi Passamonti

Senior Adviser, World Bank and

Head and Founder, Convergence Program

October 2009



7

PREFACE It is a privilege for anyone to have the opportunity to leave the mark of his professional experience. It is a

privilege also to be part of a new and innovative concept, to nurture it and to grow with it. And it is a

pleasant duty to pass on the experience and share the acquired knowledge.

For these reasons I was happy to respond to the opportunity granted by EBF to pass on the essence of my

last three years of work and to make my experience and understanding helpful to others who believe in

the force of dialogue and of partnerships.

I hope that this Toolkit leads the reader to the conclusion that the SPI Platform is an effective way of

doing things for the benefit of the financial sector, that it provides a recipe for smooth implementation

and that it encourages more such initiatives.

Ramona Bratu

Former SPI Regional Operations Manager

and SPI Romania Director for Bank Products and Services

October 2009



9

Table of Contents1 Main Document

Page

Table of Contents .......................................................................................................................................... 9

Index (Key Features) ................................................................................................................................... 10

List of Boxes ................................................................................................................................................ 12

Executive Summary ..................................................................................................................................... 13

What is the SPI Platform? ........................................................................................................................... 15

Why Build an SPI Platform? ........................................................................................................................ 25

How to Promote an SPI Platform? .............................................................................................................. 29

How to Initiate the SPI Partnership with Authorities? ................................................................................ 33

How to Launch an SPI Platform? ................................................................................................................. 37

How to Fund SPI Platform Activities? ......................................................................................................... 39

How to Implement SPI Platform Activities? ................................................................................................ 45

What Are the Main SPI Platform Operating Processes? ............................................................................. 48

How Can EBF Help Its Associates? .............................................................................................................. 53

Useful Reading ............................................................................................................................................ 55

Annexes ....................................................................................................................................................... 57

1 Chapters and Annexes can be downloaded from http://www.convergence‐see.eu/convergence/sharing‐experiences.html



10

Index (Selected key items)

Annexes Annexes

Page

Overall Concept Annex I‐2 SPI Platform Presentation to Banking Association ..........................................................27

Annex III‐8 SPI Platform Presentation to Financial Community ........................................................ 69

Annex IV‐3 SPI Platform Presentation to Public Authorities ............................................................. 87

Annex III‐1 SPI Platform Questions and Answers ............................................................................... 41

Annex I‐4 SPI Platform: A Financial Modernization Hub Framework ............................................... 39

Governance Annex I‐1 SPI Committee Operating Guidelines .................................................................................. 1

SPI Financial Modernization Program

Annex VII‐7 SPI Platform Activity Program Building Questionnaire (Albania example) ................... 169

Annex VII‐8 SPI Multi‐Annual Activity Program Template ................................................................ 181

Annex I‐3 SPI Platform Achievements ............................................................................................. 35

Annex VIII‐5 EU Better Regulation Methodology .............................................................................. 217

SPI Secretariat Annex VII‐1 SPI Secretariat Terms of Reference .............................................................................. 145

Annex VII‐2 SPI Secretariat Responsibilities Sharing ....................................................................... 149

Annex VII‐3 SPI Secretariat General Manager Advertisement ........................................................ 151

Annex VII‐4 SPI Secretariat Job Interview Invitation ...................................................................... 152

Annex VII‐5 SPI Secretariat Selection Process Report ..................................................................... 155

Annex VII‐6 SPI Secretariat Self‐Training Support .......................................................................... 157

Annex VIII‐16 SPI Secretariat Evaluation Questionnaire .................................................................... 317

Annex VIII‐17 SPI Secretariat Summary Evaluation ............................................................................ 327

Annex VIII‐12 SPI Secretariat Weekly Planning Report Template ..................................................... 303

Annex VIII‐13 SPI Albania Monthly Activity Report ........................................................................... 305



11

Annex VIII‐15 SPI Romania Semi‐Annual Stakeholder Activity Report...............................................309

Annex VIII‐14 SPI Romania Multi‐Weekly Work Plan ......................................................................... 307

SPI Project Working Groups

Annex VIII‐1 SPI Project Working Group Responsibilities ............................................................... 193

Annex VIII‐2 SPI Project Working Group First Meeting Presentation .............................................. 195

Annex VIII‐3 Responsibilities sharing PWG, SPI Secretariat and other experts .............................. 207

SPI Project Documentation (Examples)

Annex VIII‐6 SPI Project Working Group Terms of Reference ......................................................... 219

Annex VIII‐7 Scoping of the Problem Document ............................................................................. 227

Annex VIII‐8 Note on International Experience ............................................................................... 241

Annex VIII‐9 Cost‐Benefit Questionnaire ......................................................................................... 255

Annex VIII‐10 Survey Summary of Cost‐Benefit Findings .................................................................. 279

Annex VIII‐11 PWG Recommendation Document ............................................................................ 301

SPI Platform Funding

SPI Secretariat Funding Annex VI‐2 EU Project Expression of Interest ................................................................................. 117

Annex VI‐3 Bank Enterprise Adriatic Observatory Project Draft .................................................... 123

SPI Project Funding Annex VI‐1 SPI Albania FIRST Application Enquiries Example ......................................................... 111

Annex VI‐5 TAIEX Project Application ............................................................................................... 133

Annex VI‐6 TAIEX Technical Meeting Agenda .................................................................................. 139



12

List of Boxes

Main Document

Page

Box 1 SPI Platform Partners .............................................................................................................. 15

Box 2 The Convergence Program’s Experience with SPI Platform Legal Status ............................... 16

Box 3 Location Options for the SPI Platform..................................................................................... 16

Box 4 SPI Romania 2007 12‐Project Activity Program ...................................................................... 18

Box 5 SPI Albania 2009 10‐Project Activity Program ........................................................................ 19

Box 6 SPI Committee in Romania ...................................................................................................... 20

Box 7 SPI Committee in Albania ........................................................................................................ 20

Box 8 Main Responsibilities of the SPI Secretariat ........................................................................... 21

Box 9 Ten Golden Rules for Consensus Building ............................................................................... 22

Box 10 SWOT analysis for the SPI Platform ........................................................................................ 25

Box 11 Cooperation between Romanian Banking Association and SPI Romania ............................... 27

Box 12 Banking Association‐ SPI Platform Criticalities ....................................................................... 27

Box 13 Benefits of the SPI Platform for the Banking Industry ............................................................ 27

Box 14 Steps for Building Consensus Among Banks ........................................................................... 29

Box 15 The EU Civil Society Facility ..................................................................................................... 39

Box 16 Information about IPA ............................................................................................................ 40



13

Executive Summary

This Toolkit is designed on the basis of the experience of the World Bank’s Convergence Program in establishing and running SPI Platforms in Romania and Albania. In these two countries, the Convergence Program encouraged private and public stakeholders to establish SPI partnerships; it also contributed project management and European Union “Better Regulation” know‐how. The Convergence Program hired and guided the work of the SPI Secretariat and was a non‐voting member of the SPI Committee. Chapter 1 contains a description of the SPI Platform, its institutional framework and its working methods with a view to enabling the promoter to persuade other stakeholders of the benefits of establishing an SPI Platform. Chapter 2 gives the promoter of the SPI Platform the tools for raising awareness of the concept, using examples from Albania and Romania to analyse “strengths and weaknesses” of SPI Platforms. Chapter 3 documents the steps in establishing the SPI Platform and provides details on how to raise interest among the banking community. Chapter 4 offers the promoter a set of instruments to capture the attention and interest of public authorities with regard to the public‐private partnership and its methods. Chapter 5 focuses on the setting up of the SPI Committee. Chapter 6 focuses on actions to secure funding for the SPI Platform. Chapter 7 illustrates the first operational steps on designing the SPI Secretariat, on hiring and training its staff and on setting up the activity program. Chapter 8 covers operational aspects related to SPI Committee’s responsibilities, to project documentation and the analytical methods used, and to planning and reporting activities of the SPI Secretariat. Chapter 9 distills the Convergence Program’s experience to illustrate the possible facilitating role of the European Banking Federation (or its representative) with its Associates.



15

What is the SPI Platform? 1.1. Understanding the Special Projects Initiative (SPI) Platform

The information in this chapter is intended to enable the promoter of the SPI Platform – that is, an EBF

Associate – to understand the nature of the public‐private partnership, how it works, how it is organized

and its benefits and costs. Examples from Romania and Albania are used to illustrate the concepts.

1.1.1. SPI Platform Objective The SPI Platform is a public‐private partnership for institutional cooperation among market players, users

of financial services and relevant authorities for addressing national financial‐sector modernization

opportunities through proposals for reform.2

1.1.2. SPI Platform Partners SPI partners include associations of financial institutions, users of financial services – consumers and

enterprises, regulating and supervising authorities of the financial market, academic institutions and

international donors.

Box 1 SPI Platform Partners

Romania Albania

Initial

National Bank of Romania

Romanian Banking Association

Ministry of Finance

Convergence Program

Initial

Bank of Albania

Albanian Association of Banks

Ministry of Finance

Financial Supervisory Authority

Convergence Program

Joining

later

National Authority for Consumer Protection

Romanian Banking Institute

Joining

later

Ministry of Economy (Market Surveillance and Consumer Protection Department)

European University of Tirana

Italian Banking Association

SPI partners undertake responsibility for managing, funding, staffing, data and any other aspects of

supporting financial sector modernization.

They commit themselves to dialogue, cooperation and consensus‐building in deciding the issues to be

tackled and the most suitable solutions3.

They use their institutional strengths – authority in the case of public institutions, and convening power in

the case of private institutions – in implementing the regulatory and self‐regulatory outcomes of the

partnership.

2 General information about SPI Platform can be found at: http://www.convergence‐see.eu/instrument 3 An effective framework for openness, transparency and dialogue is the main pillar of OECD’s “Principles for Transparency and Integrity in Lobbying” http://www.olis.oecd.org/olis/2009doc.nsf/ENGREFCORPLOOK/NT0000503A/$FILE/JT03270937.PDF.



16

The cooperation framework is set by the SPI Committee Operating Guidelines, which set out the

responsibilities and rights of the parties (see Annex I‐1).

1.1.3. Legal Status

An SPI partnership may or may not be incorporated as a legal entity. It can function only on the basis of

agreement between partner institutions on the basis of sound governance approved and implemented by

the partner institutions.

If an SPI partnership is constituted informally it has a high degree of flexibility in its day‐to‐day work. But

its institutional strength can be enhanced by legal incorporation as a new entity – a complicated and

lengthy process – or by affiliation as a distinct entity with an existing institution, which would ideally be

neutral or one of the main partner institutions. Former Governor of Croatian National Bank Marko Škreb

made this recommendation when he assessed SPI Romania.4 In either case, it is critical to preserve the

public‐private nature of the activities in terms of governance, implementation and administration. Legal

incorporation will make it easier to organize revenue‐generating activities and to raise contributions from

domestic and international sources. A combination of these options may be designed, with the

partnership starting as a non‐legally formalized entity for a trial period and legal incorporation at a later

date. This depends on the stakeholders’ preferences, their financial options and institutional constraints.

It is an important aspect of the SPI public‐private partnership that has consequences for staffing,

management and financing.

Box 2 ‐ The Convergence Program’s Experience with SPI Platform Legal Status

In Romania and in Albania SPI started as a non‐legal entity under an agreement between the

stakeholders. Its efficient functioning may have been influenced by the sponsorship and participation of

the World Bank’s Convergence Program. After 18 months, the financial and managing ownership of the

SPI was transferred to the local stakeholders. In Romania ownership was transferred to an existing

separate legal entity in which both main partners – the National Bank of Romania and the Romanian

Banking Association – were already shareholders: the Romanian Banking Institute. In Albania the

transfer was a matter of absorption by one of the main partners. The appointment of the SPI Director

for Financial Modernization Program and Analytics as Secretary General of the Albanian Association of

Banks ensured the transfer of analytical skills, methods and procedures.

Box 3‐ Location Options for the SPI Platform

1) Public

a. The Central Bank may wish to host the SPI Platform along the lines of the European Central Bank (ECB)

European Financial Market Lawyers’ Group (EFLMG) (http://www.efmlg.org/) and equivalent units hosted

by the Bank of England, the Federal Reserve Bank of New York and the Bank of Japan. The advantage is

4 Report of the External Evaluation of the SPI Romania – Convergence Project, Marko Škreb, March 2007. http://www.spiromania.eu/admin/filemanager/files/report_of_the_external_evaluation_of_spi_romania_final_ms__march_7_2007.pdf



17

that the unit draws on the institutional and professional strength of the central bank; the disadvantages

are the lost opportunity to create multi‐polar intellectual capabilities in the country and a possible rigidity

in adapting its activities to new opportunities.

b. The Prime Minister’s Office or equivalent central unit may be the host, as in the United Kingdom 10

Downing Street “Delivery Unit” model (http://www.number10.gov.uk/Page3055). The advantage is

considerable political influence in supporting reforms; the disadvantage may be the distance from civil

society, whose sustained intellectual engagement is beneficial to the reform process.

c. The European Commission (EC) also hosts various think‐tanks for the purpose of improving the quality

of regulatory design. A notable example is Fin‐Use, which was set up to represent the views of consumers

of financial services (http://ec.europa.eu/internal_market/fin‐use_forum/index_en.htm).

2) Private

Local public and private stakeholders may decide that it is strategically important to improve the

analytical activities of the banking association, in line with good practice in more advanced countries. To

preserve the public‐private nature of this work, the banking association could sponsor the creation of a

separate legal vehicle for this work that would operate under public‐private governance. The Romanian

Banking Institute is an example of such as public‐private set‐up, although its driving force is the central

bank. A similar institution in Italy is the Osservatorio Regionale Banche Imprese (Regional Bank Enterprise

Observatory (http://www.bancheimprese.it/eng/index.asp). In the past, the Association of Italian Banks

and the Bank of Italy jointly ran a think‐tank specializing in financial sector issues

(http://www.enteluigieinaudi.it/en/index.htm).

3) Civil Society

A think‐tank or university department with leadership open to building bridges with policy analysis could

be identified to host the catalytic function. The benefit is to host the activity on neutral ground protected

from commercial influence. Long‐term fundraising from foundations and public sources is easier with this

vehicle compared with the public or private options. The downside is that its leadership, independent of

the authorities and private stakeholders, may not have the incentives and capabilities to establish a track

record of practical contributions to policy design. Possible benchmarks for this choice are the recent

Center for Financial Regulation (http://www.icffr.org/) promoted by the UK Treasury and, closer to the

commercial end of the spectrum, the “Better Regulation” activities of the Oxford‐based Oxera

(www.oxera.com).

1.1.4. Object of the SPI Platform

The SPI Platform handles financial modernization issues that increase the efficiency of financial

intermediation through interventions with the following objectives:

- reducing asymmetric information; - completing the market; - increasing contractual opportunities for entering into financial transactions; - reducing transaction costs; and - enhancing competition in the market.



18

This taxonomy is drawn from the ECB criteria for measuring progress in financial integration in the

European Union’s Single Financial Market:

“Financial modernization refers to the process of financial innovation and organizational improvements

that make the financial system more efficient by overcoming a number of frictions such as asymmetric

information, incompleteness of markets, limited opportunities for agents to engage in financial

transactions through contracts, high transaction costs and limited competition.”

Gertrude Tumpel‐Gugerell, ECB Executive Board Member, July 2006 speech

The aim of these interventions is to remove legal, regulatory and institutional obstacles to matching

demand and supply in financial services. These interventions are normally prudentially neutral in terms of

the overall targeted risk profile of financial intermediation chosen by financial regulators.

In this respect, financial modernization5 defines an innovative area of intervention that is almost fully

complementary with that of financial regulation, which traditionally defines the interface between

financial regulators and market participants. Annex I‐2 gives examples of the financial modernization

programs handled by SPI Platforms in Romania and Albania. The Convergence Program developed a

search engine6 for identifying the modernization issues to be built into a program.

1.1.5. SPI Institutional Capacity

Experiences in Romania and Albania showed that an SPI Platform supported by a three‐person SPI

Secretariat can handle ten to fifteen financial modernization projects per year.

Box 4 ‐ SPI Romania 2007 12‐Project Activity Program

Positive credit information reporting

Electronic processing of debit instruments

Improving anti‐money‐laundering (AML) reporting

Revamping rural lending based on deposit certificates

Consumer financial education

Banking ombudsman

Credit rating agencies

Stress testing

Provisioning under International Financial Reporting Standards (IFRS)

Mortgage loan and loss given default databases

Markets in Financial Instruments Directive (MiFID) implementation

Optimizing bank security

5 For discussion, see: http://www.convergence‐see.eu/convergence/faq.html 6 http://www.convergence‐see.eu/our‐mandate/how‐to‐identify‐financial.html



19

Box 5‐ SPI Albania 2009 10‐Project Activity Program

Enhancing banks’ liquidity risk management

Revising regulatory act on Execution of Procedures on Bank Accounts

Revising public procurement law on financial advisory services

Rationalized central bank reporting system

Revising Foreign Currency Open Position regulation

Preparing a feasibility study for central depositary services

Loan loss provisioning under IFRS

Consumer Financial Education

Expansion of the credit bureau services: database for businesses

Expansion of the credit bureau services: scoring cards for individuals

1.1.6. SPI Results

The outcomes of the SPI public‐private partnership are regulatory and self‐regulatory proposals whose

impact is qualitative and quantitative – increased volume of transactions and reduced transaction costs –

from the private and public good points of view. Annex I‐3 shows the outcomes of the SPI Platforms in

Romania and Albania and the quantitative assessments of the outcome of some of the projects

completed.

1.1.7. SPI Governance

The strength and solidity of the SPI Platform are ensured by its partners’ commitment to collaboration,

strong governance and effective work methods.

The comprehensive governance framework (see SPI Committee Operating Guidelines in Annex I‐1) was

conceived by the Convergence Program and tested and improved in Romania and Albania. Its project

methods are the result of practical experience; the analytical methods are based on the advanced

European approaches of EU Better Regulation and Regulatory Impact Assessment.

1.1.8. SPI Organization

SPI Committee

The supervising body of the SPI Platform is the SPI Committee of high‐level representatives of the partner

institutions. An SPI Committee has the following responsibilities: i) to decide on the activity program; ii) to

monitor implementation; and iii) to endorse and promote the outputs of the program.



20

Box 6‐ SPI Committee in Romania

Members

National Bank of Romania – First Deputy Governor

Romanian Banking Association – Chairman

Ministry of Economy and Finance – State Secretary

National Authority for Consumer Protection – Vice‐President

Convergence Program – Head

Alternates

Ministry of Economy and Finance – General Director

National Authority for Consumer Protection – Director

Box 7‐ SPI Committee in Albania

Members

Bank of Albania – First Deputy Governor

Albanian Association of Banks – Chairman

Ministry of Finance – General Director

Financial Supervisory Authority ‐ Deputy Chairman

Ministry of Economy – Director of the Market Surveillance and Consumer Protection

Convergence Program – Head

Permanent Observers

Italian Banking Association – Director

European University of Tirana – Dean of the Faculty of Economics

Alternates

Albanian Association of Banks – Secretary General

Financial Supervisory Authority – Director

Convergence Program – SPI General Manager



21

SPI Working Groups

Implementation of the activity program is entrusted to public‐private working groups established for each

project. These consist of experts from all the stakeholders, led by a strong project management group

reflecting the main stakeholders of the issue to be solved.

The project management group consists of a project owner such as the CEO of a bank or a central bank

director, who appoints a project manager representing the main stakeholder and a co‐project manager

representing the other main stakeholder. The project owner ensures project oversight and is responsible

for signing off the final SPI committee recommendations. The project manager and project co‐manager

coordinate the day‐to‐day activity of the project and are responsible for timely achievement of project

objectives.

The project working group is set up under detailed terms of reference (see Annex VIII‐1). The project

manager and project co‐manager decide membership in consultation with the stakeholders. Participation

is voluntary. The members of project working groups provides the necessary mix of authority and

expertise for ensuring that projects are successfully implemented.

Project working groups are responsible for identifying optimal solutions that address the concerns of all

parties on the basis of EU Better Regulation methods. They contribute to project implementation,

participate in meetings, contribute ideas and data, validate questionnaires, interpret consultation

feedback and approve the final project document.

SPI Secretariat

The SPI Committee and the project working groups rely on the work of an SPI Secretariat dedicated to the

partnership.

The SPI Secretariat carries out most of the analytical work with a view to making the most of the time and

knowledge of project working group members without interfering with their official responsibilities. The

SPI Secretariat provides secretarial and communication services. It requires strong organizational

capabilities to handle relationships with local and international experts.

Box 8‐ Main Responsibilities of the SPI Secretariat

• Prepare SPI committee meeting agendas; keep and distribute records of meetings. • Manage relationships with national and international banks, experts and technical assistance

providers. • Build up the activity program. • Present the SPI annual business plan, quarterly working plans and budgets to the SPI

committee for approval. • Build up visibility for the SPI Platform. • Draft project ToR. • Organize project working groups and their meetings. • Prepare background studies based on interviews, research, international benchmarks and

regulations. • Summarize contributions by project working group members. • Prepare documents for project working group meetings.



22

• Prepare draft regulatory impact assessment (RIA) questionnaires. • Collect data and perform calculations. • Prepare SPI Committee documents. • Coordinate actions for promoting, enacting and implementing SPI proposals. • Submit periodical activity reports to stakeholders.

The Convergence Program tested two SPI Secretariat models: i) in Romania – a General Manager, a

Director for Bank Products and Services, a Director for Analytics and Policy, office interns; and ii) in

Albania – a General Manager, a Director for Financial Modernization Program and Analytics, a Director for

Operations and one or two part‐time experts to cover analytical work.

The Romania model did not have separation of duties; the Albania model did not cover all the

responsibilities. In Romania, both directors carried out analytical work and could handle four to six

projects simultaneously; in Albania only one did analytical work and the Director of Operations had

difficulty in covering secretarial work. The optimum formula for an SPI secretariat might be a General

Manager with analytical and public relations skills and executive responsibilities, a Director for Analytics

and Policy, part‐time assistant experts and a junior to manage the office.

One of the most important aspects of the SPI Secretariat’s activity is its position as a neutral body, an

“honest broker”. The SPI Secretariat has to build consensus among project working group members and

SPI Committee members. This constitutes a fundamental difference between the SPI Secretariat and

other employees of the SPI Platform.

Box 9‐ Ten Golden Rules for Consensus Building

• Gain the confidence of project working groups through sound preparation of documentation and meetings.

• Maintain a neutral position in project working group meetings. • Focus project working group discussions. • Keep accurate minutes. • Keep track of disputed issues. • Seek the arguments of all parties on disputed issues. • Look for international experience in disputed issues. • Ask for the opinions of third parties on disputed issues. • Seek middle‐way solutions. • Ask for the approval of project working groups for documents, particularly SPI committee

recommendations.

In summary, the SPI Platform has three components: i) the policy‐making body – the SPI Committee; ii)

the operational engine – the SPI Secretariat; and iii) the brain – the project working groups. Annex I‐2

shows the SPI Albania organizational chart, which sets out the main responsibilities of each party and the

composition of the managing and executive bodies of the public‐private partnership.



23

1.1.9. SPI Operating Principles

The SPI operating principles are therefore:

Local ownership. This is achieved through the support of the local stakeholders and their powers to: i) decide on the SPI program; ii) mobilize their experts and cover a share of operating expenses; and iii) identify solutions and select those that address their concerns and accommodate their interests.

Programmatic focus. The issues to be tackled under SPI are proposed by the partners in consultation. They are prioritized according to the financial modernization program objectives or policy priorities approved by the SPI Committee. In Albania, for example, the annual program for 2009 was built up in the context of the policy priorities of the Albanian banking system, discussed in Bank of Albania’s Banking Forum and other meetings with banks, authorities and donors.

Mobilization of local expertise. The annual program is implemented by public‐private working groups of local experts, led by a project management group.

Involvement of foreign experts to fill knowledge gaps. The project working groups prepare proposals for regulatory or self‐regulatory changes, supported by the SPI Secretariat; if necessary, project working groups invite international experts to provide complementary perspectives.

Disciplined program management. Project working groups run the projects according to detailed ToR prepared by the SPI Secretariat. The ToR’s are based on standard documentation from the EU Better Regulation system and must be discussed in project working group meetings within three months. The recommendations of the project working groups are endorsed by the project management group and the SPI Committee before being sent to the relevant authorities for consideration.

Evidence‐based analytical methods. Projects are implemented according to EU Better Regulation methods: the main principles are that stakeholders must be consulted on policy options and that Regulatory Impact Assessment must be used to provide supporting evidence for regulatory proposals.

Transparency. The governance framework, project implementation records and documents are made available to the public through the SPI Platform website and on the websites of SPI partners.

Practical impact. The outcomes of the SPI are not studies or proposals: they are regulatory or self‐regulatory changes.

1.1.10. Potential Future Development for SPI

The SPI Platform has the potential to become the hub of a country’s financial modernization in facilitating

the involvement and coordination of donors in a program that reflects national needs (see Annex I‐4).

The SPI Platform model offers significant cost and knowledge benefits in terms of the scale of operations

and the networks of experts. The SPI Committee can use its authority to promote the enactment of

regulatory proposals. International donors might sponsor the technical assistance necessary for carrying

out analytical work for the project working groups, and in return SPI could offer donors a cost‐effective

instrument for promoting financial modernization and preparation for EU integration.



24

1.1.11. SPI Costs and Resources

The costs of an SPI Platform are salary costs for the SPI Secretariat, equipment purchases and the costs of

running an office and organizing events. The costs will vary depending on conditions in each country. The

annual budget of an SPI Platform is estimated at €100,000 on the basis of the Albania case: a small SPI

Secretariat and involvement of foreign consultants as required. A ten‐project annual program would

therefore cost €10,000 per project.

In 2007 in Romania, 40 institutions – 9 public and 31 private – provided 120 experts who had 55 project

meetings and spent 150 hours deciding on projects and implementing them.

With regard to the mobilization of in‐kind partners, in the first 18 months of operation in Albania 27

private institutions, of which 16 were banks, and six public institutions appointed 145 experts who met in

27 project working group meetings. The value of this stakeholder contribution in 2008 can be estimated

as the opportunity cost of these experts contributing 1,000 person‐days, equivalent to five staff for a

year, based on two‐hour meetings per project.

ANNEX ANNEX Section

Page Number

Annex I‐1 SPI Committee Operating Guidelines 1

Annex I‐2 SPI Platform Presentation to Banking Association 27

Annex I‐3 SPI Platform Achievements 35

Annex I‐4 SPI Platform: A Financial Modernization Hub Framework 39



25

Why Build an SPI Platform? 2.1. Rationale for Establishing an SPI Platform

In this chapter, the promoter of the SPI Platform will find additional arguments in support of the idea.

A practical approach to analysing the feasibility of establishing an SPI Platform is the strengths,

weaknesses, opportunities and threats (SWOT) system, which enables a business person to reach a

decision by balancing the pros and cons and to develop appropriate risk‐mitigation strategies.

Box 10‐ SWOT Analysis for the SPI Platform

STRENGTHS WEAKNESSES

Sound institutional framework

Programmatic approach

Results orientation

Local leadership and initiative

Efficiency

Productivity

Institutional capacity‐building

Focus on implementation

Structured processes

Evidence‐based approach

Standard documents

Accountability

Neutral stance

Additional costs for banks

Additional resources invested

No clear legal status (unless addressed)

Unclear institutional development perspectives (unless addressed)

OPPORTUNITIES THREATS

Developing markets, with large volumes of modernization opportunities

Convergence with EU regulations

Support from EBF members

EU and other funding sources

Complementarities with banking association activities

Local expertise

Cooperation with similar Platforms

Tested framework, processes, efficiency and productivity

Overlaps with other initiatives

Overlaps with banking association activities

Competition with the banking association

Public institutions not willing to enter into partnership

Low probability of finding skilled people for the SPI Secretariat

These aspects are discussed in the following paragraphs.



26

Strengths. An SPI Platform is a stable framework for cooperation, not a single‐project initiative. Sound

governance means that it addresses the sharing of responsibilities and cooperation and accountability

among the parties; and it covers all project steps, with emphasis on implementation. Prior approval of a

programmatic framework by high‐level public and private partners increases the likelihood of rapid

practical results quickly. Banks have the right to propose issues to be solved in cooperation with public

and private partners and to take advantage of the synergies among projects. Projects are largely

implemented by local experts, which helps build analytical and consensus‐building capacities; foreign

experts intervene only to fill local knowledge gaps. Private stakeholders take part in designing regulatory

solutions and can compare their opinions with those of experts from the public sector in the structured

environment of the SPI Platform. The SPI Secretariat provides assistance and support with additional

analytical services while maintaining a neutral stance. The functionality and efficiency of the SPI Platform

have been successfully tested in two countries.

Weaknesses. The disadvantages of the SPI model are that it may require additional financial and other

contributions from banking association members, and it might not have clear legal status at the outset.

The size of the additional contributions depends on factors such as salary levels, the possibility of sharing

costs with other SPI partners, and the prospects for attracting donors to sponsor the establishment and

operation of SPI. This Toolkit offers detailed information for potential sponsors on access to EU funding.

Identification of a funding source covering the first years of operations could solve the issue of SPI

sustainability, but clarification of legal status is a prerequisite for accessing funds.

Opportunities. The basic opportunity for establishing an SPI Platform is the need for financial modernization

in a country. Consultations in 2008 in Romania brought 35 modernization issues before SPI Committee’s

table; consultations in Albania in 2009 identified 40 project proposals. A large banking group has listed 273

regulatory issues that need to be addressed in central and southern Europe. Regulatory reform

requirements can be greater for countries in the process of EU pre‐accession. Opportunities for establishing

a financial sector modernization body should be tested in consultations with potential partners.

It is important to stress that EBF is willing to support its Associates in establishing and operating SPI

Platforms (see Chapter 9, page 51). This support includes dealing with EU institutions, raising awareness

and building consensus among EBF Associates and public institutions. The cooperative framework that

EBF can create and maintain for SPIs is a major asset in dealing with the weaknesses and threats.

Pre‐accession to EU country status brings with it access to EU funding, which mitigates one of the

identified weaknesses – additional costs for partners. The existence of reliable funding sources will solve

the issue of SPI sustainability, and the eligibility criteria for accessing EU funds will help to clarify the legal

status of the partnership.

Threats. Potential threats to the establishment of an SPI Platform include the possibility of overlap with

the work of the banking association and the danger of the SPI Platform becoming a competitor to the

banking association. In such a case, any overlapping could be transformed into complementarities and

cooperation between the SPI Platform and the banking association. The Romania case showed that this in

fact happened, and that each institution used its comparative advantage to leverage the effects of their

joint activities.



27

SPI Platform complements and expands the banking association’s work on building an industry position on

various issues.

Box 11‐ Cooperation between Romanian Banking Association and SPI Romania

• Projects supported by the Banking Association – Building a stronger image of the SPI program – Bringing the SPI program into Romanian institutions – Discussing SPI projects at monthly meetings with the central bank – Gathering banking professionals – Building banking consensus on SPI projects

• Support by the SPI Secretariat for the Banking Association – Managing projects for the banks – Analytics and international benchmarking – Convening experts of public institutions and private non‐financial entities – Engagement in public consultations – EU Better Regulation impact assessment

Box 12‐ Banking Association – SPI Platform Criticalities

1. The banking association must be alert to policy and regulatory developments. An SPI Platform exists to handle projects where there is prior agreement in principle between the authorities and the banking industry. Both stakeholders retain full freedom to regulate and advocate without SPI Platform involvement.

2. The banking association must monitor SPI work in progress to ensure that the discussions of project working groups reflect banking industry views and to build consensus among their members with regard to the recommendations of project working groups. The banking association may wish to have parallel technical discussions among its membership to give project working group representatives the full range of banking industry views.

3. The banking association must support SPI Committee follow‐up actions to ensure that its recommendations are implemented.

Box 13‐ Benefits of the SPI Platform for the Banking Industry

1. It creates space for banking industry initiatives, particularly when public action is hampered by fragmented decision‐making.

2. It facilitates a medium‐term programmatic approach rather than reactive case‐by‐case dialogue with financial regulators.

3. It secures a high degree of likelihood of public action on SPI Platform recommendations as a result of prior SPI Committee commitment.

4. It increases the quality of recommendations through informal collaboration with public‐sector experts. 5. It increases professional networking among private and public experts, promoting faster growth of

sophisticated expertise in the country.

To summarize, the outcomes of an SPI Platform are worth the effort involved in establishing and running

the public‐private partnership. The knowledge and support at the EU level are strong arguments in its

favor. The first things to be assessed in the initial stage are the “market” for financial modernization and

other institutions’ openness to join the partnership.



29

How to Promote an SPI Platform? 3.1. Steps for Building an SPI Platform

Establishing an SPI partnership is a long step‐by‐step consensus‐building process. In this chapter we

assume that a banking association that is an EBF associate is the SPI Platform promoter.

First, the banking industry should be made aware of SPI so that it can assess the feasibility of establishing

the partnership and initiating the build‐up actions. Then the main public partner should be gained as a

supporter of the idea. This nucleus can invite other private and public institutions to join the partnership.

Box 14 – Four‐step consensus‐building process 1. Steps for building consensus among banks:

i. EBF Associate’s decision to assess the feasibility of establishing the SPI Platform. ii. Bilateral discussions with the EBF Associate’s senior management. iii. Seminar for bank staff. iv. EBF Associate’s decision to initiate the SPI Platform.

2. Steps for initiating the partnership: i. Bilateral discussions between high‐level representatives of banks and public authorities. ii. Seminar with public authority staff. iii. Official proposal to the central bank. iv. Joint invitation from the central bank and banking association to other stakeholders.

3. Steps for establishing and running the partnership: i. SPI Committee set up. ii. Preparation of public‐private partnership project. iii. Submission of request for funding to European Commission and other donors.

4. First implementation steps of project when funding has been secured: i. Hiring SPI Secretariat staff. ii. Training SPI Secretariat staff.

iii. Designing and setting up a multi‐annual financial modernization program.

3.2. Consensus–Building among Banks on Initiating the SPI Platform

The starting point for consensus‐building is the decision by the management of the EBF Associate to take

the preliminary steps for establishing the SPI Platform: awareness‐building and consultations with the

banks. The decision to go further depends on raising awareness of the advantages of SPI Platform,

because the banks will have to contribute expertise and money. The annexes to this Toolkit give the

promoter a rich `set of tools – questions and answers, presentations, draft communications for banks, a

seminar package and a questionnaire for assessing the potential project – that can be used in the

negotiations.



30

3.2.1. EBF Associate’s Decision to Assess the Feasibility of Establishing an SPI Platform

To persuade the management of the EBF Associate of the merits of SPI Platform, the promoter should

give a presentation on the SPI partnership and on the proposed approach strategy, and answer any

questions. The Toolkit offers a presentation (Annex I‐2) and a question‐and‐answer discussion instrument

(Annex III‐1) that goes into greater detail. Anticipating positive feedback, the Toolkit provides a draft of

the communication to senior bank management (Annex III‐2) as a basis for public consultations with the

industry.

These consultations should involve senior management of the banks, and then address the executive

levels. For practical reasons, senior management must be approached through bilateral meetings because

it is unlikely that senior managers of all banks will be available on a given date. The other levels of bank

management should be addressed in a seminar.

Information gathered through this round of consultations will enable the EBF Associate to decide to

initiate establishment of the SPI Platform.

3.2.2. Bilateral Discussions with the EBF Associate’s Senior Management

Bilateral discussions with senior bank managers are essential for raising awareness about the SPI

Platform, for obtaining opinions as to the feasibility of establishing the SPI Platform and implementing its

actions and for understanding and addressing the banks’ concerns.

To get the best results from the bilateral discussions, the Toolkit provides a presentation to be delivered

during the meeting (Annex III‐3), a questionnaire to help banks to identify modernization issues to be

undertaken by an SPI Platform (Annex III‐4), and a checklist (Annex III‐5).

The presentation is designed to address a bank management’s primary points of interest: what is “SPI”,

what does it do, what results are envisaged, and what is the quantitative impact on banks likely to be in

terms of annual costs. The questionnaire is intended to help interviewees to understand what an SPI

Platform could do for banks. These processes are backed up by the check‐list. The overall aim is to

provide the information necessary for the EBF Associate to reach its decision.

3.2.3. Seminar for Bank Staff

Having collected policy opinions from senior managers, the promoter must obtain technical opinions to

ensure that potential project working group members understand the SPI Platform concept and are

willing to be involved in its activities.

The presentation given in seminar for bank staff therefore focuses on project management procedures

and on analytical methods. It describes the roles of project working groups and the SPI Secretariat,

cooperation with banks, the banking association and its committees. Brainstorming sessions on the SWOT

analysis of the SPI Platform or the project pipeline of an SPI Platform encourage bank executives to

provide feedback.



31

The Toolkit provides the seminar package: the invitation letter (Annex III‐6), an agenda (Annex III‐7) and a

presentation (Annex III‐8).

3.2.4. EBF Associate’s Decision to Initiate the SPI Platform

The results of the public consultations should be made known to the EBF Associate so that an informed

decision can be made. The Toolkit provides an outline of the memo to be presented to the management

of the EBF Associate (Annex III‐9). For reasons of transparency, the findings of the consultations with the

banks should be made known to all participants.

ANNEX

ANNEX Section

Page Number

Annex III‐1 SPI Platform Questions and Answers 41

Annex III‐2 Draft Communication Letter to Bank Management 45

Annex III‐3 SPI Platform Presentation to Bank Management 47

Annex III‐4 SPI Platform Pipeline Building Questionnaire 53

Annex III‐5 Checklist for Bilateral Meetings with Banks 63

Annex III‐6 Banking Community Seminar Invitation Letter 65

Annex III‐7 Banking Community Seminar Agenda 67

Annex III‐8 SPI Platform Presentation to Financial Community 69

Annex III‐9 Memo Outline on Consultations with Banks 81



33

How to Initiate the SPI Partnership with

Authorities? This chapter guides the promoter of the SPI Platform through the process of advocacy with public

authorities. It contains a set of tools and instructions for organizing actions and using information already

presented or available from other sources. As mentioned in the previous chapter, we assume here that

the banking association is the SPI Platform promoter.

Given the support of the banks, the EBF Associate should identify the public authorities to be approached

to establish the SPI Platform. The most important are the Central Bank and the Ministry of Finance.

Involvement of the supervisory authorities is essential in view of the collaboration between them and

market participants. It is important to understand that the SPI Platform will be only partially involved with

matters that come under the direct and exclusive oversight of the supervisory authorities.7 It is vital for

the performance and impact of the SPI Platform to define a significant role for the Ministry of Finance or

the Ministry of the Economy, because they are responsible for policy analysis, the design of financial

modernization interventions and legislative action on matters affecting the financial sector.8

The Ministry of Justice must also be approached because its endorsement of legal proposals will be

needed. The authority regulating the capital, leasing and other financial markets should be on the list of

potential SPI partners because it has many interests in common with the banking sector. And because all

SPI projects have a public good impact – some also have important consequences for consumers – the

authority in charge of consumer protection should also be approached.

The consultation strategy for public authorities is similar to that for the banking community: first, a

“political” stock‐taking round at the senior management level, followed by a seminar for executive and

technical staff. The results of these consultations should be synthesized in a memorandum for the

attention of the management of the EBF Associate and as a basis for the next steps (see Annex IV‐1).

4.1 . Bilateral Discussions between Senior Management of Banks and Public Authorities

The first institution to be approached is the other main partner – the Central Bank. Soon after this, the

managers of the banking association should approach the Ministry of Finance or Ministry of the Economy,

preferably at the level of the Deputy Minister in charge of financial sector policy issues.

Bilateral discussions between banks and public authorities should be introduced through a letter (see

draft in Annex IV‐2).

7 Unless the supervisory authorities wish to avail themselves of the SPI Platform’s collaborative analytics to analyse proposed regulations in consultation with market participants, in line with EU Better Regulation principles. 8 For a discussion of the roles of financial authorities and governments on financial efficiency, see: Lucas Papademos, European Central Bank Vice President – Price stability, financial stability and efficiency, and monetary policy , 7 July 2006.



34

The discussions should be supported by a presentation (see Annex IV‐3) that emphasizes the public good

elements of the SPI partnership and the benefits that public institutions can obtain by participating in the

partnership.

The presentation focuses on the projects proposed by the public authorities in Romania and Albania.

Some of them concerned prudential issues, because the central banks appreciated that they could use

information from banks or consulting companies to determine readiness to implement regulatory

provisions, the impact on banks, the timeline for implementation and the clarity of the regulations.

Central banks in modern economies consult market participants on new regulations – and the SPI

Platform is a structured framework for doing this. The central bank will wish to be involved in market

efficiency issues with a view to preserving public goods, consumer rights, sustainable development and

stability.

A concern that arose in discussions with central banks related to the participation of private entities in

defining prudential and stability regulations that are the exclusive responsibility of a central bank. This

concern is justified, but it is mitigated by the fact that central banks have a right of veto on the SPI activity

plan and full rights of approval of SPI Platform proposals through their SPI Committee representation.

Even when regulations are drafted with inputs from an SPI Platform, the central bank retains an

undiminished right and responsibility to approve and enact regulatory provisions.

The promoter should consult the Central Bank and the Finance and Economy Ministries as to other

institutions to be approached for the partnership, the legal status of the SPI and the next steps. It is of

paramount importance that the Central Bank is comfortable with the SPI Secretariat located in the

banking association and that it trusts its neutrality under these circumstances. The SPI Secretariat

operates under a fiduciary mandate from the SPI Committee: as a check‐and‐balance measure, it will be

important for the SPI Committee to be chaired by a public‐sector representative, particularly if the SPI

Secretariat is located in the banking association.

If the public authorities express concern that the banking association’s representatives cannot respond

immediately, the latter should collect the concerns and set up a second round of bilateral meetings. The

EBF can help in clarifying issues and suggesting solutions.

4.2 Seminar with Public Authority Staff

Middle managers of the public authorities should be invited to a seminar so that they can form a

comprehensive impression of the SPI partnership, the contribution expected of them and the advantages

they can expect from being involved in SPI activities. The feedback from the interactive sessions of the

banking sector seminar will help senior representatives decide on participation in the partnership.

The seminar package for the banking association can also be used for public authority staff (see Annexes

III, 6‐8). If the banking association decides to run parallel consultations with banks and public authorities,

only one seminar need be organized for middle management of private and public institutions.



35

4.3 Raising Public Awareness of the SPI Platform

Public information concerning the initiative to establish an SPI partnership is important because it helps

stakeholders to buy into the idea. And it can attract supporters such as international donors and raise

public awareness.

The direct advocacy campaign should be complemented by a public information campaign in support of

the decision to establish an SPI Platform. This can be done by inviting the media to the seminars and by

publishing articles on SPI governance, results and experiences in other countries, interviewing banking

association managers in public and disseminating the opinions of academics and international

institutions.

The Toolkit provides comprehensive information for use by a media specialist in preparing a public

information campaign.

4.4 Improved Regulation Methods and Regulatory Impact Assessment Tools – Seminar for Public Authority Staff

Public authorities are usually interested in adopting the analytical methods of the SPI Platform – EU

Better Regulation and RIA, its quantitative evidence tool. Introducing RIA practice and the possibility of

exercising it with private institutions, but having the work done by the SPI Secretariat, is one of the most

appealing arguments in favor of the SPI Platform.

The seminar on RIA capacity‐building should be based on the model provided by the seminar in Albania

(http://www.spi‐albania.eu/en/ria‐capacity‐building/). This had three sessions: i) introducing participants

to EU Better Regulation and RIA; ii) applying RIA to proposed local regulations; and iii) assessing the

results of the exercise. This process takes some time and involves homework between seminar sessions.

The Convergence Program website gives a list of RIA experts who were invited to training sessions in

Albania, Bulgaria, Romania and Slovenia.9

ANNEX

ANNEX Section

Page Number

Annex IV‐1 Memo Outline on Consultations with Authorities 83

Annex IV‐2 Draft Introductory Letter to Public Authorities 85

Annex IV‐3 SPI Platform Presentation to Public Authorities 87

9 http://www.convergence‐see.eu/work‐method/to‐learn‐more.html



37

How to Launch an SPI Platform? This chapter sets out the steps to be taken to set up the SPI partnership once key public and private

stakeholders have agreed to it.

Establishing the SPI Committee sets up the partnership. This strategic decision must be made known to

other institutions and to the public. The Toolkit annexes document the actions to be taken at this stage:

an official invitation letter to the central bank and the finance and economy ministries, a note backing up

the letter, a draft joint letter inviting other institutions to join the partnership, a possible open letter from

the newly established SPI Committee, and the operating guidelines covering this stage.

5.1. Setting up the SPI Committee

On the basis of a memorandum detailing the favorable results of consultations with public authorities

(see Annex IV‐1), the management of the banking association will be able to take the decision to establish

the SPI partnership.

The next action is to set up the supervising body of the partnership, the SPI Committee, whose main

responsibilities at this stage are to raise awareness of the initiative, take the necessary steps to ensure

funding, recruit the SPI Secretariat team and decide on the first projects to be undertaken.

5.1.1 Official Invitation to the Central Bank and Ministries

The first step is to send official invitations to the central bank and relevant ministries to enter into the SPI

partnership (see Annex V‐1). The information provided in the note attached to the invitation letter (see

Annex V‐2) should enable the governing bodies of the public authorities to take an informed decision and

empower their members to represent them on the SPI Committee for the initial mandate to secure

financial coverage for SPI Platform activities.

5.1.2 Joint Invitation to Other Stakeholders

The two private‐public founding institutions should send invitation letters to other potential SPI partners.

As mentioned in Chapter 1, an institution can be invited to nominate a permanent observer or a member

to the SPI Committee, subject to approval by the initial SPI partners.

A joint letter constitutes a statement that the SPI partnership is established, so it will have a greater

impact on the invited institutions. A sample invitation letter is provided in Annex V‐3; it should be

adjusted in line with the agreed composition of the SPI Committee. The note in Annex V‐2 could be

attached to the joint letter because it provides summary information about the SPI Platform and the

responsibilities of the SPI Committee.

5.1.3 First SPI Committee Meeting

The establishment of the SPI Committee should be marked by a launch meeting to approve the operating guidelines for this pre‐funding stage, to clarify the responsibilities of each member institution and to define the next steps (see Annex V‐4).



38

The newly established SPI Committee should announce the launch of the partnership through an open

letter to be published in newspapers and posted on the partners’ websites (see Annex V‐5).

ANNEX

ANNEX Section

Page Number

Annex V‐1 Draft Invitation Letter to Central Banks and Ministry of Finance 95

Annex V‐2 Decision Note for Authorities 97

Annex V‐3 Draft Joint Invitation Letter to SPI Partners 101

Annex V‐4 SPI Committee Operating Guidelines in the Initiation Stage of the 103

Public – Private Partnership

Annex V‐5 Draft Communication on SPI Partnership launching 109



39

How to Fund SPI Platform Activities? 6.1. Fund‐raising for the Public‐Private Partnership Project

As sponsor of the SPI Platform, the banking association must take the lead in mobilizing financial

resources for the SPI Secretariat, recruitment of technical assistance to identify financial modernization

interventions, project implementation and organization of project‐related events such as awareness‐

building and public information campaigns.

Part of the cost should be covered by the banking association from members’ contributions, part in by

kind potential secondments from local private or public institutions and the rest through international

assistance. EU funding should be targeted, but other sources could be explored such as the European

Bank for Reconstruction and Development (EBRD)10 (www.ebrd.com/about/index.htm), the United States

Agency for International Development (USAID) (www.usaid.gov/business) and the Centre for

International Private Enterprise (CIPE) (www.cipe.org/programs/ba/index.php). Information on

international assistance available present in a country should be sought from the government donor

coordination department or similar body.

As an example of approaching international donors, Annex VI‐1 provides two samples of funding

applications sent to World Bank‐managed Financial Sector Reform and Strengthening (FIRST) Initiative by

SPI Albania.

6.2. Potential EU Funding Sources

The Financial Perspectives of the European Union adopted in April 2006 set the priorities of the EU for

2007–2013. On the basis of this document, the European Commission prepared 300 funding programmes

for this period, with revised budgets and renewed priorities of competitiveness, innovation and

employment.

The EC holds the view that it is of paramount importance to strengthen civil society in the region and that

its organizations demonstrate their legitimacy and credibility as reliable and constructive partners. One of

the programs developed by the EC is the Civil Society Facility (CSF) – Partnership Actions involving socio‐

economic partners that addresses the mandate of an SPI Platform.

Box 15‐ The EU Civil Society Facility

CSF has three areas of activity: i) local civic initiatives and capacity‐building; ii) People 2 People; and

iii) CSF Partnership Actions, which focus on developing networks of civil society organizations (CSOs) and

promoting transfers of knowledge and experience.

CSF Partnership Actions favor: a professionally operating civil‐society sector; new CSO networks,

strategies and initiatives; improved services and dissemination of common values in the region; and

greater support for democratic issues.

10 EBRD sponsors similar initiatives such as business support councils in Armenia, Georgia and Mongolia.



40

CSF is financed from the Instrument for Pre‐Accession Assistance (IPA) multi‐beneficiary program

managed by DG Enlargement, Directorate D, and from national IPA programs managed by EC delegations.

Regional partnerships should consist of at least three CSOs from three beneficiary entities and one from

the EU.

Activities under CSF‐partnership action include:

‐ organization and implementation of workshops, information events, training sessions and

communication and awareness‐raising campaigns;

‐ provision of training and expert advice to increase the capacity of CSOs to assist and advise their

members on the implementation and impact of the relevant EU acquis communautaire;

‐ organization and implementation of partnership activities to link business associations, trade unions,

think‐tanks and other CSOs with each other and with stakeholders; and

‐ establishment of communication Platforms to promote and exchange good practices and to formulate

recommendations and practical solutions (that is, the SPI Platform).

Banking associations could be beneficiaries of this program. They could apply under national IPA

programs or, if organized in a regional partnership, under IPA multi‐beneficiary program.

Under IPA multi‐beneficiary program, the SPI Platform program will be implemented through grant

contracts following calls for proposals. The selection and award criteria for the award of grants are laid

down in the practical guide to contract procedures for EC external actions.

The IPA is the EC’s financial instrument for the pre‐accession process for 2007–2013. Assistance is

provided on the basis of the European and accession partnerships of candidate countries, currently the

western Balkan countries and Turkey. The IPA is a flexible instrument that provides assistance depending

on the progress made by beneficiary countries and their needs as shown in EC evaluations and annual

strategy papers.

Box 16‐ Information about EU IPA

Beneficiary countries are divided into two categories depending on their status as candidate countries for

accession or potential candidate countries undergoing the stabilization and association process.

Candidate countries are Croatia, Turkey and the former Yugoslav Republic of Macedonia; potential

candidate countries are Albania, Bosnia and Herzegovina, Montenegro and Serbia including Kosovo as

defined by United Nations Security Council Resolution 1244. Exceptionally, and in the interests of

coherence and efficiency, other countries may benefit from measures financed under IPA, provided the

measures form part of a regional, cross‐border, trans‐national or worldwide framework and do not

duplicate other programs under EC external aid instruments.

The IPA was designed to address the needs of beneficiary countries in the context of pre‐accession. Its

main aim is to support institution‐building and the rule of law, human rights including the fundamental



41

freedoms, minority rights, gender equality and non‐discrimination, administrative and economic reforms,

economic and social development, reconciliation and reconstruction, and regional and cross‐border

cooperation.

To ensure targeted, effective and coherent action, the IPA is made up of five components covering

priorities defined according to the needs of beneficiary countries. Two components concern all

beneficiary countries:

‐ support for transition and institution‐building, aimed at financing capacity‐building and institution

building; and

‐ cross‐border cooperation, aimed at supporting beneficiary countries in cross‐border cooperation among

themselves and with Member States.

Banking associations should consult with the EU delegation in their countries for further details about

other EU programs that could finance SPI Platforms in full or in part.

6.3. Preparation of the SPI Project for EU Funding

To prepare the SPI project as a sound business case for EU funding, applicants should first understand EC

interests in a particular area. The project can be a strong case if it encompasses the EC priorities of

competitiveness, innovation and employment. SPI projects fall under “innovation”.

The applicant should select the optimal financing programme, because it is not possible to apply for

several programmes at the same time for the same action. The EC provides a search engine on European

programmes. The Convergence Program has identified the national IPA and the multi‐beneficiary IPA Civil

Society Facility – Partnership Actions project.

Preparing a EC funding application requires some knowledge of the EC programmes: their legal basis,

geographical coverage, eligible organizations, partnership criteria and date of the publication of the next

call for proposals.

The potential applicant should understand the life‐cycle of a program: i) preparation – analysis and

feasibility; ii) programming once the program is adopted and the legal aspects defined for one or more

years; iii) implementation – before 31 March of each year the EC publishes an annual work programme

defining the priorities of the program and the financial decisions for the year; and iv) re‐programming –

an evaluation at the end of the program to obtain operational results.

To select projects for the programs, the EC uses the call for proposals procedure. Examples may be found

on the Welcomeurope website. If the program has a preliminary stage, the call for proposals refers to

expression‐of‐interest papers (see Annex VI‐2 for the document prepared by Regione Puglia for an SPI

Adriatic program under the Southeast Europe Transnational Cooperation Program

(http://www.southeast‐europe.net/hu/), one of the regional cooperation programmes supported by IPA.



42

The applicant should recruit the project participants and establish distribution of responsibilities among

participants:

The contractor is the organization that has prepared the funding request and that will sign the grant agreement with the EC if the project is selected. In the case of an SPI it should be the banking association and/or the SPI legal entity.

The partners constitute a body that participates in the project from inception to conclusion. In the case of an SPI these include financial authorities, consumers’ associations, universities, think‐tanks and employers’ associations.

Other participants include the sub‐contractor,11 the associate partner or collaborator, the committee,12 the co‐financer and the sponsor. In the case of an SPI, the SPI Committee should be included.

The coordinator must prepare and propose to the partners a working method for the project and the

partnership. In the case of an SPI Platform project this is covered by the SPI Committee operating

guidelines; in the case of a regional partnership, the project should show the distribution of tasks among

regional partners. Documentation of a regional partnership can be based on standard letters of intent

provided by the EC for annexation to the application.

There must be a project sheet that answers the main initial questions:

What is the rationale for your project?

What is the context of your project – political, legislative, projects already funded in this field?

What are its objectives? A European project has to be sound, meet a global objective and have several objectives.

Whom does your project address?

How?

Which activities should be undertaken to achieve your objectives?

With whom?

What are the capabilities and appraisals needed for the project?

Where?

Where the project activities take place?

What will the results be?

What results do you aim to achieve through this project?

Annex VI‐3 gives a detailed project description for applying for EU funding.

11 The sub‐contractor is entrusted by the project leader or by a member of the partnership to carry out part of the

project on the basis of remunerated service delivery corresponding to the market price.

12 To set up a suitable project monitoring and evaluation system, the project partnership may canvass the opinions

of a scientific committee made up of external experts that will evaluate progress.



43

6.4 Other Potential Funding Sources

SPI Platform stakeholders (either public institutions or banking associations) can also apply for TAIEX

assistance to receive technical support from EU experts on specific financial modernization projects that

involve approximation with EU legislation. SPI Albania successfully applied for TAIEX assistance to ensure

that the solution identified by the local team on modernization of public procurement for financial

advisory services was in line with EU best practices. Annex VI‐4 gives information about TAIEX. Annexes

VI‐5 and VI‐6 show the application and the structure of the TAIEX‐supported intervention respectively.

ANNEX

ANNEX Section

Page Number

Annex VI‐1 SPI Albania FIRST Application Enquiries Example 111

Annex VI‐2 EU Project Expression of Interest 117

Annex VI‐3 Bank Enterprise Adriatic Observatory Project Draft 123

Annex VI‐4 TAIEX General Background 131

Annex VI‐5 TAIEX Project Application 133

Annex VI‐6 TAIEX Technical Meeting Agenda 139



45

How to Implement SPI Platform Activities? This chapter sets out the steps for implementing SPI Platform activities once funding has been secured.

Two issues have to be settled: i) Who is going to be in charge of daily operations? and ii) What projects

are to be undertaken by the partnership?

This chapter presents some functions of the SPI Secretariat, the hiring process, and the build‐up to the

first program activity. It provides supporting documentation on the sharing of responsibilities among SPI

Secretariat staff, draft job advertisements, a draft message to candidates, an outline of the memorandum

on the selection process and its results, a training package and a template for presenting the first

modernization program.

7.1. Building up the SPI Secretariat

This involves defining the allocation of responsibilities among the members and identifying and training

the team leader and the members.

7.1.1. Designing the SPI Secretariat

The SPI Secretariat is a small, efficient unit consisting of up to three full‐time professionals. It is set up to

help market participants and authorities to work harmoniously together on analysis of regulatory change

opportunities and on sound and credible proposals to the authorities.

The SPI Secretariat coordinates the work of the project working groups, supports the solution design

process, promotes technical public‐private consensus, prepares public‐private consensus and supports

enactment work. Annex VII‐1 presents the SPI Secretariat’s ToR and responsibilities.

The quality of the SPI Secretariat and its work is of utmost importance for the success of the SPI Platform.

The SPI Secretariat staff must have the necessary seniority to be able to:

bring together partners, managers and experts in the project working groups, which have to persuade senior managers of the financial institutions to assume ownership of the projects;

convene project working group meetings in an environment free of hierarchical constraints; the members’ professional status will give them the authority to support the project management group;

plan, implement and coordinate multi‐project activities;

carry out analytical activities, and research regulations and international experience;

design analytical tools; and

record accurately the substance and important nuances of the discussions of the project working groups and SPI Committee.

The main responsibilities of the SPI Secretariat are described in Chapter 1.1.8. Annex VII‐2 gives a formula

for the sharing of responsibilities among SPI Secretariat staff of three full‐time members – a general

manager, a director of the policy modernization program and an office manager.



46

If office management can be covered by the banking association, the SPI Secretariat analytical team could

be enlarged with another member, who could be a part‐time expert. Depending on the size of the SPI

Secretariat team, the responsibilities in the Annex can be shared differently: for example, some executive

tasks of the general manager could be allocated to an additional person.

7.1.2. Hiring the SPI Secretariat

Advertising the job

To ensure a large pool of candidates, job advertisements should be posted on the websites of the central

bank’s and the banking association, on specialized human resource websites and published in major

newspapers. Annex VII‐3 contains a sample job advertisement for the position of general manager.

Special attention should be given to the selection of the SPI general manager, who has to be a senior

person with management experience, entrepreneurial skills and the ability to run the day‐to‐day work of

the SPI Platform without intervention from the main SPI partners.

Selection process

The experiences of SPI Romania and SPI Albania lead to a four‐stage process of selection of the SPI

Secretariat that also involves other SPI partners. The process should be transparent and thorough so that

the SPI Secretariat acquires the professional legitimacy required to do its work. The interviewing panel

should consist of banking association representatives; it may be enlarged as the process develops with

representatives from partner institutions.

The sequence should ensure that the general manager is selected first so that he or she can be involved in

the recruitment of the other members of the SPI Secretariat. Recruitment of the office manager should

not pose problems unless further promotion to the status of analyst is foreseen. Selection of the right

analyst and compatibility with the general manager are most important.

Short‐listed candidates should be invited for a first interview. The message should contain a description

of the selection process and the requirements for each step (see Annex VII‐4).

Round One

The purpose of the first meeting is to get to know the candidates and their professional backgrounds and

to assess their compatibility with SPI Platform requirements. The interviews should take about an hour.

Candidates should be invited:

to familiarize themselves with the material on www.spi‐albania.eu and the banking association website. They should be invited to read about the SPI governance framework, the SPI Secretariat’s responsibilities and the activity programs;

to discuss their views on the SPI mandate and strategy; as indicated in the job advertisement, SPI Secretariat staff need to have an entrepreneurial desire to build a new institution;

to justify their suitability for the job in terms of professional and personal background.



47

Round Two

Round two is a technical session. Shortlisted candidates from round one should be asked to identify at

least three possible modernization projects that could be handled by the SPI Platform and to develop one

of them. This will test their understanding of SPI projects and their analytical and planning capabilities.

Round Three

The third round is dedicated to assessing team compatibilities and team‐building. Teams of candidates

shortlisted for general manager and director of analytics should be tested in several meetings to define

the dynamics of the team. The output of this round should be the proposed SPI Secretariat team.

Round Four

The proposed SPI Secretariat team should present their candidacies at an SPI Committee meeting, at

which a final decision should be reached. The selection panel should report to the SPI Committee meeting

on the selection process (see Annex VII‐5).

7.1.3. Training the SPI Secretariat

The SPI Secretariat should have a training session on the SPI Platform, SPI partner institutions and SPI

methods and procedure.

The banking association and the central bank should invite the SPI Secretariat team to study tours of their

institutions to acquaint them with their organization and activities. With regard to training on the SPI

Platform, Annex VII‐6 contains a self‐training support tool. The SPI Secretariat should receive training

opportunity on RIA procedure.

7.2 Preparing a Multi‐Annual Modernization Program

Multi‐annual modernization program should be built on the findings of the round of consultations with

the banking community, performed through bilateral meetings and through the seminar by the banking

association when building consensus on the establishment of the SPI Platform.

For consulting SPI stakeholders, the SPI Secretariat must use a detailed questionnaire adapted to the

national context. The SPI Albania 2009 questionnaire (Annex VII‐7) presents the proposed annual activity

program13). To facilitate project proposals, this document guided consultation among participants on

Albanian market issues, topics raised by the Governor of the Bank of Albania at the Banking Forum, the

Strategic Directions for the Albanian Financial Sector outlined in the National Strategy for Integration and

13 (http://www.spi‐albania.eu/admin/js/filemanager/files/web/spicommittee/thirdmeeting/02%20SPI%20Albania%20Proposed%202009%20Program.pdf



48

Development (2007–2013) and the Bank of Albania regulations issued in 2008. The SPI Secretariat should

look for similar issues in modifying the questionnaire.

Another source of SPI projects is analysis of the current state of the market compared with the EU

Financial Services Action Plan (FSAP) to identify issues where the SPI could be involved and issues that

were not proposed by the stakeholders. The directives of the Government for achieving EU acquis are to

be considered by the SPI Secretariat as complementary to project proposals by the public authorities.

On the basis of information gathered through the questionnaires, the SPI Secretariat must set up bilateral

talks with the proposers of projects to understand the problems to be addressed and the regulatory

implications. Project proposals should be listed in a table that should be sent to SPI stakeholders for

prioritization.

Of the proposals prioritized by SPI stakeholders, projects for the current year should be selected, bearing

in mind that the SPI Secretariat could be expected to manage two or three projects in four months. The

SPI General Manager then has to plan the implementation of the activity program for the current year.

The proposed SPI multi‐annual activity program has to be presented for the SPI Committee for approval

in the format presented in Annex VII‐8. The approved program should then be communicated to the SPI

stakeholders.

ANNEX ANNEX Section

Page Number

Annex VII‐1 SPI Secretariat Terms of Reference 145

Annex VII‐2 SPI Secretariat Responsibilities Sharing 149

Annex VII‐3 SPI Secretariat General Manager Advertisement 151

Annex VII‐4 SPI Secretariat Job Interview Invitation 152

Annex VII‐5 SPI Secretariat Selection Process Report 155

Annex VII‐6 SPI Secretariat Self‐Training Support 157

Annex VII‐7 SPI Platform Activity Program Building Questionnaire 169

Annex VII‐8 SPI Multi‐Annual Activity Program Template 181



49

What Are the Main SPI Platform Operating

Processes? Chapter 8 provides an overview of SPI activities and documentation. The SPI Committee operating

guidelines are completed, with more details on project management group activities and on EU Better

Regulation methods. Most documents prepared by the SPI Platform are standardized; the annexes to this

chapter contain templates to be used for project documents and for activity planning and reporting.

8.1. SPI Committee Operating Guidelines

The SPI Committee operating guidelines (see Annex I‐1) and their annexes govern the activities of the SPI

Platform. They provide the rules and procedures for decisions and executive activities in the SPI Platform

for all stages of project‐related activities:

the functions of the SPI Committee;

Project selection and approval (see Annex II of the SPI Committee Operating Guidelines);

Project implementation (see Annex III); and

Enactment activities (see Annex IV).

Annex V of the SPI Committee Operating Guidelines presents the cooperation between SPI stakeholders

and the SPI Secretariat when deciding on projects to undertake, identifying solutions, reaching consensus

on the proposals and enacting the agreed solutions.

8.2. Organizing Project Activities

The essence of the SPI Platform work methodology is that individual projects are placed under the

responsibility of a Project Owner who is appointed by the SPI stakeholder proposing the project. The

Project Owner assembles a public‐private Project Management Group; provides guidance to project

working activities; endorses final project working group recommendations before they are transmitted to

the SPI Committee for discussion and endorsement; and leads post‐SPI Committee approval enactment

promotion activities with relevant authorities.

The Project Manager and Co‐Project Manager, with SPI Secretariat support, identify the technical

expertise needed in the project working group and recruit the experts; clear the documents prepared by

the SPI Secretariat before submission for project working group discussion; lead project working

discussions.

The responsibilities of project working groups (see Annex III of the SPI Committee Operating Guidelines)

are summarized in Annex VIII‐1. This document should be handed to project working group members at

their first project meeting. For some of the projects, domestic or international experts, known as

technical anchors or TANs, may be needed to identify the most appropriate solutions.



50

The presentation shown in Annex VIII‐2 helps the SPI Secretariat to explain: i) what it is expected from

the project management team and from the project working groups; ii) SPI Committee responsibilities;

and iii) EU Better Regulation methods. The Annex explains the steps for analysis and provides examples

from the SPI Albania project in terms of understanding a problem, the general, specific and operational

objectives of the project and identification of possible solutions.

Annex VIII‐3 sets out models for sharing responsibilities between project working groups, TANs and the

SPI Secretariat in three situations:

when the project working groups and SPI Secretariat can achieve project objectives without

additional expertise;

when project working groups and the SPI Secretariat ask for the assistance of a TAN, but most of the analytical work is done by SPI Secretariat;

when the SPI Secretariat has a supporting role, with the analytical work covered by a TAN. Examples of minutes of meetings that must be prepared by the SPI Secretariat to record discussions of

documents and project progress is presented in Annex VIII‐4. It is important that the SPI Secretariat

accurately records points raised by project working group members during discussions and notes the

conclusions reached. Practical examples can be downloaded from http://www.convergence‐

see.eu/instrument/project‐working‐groups.html.

8.4 Project Documents

In the Annex section are shown examples of standard SPI project documents based on EU Better

Regulation approach (see Annex VIII‐5) to be prepared by the SPI Secretariat as projects develop:

Terms of Reference (Annex VIII‐6);

Scoping the Problem (Annex VIII‐7);

Note on International Experience (Annex VIII‐8);

Cost‐Benefit Impact Analysis (Annex VIII‐9);

Summary of the cost and benefits analysis (Annex VIII‐10);

Final project working group recommendations document (Annex VIII‐11).

Use of standardised documentation is a key operational process to enable the small SPI Secretariat team support many domestic expert teams to execute the financial modernization program. International experts bring with them their own idiosyncratic project management methodologies which are ill‐suited for the emergence of local analytical and project management capabilities. A detailed Terms of Reference, to be approved in the first project working group meeting, becomes the roadmap that will guide the work, step‐by‐step, with a strong focus on quick resolution of the solution‐finding process. The Scoping the Problem document provides a succinct institutional, legal and regulatory context, defines the nature of the problem to be solved (either a market or a regulatory failure), assesses the impact of this failure on the authorities policy goals and outlines possible solution options.



51

The Note on International Experience provides a benchmark on how the problem at‐hand has been addressed in other relevant countries or group of countries. It helps guide the project working group to identify solutions that would work in an international context. The Cost‐Benefit Analysis is an essential part of the solution‐searching as it purports to understand how proposed regulatory measures may affect clients, financial intermediaries and financial authorities. It provides a “reality‐check” on how whether the intended solution (or solution options) is likely to work out in practice. The resulting Summary is then discussed in a Market Consultation context to generate technical consensus on the final recommendation. The Recommendation document, cleared by the Project Owner, contains the proposed official decision document, together with background analyses that will help the enacting authority process the proposal through its own decision‐making circuit. These documents, codified by EU financial regulators as helping achieve the goals of “Better Regulation”, are also very useful to catalyze transparent and evidence‐based analytical collaboration between public sector and private sector experts, consistently with the high integrity standards now being implemented internationally for public‐private policy dialogue.

8.5 SPI Secretariat Reporting

The SPI Secretariat may plan activities and reporting on a weekly basis (see Annex VIII‐12). It should also

prepare monthly activity reports (see Annex VIII‐13) to be sent to SPI Committee members, SPI partners

and to the SPI website.

In order to have a comprehensive image of all activities project or non‐project related and of their

progress, SPI Secretariat could use a multi‐week planning board as exemplified in Annex VIII‐14.

To obtain a clear picture of stakeholders’ involvement in SPI activities, it is recommended that quarterly

or bi‐annual analyses be carried out of each party’s contribution to the partnership, in line with the

example of an SPI Romania report (Annex VIII‐15).

For Annual Reports, the SPI Romania 2007 and SPI Albania 2008 reports could be used as benchmark14.

8.6 Project Evaluation

It is a good practice to ask project working group members to evaluate the activities of the SPI Secretariat

at the completion of a project. This helps improve performance and is an effective mechanism for

feedback of financial community views of the activities of the SPI Platform. Project working group

members should be given an evaluation questionnaire (see Annex VIII‐16) at their first meeting so that

they can familiarize themselves with the aspects of Secretariat performance to be observed.

Annex VIII‐17 gives an example of a summary of SPI Secretariat performance as appraised by project

working group members in Albania.

14 SPI Romania: http://www.spi‐romania.eu/admin/filemanager/files/spi_romania_annual_report_2007.pdf SPI Albania: http://www.spi‐albania.eu/admin/js/filemanager/files/web/news/SPI%20Albania%20Annual%20Report%202008.pdf



52

ANNEX

ANNEX Section

Page Number

Annex VIII‐1 SPI Project Working Group Responsibilities 193

Annex VIII‐2 Project Working Group First Meeting Presentation 195

Annex VIII‐3 Responsibilities sharing PWG and SPI Secretariat 207

Annex VIII‐4 Example of Project Working Group Meeting Minutes 211

Annex VIII‐5 EU Better Regulation Methodology 217

Annex VIII‐6 Example of SPI Project Working Group Terms of Reference 219

Annex VIII‐7 Example of Scoping of the Problem Document 227

Annex VIII‐8 Example of Note on International Experience 241

Annex VIII‐9 Example of Cost‐Benefit Questionnaire 255

Annex VIII‐10 Example of Survey Summary of Cost‐Benefit Findings 279

Annex VIII‐11 Example of Project Working Group Recommendation Document 301

Annex VIII‐12 SPI Secretariat Weekly Planning Report Template 303

Annex VIII‐13 Example of SPI Secretariat Monthly Activity Report 305

Annex VIII‐14 Example of SPI Secretariat Multi‐Week Work Plan 307

Annex VIII‐15 Example of SPI Secretariat Stakeholder‐based Bi‐Annual Activity Plan 309

Annex VIII‐16 Example of SPI Secretariat Evaluation Questionnaire 317

Annex VIII‐17 SPI Secretariat Summary Evaluation 327

ADDITIONAL READING

1. Examples of SPI Albania and SPI Romania Project Working Group Meetings activities

http://www.convergence‐see.eu/instrument/project‐working‐groups.html

2. Example of SPI Albania Secretariat Activity Evaluation

http://www.convergence‐

see.eu/IMG/pdf/SPI_Albania_Secretariat_evaluation_Liquidity_Octobe_2009.pdf

3. Example of a Cost‐Benefit Qualitative Analysis Questionnaire

http://www.convergence‐see.eu/IMG/pdf/Capital_Adequacy_Questionnaire.pdf

4. Example of SPI Secretariat Activity Planning Reports

http://www.convergence‐see.eu/instrument/spi‐secretariat.html



53

How Can EBF Help Its Associates? 9.1. EBF Assistance for its Associates

One of EBF’s guiding principles refers at promoting Better Regulation in the EU and at winning support for

regulatory convergence abroad, in order “to alleviate the burden on banks and improve their

competitiveness”.

EBF identified the SPI Platform, designed and operated by the World Bank’s Convergence Program, as a

suitable instrument to implement these guiding principles in candidate and other countries in Eastern

Europe.

By sponsoring the publication of this Toolkit, EBF offers a new service to its Associates –support for

implementing SPI Platform and for helping raise financial support for these activities from EU financial

assistance programs. Through the Toolkit, EBF helps to enhance the analytical capacities of its Associates,

with positive effects on the integration of candidate and other Eastern European countries into the EU

Single Financial Market.

EBF supports its Associates in establishing and operating SPI Platform partnerships (please see Annex IX‐1

– the letter to EBF Associates). Possible EBF support measures are provided in Annex IX‐2.

9.2. EBF Support at each Stage of Implementation

9.2.1. Support for Associates in Building Consensus on Establishing SPI Platforms

Through the letter presented in Annex IX‐1, EBF could encourage its Associates to state their

commitment to bilateral discussions with members of banking associations and public authorities.

EBF might consider participating in meetings with stakeholders if required to do so by the Associate. The

presentation in Annex IX‐2 may be used to illustrate EBF’s offer on such occasions.

EBF experts could also participate in the Better Regulation and RIA seminar to share the knowledge of the

experiences of EU members, as reflected in its December 2007 report15 .

9.2.2. Support for Associate in Preparing a Request for EU Funding for an SPI Platform

EBF can keep its Associates informed of changes in the assistance programs developed by the European

Commission and could provide samples of successful applications. It can also provide supporting letters to

back up its Associates’ funding applications, and could intervene to facilitate the formation of the regional

partnerships. And, depending on the needs of Associates, EBF could help to mobilize assistance in drafting

the application for EU funding.

15 http://www.fbe.be/DocShareNoFrame/Docs/1/HOMLKALBOMBOBFOCMJFGNKABRDVOHT4JH681BOQHUC5N/EBF/docs/DLS/Better_Regulation_EBFReport_2007‐2007‐02318‐01‐E.pdf



54

EBF might consider applying for EU funding itself, and take part in forming a European partnership. As a

beneficiary of EU funding, EBF would have the financial means to provide technical assistance, organize

training and knowledge‐sharing events for its partners, offer guidance on efficient operation of SPI

Platforms, assess their performance and promote best practices and regional initiatives.

9.2.3. Assistance to Associates in SPI formation

EBF may send a congratulatory letter to the newly established SPI Committee on the occasion of its first

meeting (Annex IX‐3). This will reinforce its support for the initiative and offer its contribution SPI

Committee activities.

9.2.4. Support in Operating the SPI Platform

EBF can provide support for projects run by SPI Platforms through its members. Technical assistance

might take the form of peer review of documents produced by project working groups or advice on

international experience, EU regulations and possible solutions to problems.

EBF can make available to SPI Platforms a list of experts to be contacted if needed, and can facilitate

contact with them and encourage their participation in SPI Platform events or projects.

EBF can use its regular meetings to share knowledge about SPI Platforms. It could organize special events

and training seminars or workshops by pooling resources from SPI Platforms and from its members.

The EBF website could host a forum for SPI Platforms where members can share views, concerns and

solutions.

ANNEX

ANNEX Section

Page Number

Annex IX‐1 European Banking Federation Letter to SPI Committee 331

Annex IX‐2 Presentation on European Banking Federation Support 333

Offer to its Associates

Annex IX‐3 European Banking Federation Congratulatory Letter 335



55

Useful Reading Has the Italian Banking Association (A.B.I.) Contributed to Financial Sector Development in Italy?

A Case Study Report (December 2005)

http://www.convergence‐see.eu/IMG/pdf/Cesarini_Report.pdf

“Financial Sector Development: Why and How to Build a Public Private Partnership” (May 2005)

http://www.convergence‐see.eu/IMG/pdf/LP_Speeches_15_‐

_Financial_Sector_Development_When_and_How_to_Build_a_Public_Private_Partnership_‐

_Tshakhdzor_May‐05.pdf

Roger W. Ferguson Speech: “Financial regulation ‐ seeking the middle way”

http://www.convergence‐see.eu/IMG/pdf/Regulations_‐_The_Middle_Way.pdf

“Managing Regulation in a New Era”, McKinsey Quarterly (December 2008)

http://www.convergence‐see.eu/IMG/pdf/McKinsey_Quarterly_Dec_2008_‐

_Managing_regulation_in_a_new_era.pdf

“The Financial Industry Calls for Action to Strengthen the Global Financial System and Promote

Stability in Financial Markets “ (July 2009)

http://www.iif.com/press/press+76.php

http://www.iif.com/download.php?id=/11YetxP3hE=

“What Does SPI Albania Do?” SPI Committee and SPI Secretariat Presentations to the EU

Conference on Donor Coordination to the Western Balkans and Turkey (April 2009)

http://www.spialbania.eu/admin/js/filemanager/files/web/news/SPI%20Albania%20Donor%20C

onference%20SPI%20Committee%20Presentation.pdf

http://www.convergence‐

see.eu/IMG/pdf/SPI_AlbaniaDonorConferenceSPISecretariatPresentation.pdf

“How to Change a Law in Six Months: Improving Auction Procedures for Immovable Collateral

under Foreclosure” (July 2009)

http://www.spi‐albania.eu/admin/js/filemanager/files/web/news/FPD%20‐

%20Improving%20auction%20procedures.pdf



57

Annexes – Table of Content Annexes

Page

Chapter 1 Annex ........................................................................................................................................... 1

Chapter 3 Annex ......................................................................................................................................... 41

Chapter 4 Annex ......................................................................................................................................... 83

Chapter 5 Annex ......................................................................................................................................... 95

Chapter 6 Annex ....................................................................................................................................... 111

Chapter 7 Annex ....................................................................................................................................... 145

Chapter 8 Annex ....................................................................................................................................... 193

Chapter 9 Annex ....................................................................................................................................... 331

Annex I-1

SPI Committee Operating Guidelines

Context Enhancing the financial sector contribution to growth requires a large-scale fine-tuning of

micro-regulations that affect the efficiency of financial sector intermediation. These

actions have to take place in close cooperation between financial authorities, members of

the banking and financial industry, and users of financial services.

To accelerate this process, main financial sector stakeholders have agreed to launch the

“SPI Financial Sector Modernization Platform” (“SPI Platform”) and, in order to support

it, to establish a high-level public-private Steering Committee (the “SPI Committee”) that

will initiate, oversee and act upon analytical projects that hold the greatest potential for

their contribution to financial sector modernization.

The SPI Committee receives analytical support from the SPI Secretariat, which is jointly

managed by a General Manager, implementing and running together SPI Platform.

SPI is placed in the broader context of a regional financial sector modernization program

that will promote the launch of similar activities in neighboring countries to ensure

maximum regional cooperation and coordination.

SPI Committee Three Core Principles

The SPI Committee represents a high level commitment to public-private

collaboration to promote financial sector modernization.

The SPI Committee selects unanimously the Financial Sector

Modernization Program projects.

The SPI Committee commits to bring projects to final implementation with

utmost diligence by supporting the project working groups in their

analytical, consensus building and enactment activities.

SPI Platform ToolkitEuropean Banking Federation World Bank's "Convergence" Programme

Page 1 of 335

2

ARTICLE 1: SPI COMMITTEE PURPOSE Section 1. Mission Statement and Authority The SPI Committee represents a high level commitment to public-private collaboration to

implement financial sector modernization projects.

Its founding members are the Central Bank, Ministry of Finance/Economy and the

Banking Association.

The SPI Committee is responsible for selecting the analytical projects to be undertaken as

part of the Modernization Program. The SPI Committee undertakes projects with the

view to promote their enactment with the greatest effectiveness as provided by the

institutional means and instruments at the disposal of its members.

The SPI Committee will support with utmost diligence the analytical, consensus building

and enactment work of the projects.

The SPI Committee will submit the reports prepared by the SPI Secretariat to the

competent authorities for consideration and approval, will closely monitor progress of

their enactment, and will intervene as appropriate to ensure their speedy enactment and

implementation.

The SPI Committee may decide to establish links with other authorities and civil society

institutions with a key role in design and implementing financial sector modernization

solutions. The links may involve SPI Committee membership, formation of specific SPI

Committee consultative panels or other ad hoc arrangements as necessary.

ARTICLE 2: SPI COMMITTEE MEMBERSHIP

Section 1. Members The SPI Committee is composed of three founding members (hereinafter, the “SPI

Committee Members”) as follows:

1. Governor of Central Bank (Hosting Chairperson);

2. Minister/State Secretary of Ministry of Finance/Economy;

3. Chairman of the Banking Association

The SPI Committee Members operate in their personal capacity to promote, on a best

effort basis, win-win public-private solutions to financial sector modernization issues.

Their actions and decisions in the SPI Committee cannot be deemed having being taken

pursuant to the general powers and authority that are vested with each of them by her or

his institution.

Each SPI Committee member may appoint an Alternate SPI Committee member.

The SPI Committee may invite representatives of other institutions to attend its meetings

as permanent observers in order to enhance relevance and effectiveness of SPI

Committee-sponsored initiatives.


Page 2 of 335

3

Annex I contains the list of the SPI Committee members and permanent observers and of

their alternates.

The SPI General Manager participates in the SPI Committee meetings as observer, except

when the Committee determines to meet in executive session. The SPI Secretariat acts as

SPI Committee Secretary. The Secretary is in charge of drafting the SPI Committee

meetings agenda and disseminates minutes of SPI Committee meetings to the Members

for approval following each meeting.

Section 2. Term The SPI Committee has been established at the launch of SPI Platform that is, on [date].

ARTICLE 3: SPI COMMITTEE ACTIVITIES

General Remarks:

SPI Committee Members or their Alternates attend regularly all the meetings to underline

a high-level commitment to public-private dialogue. They must be able to actively

participate in Committee meetings and projects.

The specific role of SPI Committee is to:

1. Review the pipeline of micro-regulatory issues that require resolution and approve

the proposals for individual analytical projects prepared by the SPI Secretariat

consistently with the priorities for financial sector modernization. The selection

and approval process is extensively described in Annex II.

2. Provide high level representatives for SPI projects’ management teams and

experts for the project working groups, documents, data and information for the

analytical work, as extensively described in Annex V SPI Stakeholders

cooperation Guidelines and in Annex III SPI Working Group Activities

Guidelines.

3. Monitor, on a quarterly basis, progress of projects agreed and undertaken

according to the report submitted by the SPI Secretariat and discuss options to

bring them to practical conclusions in line with SPI Albania objectives.

4. Support the enactment of the SPI proposals, according to the provisions of Annex

IV SPI Cooperation for Enactment Activities.

5. Authorize SPI Secretariat to circulate certain work reports and recommendations

to respective counterparts.

6. Approve the annual report of SPI Platform for distribution to main stakeholders.

ARTICLE 4: SPI COMMITTEE MEETINGS

Section 1. Frequency, venue and chairmanship The SPI Committee meets formally at least quarterly. The SPI Committee Member

hosting the meeting will also act as a chairperson of the respective meeting.


Page 3 of 335

4

Section 2. Notice of meeting, agenda and quorum Notice of the meeting is provided in advance, with an agenda and respective meeting

materials e-mailed/mailed to the SPI Committee Members seven days prior to the

meeting.

The SPI Committee meeting agenda is prepared by the SPI Secretariat, in consultation

with SPI Committee Members.

A draft agenda is distributed to SPI Committee Members prior to the meeting. Any SPI

Committee Member may request inclusion of items in the agenda. S/he will do so by

contacting in written form the SPI Secretariat before the meeting.

A quorum shall be required to conduct the business of the SPI Committee. A quorum is

defined as a simple majority of the members.

Section 3. Meeting Records Minutes of SPI Committee meetings are kept and maintained by the SPI Secretariat.

Approved minutes are distributed to the SPI Committee Members no later than a week

after their approval. Meeting decisions are made publicly available in ways to be

determined.

Section 4. Decision Making and Method of Vote SPI Committee decisions are taken by consensus among the SPI Committee Members

present in the meeting.

Section 5. Compensation No SPI Committee Member will receive salary or any other honorarium for their services

under these bylaws.


Page 4 of 335

5

ARTICLE 5: OPERATING GUIDELINES AMENDMENTS

These guidelines shall govern the SPI Committee in all cases to which they are

applicable. The SPI Committee may adopt special rules of order if required. These rules

can be amended at any regular meeting of the SPI Committee by consensus, provided that

the amendment has been submitted in writing at a previous meeting.

[place, date]

Central Bank Governor Ministry of Finance/Economy

Chairman of Banking Association

Annexes Annex I List of SPI Committee members and permanent observers and of their alternates Annex II SPI Project Selection and Approval Process Annex III SPI Working Group Activities Guidelines Annex IV SPI Cooperation for Enactment Activities Annex V SPI Stakeholders Cooperation Guidelines


Page 5 of 335

6

List of SPI Committee members and permanent observers and of their

alternates

SPI Stakeholder SPI Committee Members

SPI Committee alternate members

Central Bank

Ministry of Finance/Economy

Banking Association

SPI Committee Permanent Observers

[Financial

Supervision

Authority]

[Ministry of

Economy and

Finance]


Page 6 of 335

7

Proposal, Selection and Approval Process for SPI Projects

Financial sector modernization

“Financial modernization refers to the process of financial innovation and organisational

improvements in the financial system that reduces asymmetric information, increases the

completeness of markets, increases opportunities for agents to engage in financial

transactions through (explicit or implicit) contracts, reduces transaction costs and

increases competition.” – An ECB Executive Board Member

I. Eligible projects to be undertaken under SPI Committee aegis

In order to be undertaken under SPI Committee aegis, projects should observe the

following eligibility criteria:

Relevance for both market players and authorities

SPI projects should have important public and private benefits in order to motivate

authorities and market participants to join forces in their preparation.

The public good benefits refer to financial innovation and organizational improvements

that reduce asymmetric information, complete the market framework, and increase

opportunities for public and competition among market players.

Examples of public benefits:

potential reduction in costs to users of bank products and

services;

improved access to bank products and services;

improved regulatory and enforcement environment;

enhanced tools for monitoring financial stability.

Examples of private benefits:

improvement of market infrastructure, accounting and

reporting systems;

diversification and growth of market opportunities;

reduction of costs.

Action lines

SPI projects should envisage the following areas of interest:

(a) new product development;

(b) cost efficiencies; and

(c) better industry-consumer relationships.

Benchmarking with the strategic directions set by the EU Commission to build

a single financial market


Page 7 of 335

8

SPI projects should contribute to the national efforts for EU accession.

The objectives of the Commission’s financial services policy over the next 5 years are to:

• consolidate dynamically towards an integrated, open, inclusive, competitive, and

economically efficient EU financial market;

• remove the remaining economically significant barriers so financial services can be

provided and capital can circulate freely throughout the EU at the lowest possible cost

– with effective levels of prudential and conduct of business regulation, resulting

in high levels of financial stability, consumer benefits and consumer protection;

• implement, enforce and continuously evaluate the existing legislation and to apply

rigorously the better regulation agenda to future initiatives;

• enhance supervisory cooperation and convergence in the EU, deepen relations with

other global financial marketplaces and strengthen European influence globally.

II. Proposal and selection process

A. SPI projects are proposed by stakeholders primarily and residually by the SPI

Secretariat based on the above mentioned criteria.

1. Stakeholders’ proposals

SPI Secretariat initiates the consultation process with stakeholders by sending them a

questionnaire on the initiatives suitable to be approached under SPI Committee aegis

(attached).

SPI Secretariat collects the proposals and starts mapping them in a descriptive matrix in

order to perform a first assessment on the eligibility of the proposals as SPI projects.

In order to get details on the background of the eligible issues, the objectives of the

projects, the possible implications, the possible involved parties and their contributions to

the projects, SPI Secretariat conducts interviews with main players.

2. SPI Secretariat’s proposals

SPI Secretariat performs analysis on the current status of the market as compared to

FSAP (Financial Services Action Plan) in order to identify areas and specific issues

where the SPI involvement could be needed and that were not proposed by the

stakeholders.

SPI Secretariat performs the necessary research in order to acquire information on the

context of the identified issues, on the European experience in solving the issues, on the

interested parties and potential impact of the project.

SPI Secretariat consults with the international donors’ community (World Bank Group,

EBRD, etc) in order to check on their plans and on the support they might need from the

SPI partnership.


Page 8 of 335

9

B. SPI Secretariat performs a brief impact assessment for all the proposed projects.

C. SPI Secretariat structures the proposals in a matrix, by estimated completion time and

by area of interest, detailing them on the following outline:

Description-Background;

Impact drivers (industry and public);

General economics;

SPI Committee involvement rationale;

Objective;

Proposed/expected contributions of the stakeholders and of SPI Secretariat.

SPI Secretariat justifies the non-inclusion of project proposals received from stakeholders

in the final proposal for SPI Committee consideration.

III. Approval process

Based on the matrix, in its quarterly meetings, SPI Committee approves the projects to be

undertaken under its aegis, having in view:

suitability of the project for the public – private partnership;

importance of the project proposals (in qualitative and quantitative terms);

balanced distribution across the action lines.

SPI Committee establishes priorities, stakeholders’ and SPI Secretariat’ contributions and

provides necessary guidance.

IV. Raising awareness on the SPI projects

In order to raise the stakeholders awareness on the SPI projects, on their expected

contributions in terms of specialists for the project working groups, data and information,

and in order to avoid any eventual overlapping, SPI Secretariat takes the following

actions:

SPI Secretariat sends the projects matrix, under SPI Committee members’

signatures, to stakeholders;

Secretariat posts the approved SPI projects on the SPI Albania website.


Page 9 of 335

10

SPI Working Group Activities

1. Setting up the Project Working Groups

Principles SPI Secretariat proposes the Project Working Groups composition having in

view the representation of the relevant stakeholders and the leadership. SPI partners undertake the projects’ ownership and ensure participation in the

Project Working Groups. PMT agrees on the project strategy and on the optimal composition of the PWG

in order to ensure timely achievement of the project objective a. Project Working Group composition

SPI Secretariat drafts the Project ToRs with the following structure (see template in

attachment 1 of this annex):

- background information;

- project objective;

- strategy;

- methodology (steps, output, contributions);

- Project Management Team and Project Working Group composition: o Project Management Team (PMT): Project Owner - represents the main

stakeholder at top management level and ensures the project oversight;

Project Manager – is appointed by the Project Owner (out of the PO’s

institution management staff) and ensures the management of the day-to day

activities; Deputy Project Manager(s) – represent(s) the other main

stakeholder(s) and second(s) the Project Manager in coordinating the day-to-

day activities;

o Project Working Group members: they represent all stakeholders, with

specific expertise profiles.

b. Project Working Group (PWG) appointment - SPI Secretariat proposes, in consultation with the Banking Association and Central

Bank, a list of persons to be appointed in the PWG/a list of banks to be invited to appoint members in the PWG.

- SPI Secretariat prepares the invitation/appointment letters according to the

attached templates.

- SPI Committee members/their representatives/POs sign the letters jointly or

separately (as agreed) in order to invite/appoint PWG members.

- Based on the confirmation received, SPI Secretariat contacts PMT, sending them the

draft ToRs.


Page 10 of 335

11

c. Strategy PMT meetings - PMTs gather/have individual meetings with SPI Secretariat in order to agree on the

project ToRs, on the adequacy of the PWG composition and on the first documents

prepared by SPI Secretariat.

- SPI Secretariat presents them the SPI concept, structure, activities and methodology,

emphasizing the responsibilities’ sharing among SPI Secretariat and PWG members.

- SPI Secretariat re-runs the appointment procedure in case PMT decides that changes

in PWG composition are needed.

2. Project Working Group activities

Principles PWG activities are based on homework, active participation in the discussions

and agreement on the final output. SPI Secretariat convenes PWG meetings, contributes to/prepares background

documentation, provides international benchmarking (directly or through contracted experts), centralizes individual contributions, ensures consensus – building and writes final documents to be presented for SPI Committee approval.

As evidenced either in the approved minutes of the relevant PWG meeting or through a separate approval by Project Management Team, PWG documents always reflect a PWG position. Whenever possible, they carry an explicit caption to this effect.

In order to ensure a fair representation, SPI Secretariat divides the banking community by clusters and makes sure the clusters are properly represented in PWGs.

a. Pre-gathering activities

In order to ensure the same level of knowledge for the PWG members, SPI Secretariat

and PMT share the responsibility of preparing:

- a compilation of the regulatory framework, or

- a background study, or

- a note on international experience, or

- the scoping the problem documents, as the case may be.

b. PWG meetings

- SPI Secretariat sends the meeting proposal with the agenda, ToRs and background

documentation.

- With the package for the first PWG meeting, SPI Secretariat forwards also the

questionnaire for evaluating their activity in order to get PWG members familiarized

and to follow the assessment criteria during the project life.

- At the beginning of the first PWG meeting, SPI Secretariat performs an introductory

presentation on SPI as described at 1.c.


Page 11 of 335

12

- In setting up the meeting details (date and venue), SPI Secretariat consults with PMT

and/or the Banking Association.

- SPI Secretariat drafts the minutes of the meetings and sends them to PWG for

approval.

- PWG meetings could be held on-line, through exchange of email messages. In this

case, SPI Secretariat will include in the meeting package the proposed draft minutes

of the meeting.

- PMT establishes the individual tasks.

- SPI Secretariat follows up with PWG members for the individual contributions.

- SPI Secretariat centralizes individual contributions and prepares intermediary and

final documents.

- PWG agree on the external expertise needed (expert profile and expected

contribution) and provides suggestions on possible/preferred providers of technical

assistance.

- SPI Secretariat contracts the expert and handles the relationship with this one.

c. Other project related activities

- PMTs will relate with all possibly involved institutions in reaching the projects’

objectives. SPI Secretariat will make the respective suggestions and will draft

proposed letters to be signed by PMT (preferably PO).

- PMT will attend meetings and discussions with the partner institutions.

- In case the project objectives or strategy will need to be changed due to objective

factors, SPI Secretariat will draft the proposed amendments to the project ToRs,

stating reasons and further actions. Based on PWG approval, SPI Secretariat will

inform the SPI Committee accordingly.

d. PWG recommendations - PMT will facilitate discussions and consensus reaching among PWG members

during their meetings and/or by drafting possible PWG proposals.

- Based on the discussions within PWG meetings, on PWG members’ individual

contributions and on research in the international experience, SPI Secretariat will

draft PWG recommendations.

- PWG members will approve the proposed recommendations, for further submission

to the SPI Committee. SPI Secretariat will seek for PO’s and/or PM’s express

approval.


Page 12 of 335

13

TERMS OF REFERENCE

Project: [Title]

Project Owner: Project Manager: Deputy Project Managers:

Technical Anchor (TAN):

Project Working Group:

I - Background - Identification of the problem

II - Project Objective – Definition of policy goals

III – Intended Strategy – Description of the BR 9 steps

=============IAAD============== Data=========Policy====Conclusion==

Consultation Consultation

IV- Methodology: from kick off to the accomplishment of the project

A. First PWG Meeting

Preparation of PWG 1st meeting (PM/DPM and SPI Secretariat)

PMG and SPI Secretariat to prepare: a. a background note on current situation. b. a note

on international experience.

Output: First Draft of “Scoping of Problem” for PWG discussion

Regulatory

context Problem

identification

Policy

goals Proposed regulatory

action

Consultations Feedback

goals

Questions

asked Overall

feedback Policy recommen-

dation

Regulatory

context

Problem

Identification

!

Policy

objectives

2

Proposed regulatory

action

3-4

Cost and

Benefit

questionnaire

5-9

Policy

document for

consultations

10

Consultati

on

Feedback

PWG

Policy

recommendati

on 11


Page 13 of 335

14

PWG 1st meeting

Objectives: to understand the current context and the policy goals;

to formulate recommendations on policy options.

Output: Information to complete Impact Assessment Analysis Document (IAAD) 1-4

(scoping the problem and impact analysis) (to be endorsed in PWG 2nd

meeting)

B. Second PWG Meeting Preparation of PWG 2nd meeting (PM/DPM and SPI Secretariat) PMG and SPI Secretariat to draft the questionnaire for data collection.

PWG 2nd meeting

Objective: to analyze the impact for users, regulated firms and regulators (cost-benefit

analysis)

Output: (a) Endorsement of IAAD (1-4) and (b) Final questionnaire

C. Third PWG Meeting

Preparation of PWG 3rd

meeting (PM/DPM and SPI Secretariat)

SPI Secretariat to: collect data from PWG participating banks analyzing; summarize

questionnaire results and prepare draft “summary impact assessment” for PWG

discussion and endorsement.

PMG and SPI Secretariat to draft policy option consultation paper

PWG 3rd meeting

Objectives: (a) to endorse Impact Assessment Analysis Document including “Summary

Impact Assessment”; b) finalize policy option consultation paper.

Output: IAAD; final policy option consultation paper on IAAD.


goals

Questions

asked Regulatory

context

Problem

identification

Policy

goals Proposed

regulatory

action

Overall

feedback

Policy

recommen-

dation

Regulatory

context

Problem

identification

Policy

goals

Proposed

regulatory

action


goals

Questions

asked

Overall

feedback

Policy

recommen-

dation


Page 14 of 335

15

D. Forth PWG Meeting

Preparation of PWG 4th

meeting (PM/DPM and SPI Secretariat :

a. Run consultations with stakeholders based on the policy option consultation paper; b.

Draft feedback document; c. Draft the final policy document.

PWG 4th meeting

Objective: a) to discuss the consultation feedback document and the policy document and

b) to agree on the policy recommendations.

Output: Policy recommendations.

Following PWG 4th

meeting:

Preparation of the SPI Committee paper.

Overall

feedback Regulatory

context Problem

identification

Policy

goals

Proposed

regulatory

action


goals

Questions

asked

Policy recommen-

dation


Page 15 of 335

16

Enactment Procedure for SPI regulatory proposals

I. Background

Ministry of Finance will be asked to facilitate the enactment of the law amendment

proposals prepared under SPI Committee aegis and endorsed by it.

The complexity of the enactment procedure requires a high degree of coordination

between MoF and SPI Secretariat in order to:

- avoid potential hurdles and delays;

- build on the extensive preparatory work done within the SPI PWGs;

- ensure the continuous support of the SPI Secretariat and of the PWG members;

- assist MoF staff to comply with the procedures with the utmost diligence.

II. Enactment procedure

A. Preparation of the enactment process

1. The enactment procedure starts with the preparation of the promoting package by SPI

Secretariat, based on PWG members’ contributions.

The promoting package should contain the followings:

- the law amendment proposals;

- the supporting notes including the Regulatory Impact Assessment findings;

- any other relevant document.

MoF will provide the list with the documents to be included in the promoting package.

2. SPI Committee endorses position paper and promotion package. Its members sign the

cover letter to the Minister of Finance prepared by the SPI Secretariat. In case the letter

cannot be signed in the SPI Committee meeting, the designated replacements of the SPI

Committee members or other appointed persons and the SPI Secretariat are responsible

for getting the signatures rapidly in order not to produce unnecessary delays. An

electronic system for speeding up the signatures gathering will be envisaged.

3. SPI Secretariat delivers the promoting package with the cover letter to the designated

contact person in MoF.

B. Enactment process within MoF

1. After receiving the documentation from the Minister’s cabinet, the designated MoF

contact person sends the law amendment proposal to the involved departments asking for

opinions. In order to facilitate the understanding process, the SPI Secretariat and/or the

MoF PWG member should be indicated to the departments as reference contacts.


Page 16 of 335

17

2. Designated MoF contact person takes care of the official public consultations (if

needed) by posting the law amendment proposals on MoF website.

3. Designated MoF contact person collects the opinions expressed by MoF departments

and notifies the SPI Secretariat on the suggestions made, asking for SPI Secretariat

support in assembling the final form.

4. Designated MoF contact person sends the promotion package to the involved

departments for final endorsement. After the final endorsement of the involved

departments, the promoting package is sent to the Minister for signature.

5. Designated MoF contact person collects the promoting package signed by the Minister

and sends it to BoA for endorsement, notifying the SPI Secretariat.

C. Co-Enactment process

. In case the law enactment requires Central Bank endorsement, the Central Bank SPI

Committee member will co-ordinate the necessary actions in order to get Central Bank

endorsement. SPI Secretariat will support Central Bank /MoJ with all the necessary

information.

2. In case the law enactment procedure requires the endorsement of other Ministries

(typically the Ministry of Justice) or other institutions, the designated MoF contact person

sends the promoting package to the respective Ministry/ institution, follows up and asks

for SPI Secretariat support.

2. The designated MoF contact person follows up with the respective Ministry/institution

on the status of the promoting package and asks for SPI Secretariat support.

3. After the promoting package is signed by MoJ, the designated MoF/MoJ contact

person sends it to the Government in order to be forwarded to the Albanian Parliament,

notifying all the co-signatory parties.

The detailed steps of the enactment procedure and the estimated time for each of the steps

are described in Attachment 1.

III. General provisions

1. SPI Secretariat will consult with MoF designated person in charge with the enactment

process regularly (weekly).

2. SPI Secretariat will open a separate file for every law amendment proposal under

enactment process (sample in Attachment 2) and will evidence the progress and the time

taken by each step.


Page 17 of 335

18

3. MoF will acknowledge the involved departments on the enactment procedure and will

communicate to SPI Secretariat the contact details of the departments’ management.

4. In order to establish a permanent contact with MoJ for enactment purposes, SPI

Secretariat will prepare a letter to be sent under SPI Committee members’ signatures to

MoJ in order to ask for support in enactment process and for designation of a contact

person for the enactment procedure.

5. For transparency reasons, the status of the enactment process will be communicated

monthly through the electronic newsletter to the large community of the SPI Committee

member institutions. A summary enactment monitoring table is also shown on the SPI

Albania website.


Page 18 of 335

19

Enactment procedure – steps and estimated time

No. Steps Responsible

parties Involved parties

Estimated time

1. Preparation of the promoting

package, based on the list

provided by MoF

SPI Secretariat PWGs According to the

approved plan

2. Preparation of the SPI cover

letter

SPI Secretariat SPI Committee SPI Committee

meeting /two days

after meeting

3. Signatures on the cover letter SPI Secretariat and

replacements of SPI

Comm. members

SPI Committee Two weeks/4 days in

case of electronic

signature

4. Sending the promotion

package to MoF

SPI Secretariat MoF designated

person

One day after getting

the last signature

6. Sending the law amendment

proposals for comments and

suggestions

MoF designated

person

Involved

departments

7. Support the presentation of

law amendment proposals

SPI Secretariat Involved

departments

8. Post the law amendment

proposals on MoF website (if

needed)

MoF designated

person

Relevant

department in MoF

9. Collect suggestions and

comments from departments

and comments from the

public

MoF designated

person

Involved

departments

10. Finalize the presentation note

and send it to be signed

MoF designated

person

Involved

departments

11. Send the promoting package

to the minister’s cabinet for

signing

MoF designated

person

Minister’s cabinet

12. Send the signed promoting

package to CB/other

institution/MoJ

MoF designated

person

CB member in the

SPI Committee

/MoJ

13. Internal BoA/other institution

procedure

CB member of SPI

Committee

CBo departments/

Governor’s cabinet

14. Follow up with CB/institution SPI Secretariat CB member in the

SPI Committee

15. Internal MoJ procedure MoJ designated

person

MoJ departments

/Minister’s cabinet

16. Follow up with MoJ MoF designated

person

MoJ designated

person


Page 19 of 335

20

Content of the file open for a law amendment proposal

No. Enactment step Time taken/ date

Actions to be taken by SPI Secretariat

Actions taken by SPI Secretariat

1. Signatures on the cover letter 2. Sending the promotion

package to MoF

3. Sending the law amendment

proposals for comments and

suggestions

4. Post the law amendment

proposals on MoF website (if

needed)

5. Collect suggestions and

comments from departments

and comments from the public

6. Finalize the presentation note

and send it to be signed

7. Send the promoting package to

the minister’s cabinet for

signing

8. Send the signed promoting

package to BoA/other

institution/MoJ

9. Internal NBR/other institution

procedure

10. Internal MoJ procedure


Page 20 of 335

SPI Albania

Interface Issues with Key Stakeholders Central Bank

Banking Association

The SPI Platform mandate is to prepare proposals for legislative, regulatory and self-regulatory financial sector modernization

initiatives which are likely to result in quick enactment and endorsement by competent authorities and institutions. Ex-ante

consensus on the relevance of the issue, quality of analysis and broad consensus on the proposal are key to fulfilling this mandate.

A high level public-private SPI Committee, supported by an efficient SPI Secretariat, oversee the integrity of these activities.

Placed at the juncture of public and private institutions, SPI Platform draws its legitimacy from helping each stakeholder fulfill its

specific mission in full transparency, within the boundary of solutions that reflect the broadest possible public-private consensus.

Accordingly, SPI Platform helps public institutions improve the effectiveness of their regulatory actions as defined by their own

mandates (e.g., financial sector efficiency, stability or consumer protection). It helps the market participant community minimize

the impediments to their businesses arising from unintended consequences of the regulatory framework. In both cases, it

significantly contributes to their institutional strengthening.

The SPI Platform relevance depends therefore on how its activities are aligned with the objectives of its key stakeholders. While

the SPI Committee has a key role in setting the general direction and in shaping the outcomes of the public-private partnership, the

SPI Secretariat has a specific responsibility to ensure that the technical work it supports is fully integrated into the operational

processes of the relevant stakeholders for issue alignment, consensus-building and, eventually, enactment support.

The following table describes the SPI Platform interface with the Central Bank and with Banking Association in each of the

four phases of the SPI activities (i.e., issue identification, solution searching, consensus-building and enactment promotion).


Page 21 of 335

22

ISSUE IDENTIFICATION – 3 TYPES

Description Central Bank (CB) Banking Association (BA)

SPI SECRETARIAT STRUCTURING ASSISTANCE

1) IMPACT ASSESSMENT

CB banking sector regulatory issues (with

the exclusion of monetary and foreign

exchange policy) where there is a need for

evidence-based policy making, in line with

EU “better regulation” approach.

- Identifies future regulatory initiatives where SPI could help perform impact assessment analysis in

order to better calibrate CB

policy actions

- Performs simplified / full RIA depending on the CB request

- Prepares and runs market surveys relating to BA - design of

questionnaire, calibration of survey, etc.

- Conducts public consultations as part of the RIA policy options

identification and assessment

- Submits to CB impact assessments for alternative regulatory options

2) PUBLIC CONSULTATIONS EU-wide regulatory initiatives which are

to be transposed into national legislation

and which should be calibrated based on

the national specificities

- Selects EU-wide regulatory initiatives (proposals of directives, regulations, etc.) where SPI could conduct public consultations and collects

the opinions of other public

and private stakeholders

- Identifies relevant stakeholders

- Raises awareness of the stakeholders on the issues under discussion

(round tables, seminars)

- Requests for stakeholders opinions

- Centralizes stakeholders opinions and draws preliminary conclusions

for CB.

3) SPI PROJECTS PROPOSALS CB issues (with the exclusion of monetary

and foreign exchange policy) where

involvement of market players is

beneficial for identification and discussion

of the most suitable regulatory solutions

AAB issues that require public approval

or endorsement are to be proposed as SPI

projects.

- Invites CB departments to identify project proposals to be undertaken by SPI

- Asks banks to provide

project proposals to be

undertaken by SPI - Proposes projects to be

undertaken by SPI raised by

BA members and/or Board that

are consistent with the SPI

mandate.

- Drafts project selection procedure and questionnaire

-Sets up strategy for project identification

- Ensures that the project proposals are in line with the project

identification and selection procedure

-Proposes projects based on search in international experience and

according to EC priorities

-Ensures a balanced project portfolio

-Prepares project proposals and sends them for SPI Committee approval

- Identifies the needed expertise and composition of the PMG and PWG

and prepares the Working Group (WG) invitation letters

- Prepares the ToRs of the project and sends them to PMG for

preliminary endorsement


Page 22 of 335

23

SOLUTION SEARCHING

Description/Comments Central Bank (CB) Banking Association (BA)

SPI SECRETARIAT ANALYTICAL SUPPORT

PROVIDING EXPERTISE

CB and BA support SPI projects

by mobilizing CB’s and member

banks’ staff.

- Provide leadership to Project Management Group

(PMG) and members to Project Working Groups

(PWG) - Support organization of technical seminars and other

project-related events

- Helps identify local experts

-Identifies the needed expertise and composition of the PMG and

PWG and prepares the Working Group (WG) invitation letters

- Prepares the PWG meetings

- Searches for solutions in international experience and EU

legislation

- Identifies the needs for international/local consultants

- Arranges for the consultants’ support

- Prepares documents for discussions

- Drafts RIA questionnaire (as part of the SPI Projects RIA)

- Collects data and performs calculations

- Organizes seminars and other supporting events ONGOING MONITORING AND FEEDBACK

CB monitors WG activities and

provides timely feedback.

- Ensure ongoing consultations with CB relevant departments and with banks and/or Technical Commissions - Provide instructions to their representatives in the PWG and liaise with SPI Secretariat

- Supports data collection by sending requests for data

on behalf of CB/BA to promote evidence-based policy

analysis

- Collects feedback from SPI stakeholders

- Collects and aggregates individual contributions

- Prepares documents presenting the solutions


Page 23 of 335

24

CONSENSUS-BUILDING

Description/Comments Central Bank (CB)

Banking Association (BA)

SPI SECRETARIAT CONSENSUS-BUILDING SUPPORT

ONGOING CONSULTATIONS

CB and SPI, BA and SPI consult

each other regularly to ensure full

alignment in reaching a common

solution.

- Ask CB Departments/banks to review

proposed PWG solutions

- Provide input on disputed issues

- Secure CB/BA Board endorsement for final recommendation

- Seeks for the representation of all stakeholders in the PWG

- Supports PMG in running the discussions in the PWG meetings

- Outlines the issues where a common solution was not identified

- Looks for international benchmarking in disputed solutions

- Asks for independent opinions on the disputed issues

- Provides ideas for reaching solutions acceptable to all parties

- Performs RIA for the disputed issues in order to facilitate the

best choice

- Sends the documents for consultation / endorsement to the

principals

PARTICIPATION IN DESIGN OF MARKET DRIVEN SOLUTIONS CB has the opportunity to participate in the design of solutions of private-driven projects and industry self-regulatory solutions BA has the opportunity to participate in the design of solutions of public-driven projects.

- Ask CB Departments/Technical

Commissions to review proposed PWG

solutions

- Provide input on disputed issues

-Seek for the representation of all

stakeholders in the PWG

- Outlines the benefits of promoting self-regulatory solutions as

part of the “better regulation” approach

- Ensures that the self-regulatory solutions embed safeguards

which are in line with the supervisory approach

- Supports PMG in running the discussions in the PWG meetings

- Looks for international benchmarking on possible solutions

- Asks for independent opinions on the proposed issues

- Performs RIA for proposed issues in order to facilitate the best

choice


Page 24 of 335

25

ENACTMENT PROMOTION

Description/Comments Central Bank (CB) Banking Association (BA)

SPI SECRETARIAT ENACTMENT SUPPORT

COORDINATION OF ACTIONS

CB, BA and SPI Secretariat coordinate actions in respect of full range of SPI projects

- Actively participate in promoting the legislative initiatives through letters and public interventions

- Send CB/BA submission under the public consultation process

- Prepares the law / regulations

enactment packages

- Prepares SPI Committee letters to the

legislative initiator or to the CB Board

for CB regulations

- Provides detailed description of RIA

to the legislative initiator or to the CB

Board

- Follows up with the legislative

initiator

- Notifies CB on the initiation of the

public consultation process - Sends SPI Secretariat submission

under the public consultation process

- Arranges and/or attends the meetings

with institutions involved in the

enactment process

- Prepares other documents as required

by the legislative initiator

- Coordinates issuing of CB regulations that have been designed under the SPI

- Asks BA members to send opinions under the public consultation process


Page 25 of 335


Page 26 of 335

1

1

SPI PARTNERSHIP FOR FINANCIAL SECTOR

MODERNIZATION

Presentation to EBF’s Associate’s Managementby [promotor][date] [place]

2

ForewordThis presentation is intended to offer a broad image on the SPI

partnership, on its objective, governance, processes, methodologies

and results.

This partnership, which brings together the experience and

knowledge of what is desirable and feasible from both a policy and a

business perspective, can be a powerful engine to promote financial

sector modernization.

This presentation should enable EBF’’s Associate’s Management to

take the decision to undertake some preliminary steps for

establishing a SPI platform to support a large financial sector


It is based on the Convergence Program’s experience with SPI

Romania and Albania (SPI stands for Special Projects Initiative 1/).

More details may be offered by request. 1/ www.spi-albania.eu and www.spi-romania.eu have more details.

3

Launched in July 2005 by the World Bank with support from Italy’s

Ministry of Economy and Finance, the Convergence Program promotes

public-private financial sector modernization in South-East Europe.

Under a “BOT” concept (Build-Operate-Transfer), the Convergence

Program helped authorities and market participants set up a

partnership (SPI Platform) that strengthens a country institutional

infrastructure with incentives and skills (analytical, consultative and

implementation) that support large-scale financial sector modernization

programs using EU Better Regulation methodology.

The SPI Platform has the potential to become a key financial sector

modernization hub, coordinating local and international players.

SPI Platform – a Convergence Program’s Product

4

Financial Modernization

“Financial modernisation refers to the process of financial

innovation and organizational improvements that make the

financial system more efficient by overcoming a number of

frictions such as asymmetric information, incompleteness of

markets, limited opportunities for agents to engage in financial

transactions through contracts, high transaction costs and

limited competition.”

-Gertrude Tumpel-Gugerell, European Central Bank Executive Board Member, July 2006 speech


Page 27 of 335

http://www.spi-albania.eu/



http://www.spi-romania.eu/



wb323932

Text Box

Annex I-2

2

5

How to Increase Financial Sector Efficiency?

Illustrative sources of efficiency gains

Sources of inefficiency1//

Lack of competition

Informational asymmetries

Incompleteness of markets

Lack of opportunities of engaging in fin. transactions

Transaction costs

The different amount of information available to agents (banks and clients) leads to inefficient transactions (both in prices and quantities)

The lack of suitable products and services prevents banks and potential clients from engaging in financial transactions

Legal system inefficiencies, the lack of banking skills, or of financial education of both consumers and firms prevents banks and potential clients from engaging in financial transactions

Stamp duties, registry taxes and other administrative costs may alter the prices of financial services and products, thus leading to inefficient transactions (both in prices and quantities)

Market power may lead to high prices and low traded quantities

• Increase of firms’ financial statement transparency

• Increase of credit history disclosure

• Provision of collaterals

• Modernization of legal systems / procedures

• Improvement of financial market responsiveness to real economy needs

• Increase of market participants’ information

• Increase of payment / settlement systems’ efficiency

• Reduction of administrative costs

• Increase of on-line banking services

• Moderniza-tion of antitrust regulation

• Antitrust supervision

• Increase of the number of financial markets

Financial efficiency is the condition under which resources available in a financial system are allocated towards the most valuable investment

opportunities at the lowest possible costs.

1/ Drawn from: European Central Bank, Financial Integration in Europe, Ch.2 ,“Financial Development Concepts and Measures”, April 2008

Illustrative (better) market outcomes • More lending to

SMEs

• More financial products available to exporting firms

• More mortgage lending • Enlargement of banks’ client base

• More customer oriented pricing policies 6

SPI Partnership (1) • SPI Partnership – a public-private cooperation commitment

for identifying commonly agreed solutions for financial sector modernization.

• SPI Partners - professional associations of the private financial institutions, regulating and supervising authorities of the financial market and of other closely related fields, academic institutions, international donors, etc.

• Banking Association • Central Bank • Ministry of Finance• Consumer Protection Agency• Financial Market Authority

• SPI Committee – top level representatives of SPI Partners ensuring the partnership’s management

7

SPI Partnership (2)

Funds

Human resources

Data

International expertiseInstitutional strengths

Financial sector

modernization

Public institutions: human resources, data, institutional strengthsPrivate institutions: human resources, data, funds, international expertiseSPI technical partner: human resources, funds, international expertise,

institutional strengthsMoU 8

SPI Partnership (3)• Partners’ main responsibilities:

– funding partially the financial needs of the SPI activities and applying for other donors’ support;

– SPI projects proposals and leadership;– members to all PWGs;– access to data;– empowering their representatives in SPI

Committee to endorse SPI documents;– actions for enactment of regulatory proposals

endorsed by SPI Committee.


Page 28 of 335

http://www.ecb.int/pub/pdf/other/financialintegrationineurope200804en.pdf

3

9

SPI Romania Partners• National Bank of Romania• National Authority for Consumers Protection • Ministry of Economy and Finance• Ministry of Agriculture and Rural Development• Ministry of Interior and Administration Reform• Anti-Money Laundering Office• TransFonD• Credit Bureau• National Authority for the Supervision of Personal

Data Processing • Rural Credit Guarantee Fund• Grading Commission for Comestible Seeds • Romanian Commodities Exchange• Romanian Stock Exchange• National Securities Comission• The National Association for Consumers’ Protection

and Promotion of Programs and Strategies from Romania

• Italian Banking Association• OECD• International Finance Corporation• World Bank

• Romanian Banking Association• Raiffeisen Bank • Raiffeisen Banca pentru Locuinţe• OTP Bank• Banc Post• CEC• BCR• Alpha Bank• BRD-GSG• UniCredit Ţiriac Bank• RIB Romanian International Bank• Credit Europe Bank• ING Romania• Citibank• ABN AMRO• ATE Bank Romania• Coface Romania• Cargill• KPMG • Deloitte• Clifford Chance• Algoritmics• Bearing Point• Financial Ombudsman Service, UK• Goodwood Financial Consulting 10

10

SPI Albania Partners• Albanian Association of Banks• Alpha Bank• Banka Popullore• Credins Bank• Credit Bank of Albania• Emporiki Bank • First Investment Bank• International Commercial Bank• Intesa Sanpaolo Bank• Italian Bank for Development• National Bank of Greece• National Commercial Bank• Pro Credit Bank• Raiffeisen Bank• Tirana Bank• United Bank of Albania • Union Bank• Albanian Mobile Communications • Vodafone Albania

• Bank of Albania• Ministry of Finance• Ministry of Economy, Trade and

Energy• Financial Supervisory Authority• Ministry of Justice • EURALIUS• National Accounting Council• European Bank for Reconstruction and

Development • International Finance Corporation • Council of Ministers (Donors’

Coordination Unit)• KPMG• Price Waterhouse Coopers• Deloitte• Ernst &Young

11

Romania’s 2007 Modernization Program

BOLD BLUE: NBR Proposals; BOLD RED: RBA Proposals; Black: Other Proposals

FINANCIAL SECTOR

MODERNIZATION CRITERIA

European Central BankAsymmetric information

Completeness of the market

Increased opportunities to

engage in financial transactions

Reduced transaction costs

Increased competition

Business development

Positive credit

information

sharing

1.Rural lending

2. Credit Rating

Agencies

Law on bank

guarantees

Loss-Given-Default

Database

Mortgage Loan

Database

Industry competitiveness

Stress testing MiFID

implementation

1. Prudential IFRS

2. Debit Instruments

E-Settlement

3. AML Law

4. Law on Safety

Industry reputation

1. Ombudsman

2. Consumer education

Total 2 3 3 5 1

Ital

ian

Ban

king

Ass

ocia

tion

12

SPI Romania 2008 Modernization Program


Page 29 of 335

4

13

FINANCIAL SECTOR

MODERNIZATION CRITERIA



Increased opportunities to engage in financial

transactions

Reduced transaction costs



1.Corporate /consumer lending2. Scoring cardsystem for individuals

3. Stock exchange

4. Leasing transactions5. Securitization6. AAB Strengthening

27. Consumer credit

7.Agricultural lending8. Lending to tourism

9. Lending to municipalities

10. Mortgage loans

11. Structural lending

12. Lending environment

13. Lending to PPPs

29. FX open positions

14. Strengthening bank staff


15. Credit risk in consumer lending16. Better credit risk management

17. KYC policies

30. Revising capital adequacy ratio28. Corporate governance and requirements for their administrators

18. Expansion of banks

activities

19. Reducing cash transactions20. Auction procedures for buildings21. AML reporting

22. Write-off of bad debts

23. Account stopping

31. Reviewing guidelines on banks’ liquidation32. BoA reporting33. Harmonizing accounting policies36. The impact of IFRS Implementation on the Banking Regulations

Industry reputation

34. Improving

access to basic

banking products

24. Financial

ombudsman

25. “Effective” interest

rate (EIR) 26. Consumer financial education35. Enhancing financial

consumer’s protection

Total 36 6 8 9 10 3

SPI Albania 2008 Modernization ProgramRed: Projects undertaken; Other BoA proposals; Other AAB proposals

14

Bank of Albania Governor’sBanking Forum Issues

European Central Bank

Asymmetric information




Reduced transaction

costs


Transparency in bank-customer relationship 0/1

Strengthening judicial system on banking issues 1/8

Revising regulatory act on Execution of Procedures on Bank accounts

The recognition of and protection from the various risks

5/8

Extension of the credit bureau services – 1.database for businesses2. scoring cards for individuals;


Revising Foreign Currency Open Position Loan loss provisioning under IFRS

The strengthening of internal control 0/1

Introduction of new products 1/7

Revising Public Procurement Law

The functioning of the interbank market 1/5

Preparing a feasibility study for a central depositary

The increase of funds circulation through the system 1/2

Establishment of a national settlement scheme for payments in foreign currency

The building of full technological capacities 1/2

Unique and rationalized reporting system

Facilitate lending to excluded groups 0/3

The increase of ALL denominated lending 0/3

Improvement of bank’s governance

Total :10 2 4 2 2

SPI Albania 2009 Financial Modernization Program (1)Projects undertaken: Public-private proposals; AAB proposals; Authorities proposals

15

SPI Albania 2009 Financial Modernization Program (2)Bank of Albania

Governor’sBanking Forum Issues


Asymmetric information Completeness of the market

Increased opportunities to engage in financial transactions

Reduced transaction costs Increased competition

Transparency in bank-customer relationship

1/1

1.Regulating bank communications of “effective” interest rate (EIR) offered to customers

Strengthening judicial system on banking issues

7/8

2.The creation of a complete regulatory framework on the merge and acquisitions of banks3.Clarification of non-residents’ banking status

4.Improving stability in the regulating environment

5.Facilitating expansion of banks activities6.Increase the number of specialized courts7.Improving auction procedures for movable collateral under foreclosure

8.Reviewing banking regulations on licensing

The recognition of and protection from the various risks 3/8

9.Modernizing moveable collateral registries10.Better functioning of Electronic Register of Commerce

11.Improving credit risk management in consumer lending

The strengthening of internal controls 1/1

12.Improving the lending environment

Introduction of new products 6/7

13.Strengthening the stock exchange 14. Developing pension funds 15.Facilitating leasing transactions

16.Facilitating structural lending17.Promote project financing

18.Guarantees for SME-s Lending


19.Improving FX market 20.Harmonizing accounting policies 21.Reducing paper-based documents

22.Link deposit insurance premiums to risk profiles


23.Improving transparency and equal access to guarantee funds

The building of full technological capacities

1/2

24.Optimizing Anti-Money Laundering Reporting

Facilitate lending to excluded groups

3/3

25.Improving access to basic banking products

26.Facilitating agricultural lending27.Facilitating lending to PPPs

The increase of ALL denominated lending

3/3

28.Increasing mortgage loans29.Facilitating lending to tourism30.Lending to municipalities

Total: 30 4 5 9 8 4

16

2007 SPI Romania Activityhttp://www.spi-romania.eu/spi-secretariat/activity-reports/

Financial Impact of Finalized SPI Projects (Mln, EUR) – First Full Year

16

Volume Impact (% of 2007 target)

Additional Lending Volume

0

10

20

30

40

50

60

70

80

90

0 170 220 240

Debit InstrumentsAML

Rural Lending

IFRS

Law on Safety

Bank Ombudsman

Cos

t Sav

ings

76%

Cost S

avin

gs Im

pact (%

of 2

007 ta

rget)

82%

182

73

236

Databases

134

99%

Positive Information

Total number of projects: 14

Self regulatory actions completed1. Expansion of positive information sharing2. Ombudsman3. Consumer financial education4. MiFID5. Credit exposures stress testing techniques

Regulatory changes underway6. Law on goods safeguard, values and persons protection 7. Electronic processing of debit instruments8. Amendments of the anti-money laundering law9. IFRS loan loss provisioning

Regulatory changes to be initiated10. Rural lending

Proposals to be completed in 200811.Law on bank letters of guarantee12.Mortgage loan servicing and loss given default databases13.Roland Berger study

Abandoned: 1 project14.Credit rating agencies


Page 30 of 335

5

17

2008 SPI Albania Activity At-A-Glancehttp://www.spi-albania.eu/

17

Completed projects: 31. The impact of IFRS implementation on Banking Regulations2. Changes and Amendments on the Civil Procedure Code3. Improvement of Bailiff Services

Legislative Outputs: 1. New Law on Liberalization of Bailiff Services2. Changes and Amendments to the Civil Procedure Code of Albania (reference to the execution of collateral

and enforcement of proceedings).

Analytical Outputs1. Recommendations on improving the public bailiff service2. Recommendations on the draft Law on Private Bailiff 3. Recommendations on amending the Civil Procedure Code4. Regulatory Impact Assessment on the Civil Procedure Code amendment proposals5. Recommendations on regulatory changes to be made in order to implement IFRS and an action plan on

issuance of the regulatory amendments 6. Summary findings of the survey on the banks’ readiness to implement IFRS

Operational Outputs1. Project Working Group Meetings held: 132. Participating Professionals: 753. Public Institutions Represented: 64. Private Institutions represented: 27

5. Projects Under Completion: 31. Reducing Cash Transactions2. Reviewing the Capital Adequacy Regulation3. Improving Consumer Financial Education

181818

SPI Albania Organizational Chart

Italics: Project Working Groups Private Sector Members

19

SPI Committee– Members:

• Central Bank- Governor & Hosting Chairperson,• Banking Association - Chairman, • Other authorities – Senior Officials,

– Main responsibilities• Selecting the analytical projects to be undertaken;• Monitoring and shaping work-in-progress;• Endorsing SPI projects recommendations;• Monitoring enactment progress of regulatory

proposals;• Intervening for speedy enactment and

implementation.

- Meetings - quarterly 20

SPI Project Working Groups– Project Management Team

• Project Owner - top level of the main stakeholder; project oversight• Project Manager – is appointed by the Project Owner (usually out of the

PO’s institution management staff) and chairs PWG meetings;

• Co- Project Manager(s) – represent(s) the other main stakeholder(s) and second(s) the Project Manager in coordinating PWG meetings.

– Project Working GroupComposition: 6-10 representatives of public and private stakeholders, with specific expertise profiles.Responsibilities:

– Actively participating in the meetings;– Providing contributions (their institutions’ experience, parts of

documents);– Validation of RIA questionnaire;– Providing data/filling in questionnaires;– Validation of RIA findings;– Approval of position/policy documents;– Supporting enactment activities.

– PWG gathering– Meetings: 3-4 meetings over 3 months


Page 31 of 335





6

21

SPI Secretariat – main responsibilities» Preparing SPI Committee meetings agenda, keeping meetings

records and distributing minutes to members;» Managing relationships with the banking community,

international banks, local experts and other technical assistance providers, etc.

» Building up the activity program;» Drafting project ToRs; » Organizing PWGs and their meetings;» Preparing background studies based on interviews, research,

international benchmark, compilation of regulations;» Summarizing individual contributions of the Project Working

Group members;» Preparing documents for PWGs discussions;» Preparing draft RIA questionnaire;» Collecting data and performing calculations;» Preparing SPI Committee documents;» Coordinating actions for promoting, enacting and implementing

SPI proposals;» Submitting periodical activity reports to stakeholders;

22

SPI– Structure and Processes

• Operating principles:– Local ownership – Programmatic focus – Mobilization of local expertise – Involvement of foreign experts to fill local knowledge

gaps – Disciplined program management – Evidence-based analytical methods to search for

solutions – Full transparency of our work – Strong practical impact orientation

• Operating guidelines

23

Policy Design Steps Purpose

Scoping of problem1. Problem identification To understand if a market/regulatory failure creates the case for regulatory

intervention.

2. Definition of policy objectives To identify the effects of the market /regulatory failure to the regulatory

objectives.

3. Development of “do nothing option” To identify and state the status quo.

4. Alternative policy options To identify and state alternative policies (among them the “market

solution”).

Analysis of impact5. Costs to users To identify and state the costs borne by consumers

6. Benefits to users To identify and state the benefits yielded by consumers

7. Costs to regulated firms and regulator To identify and state the costs borne by regulator and regulated firms

8. Benefits to regulated firms and regulator To identify and state the benefits yielded by regulator and regulated firms

Consultations9. Data Questionnaire To collect market structure data to feed into cost and benefit analysis

10. Policy Document To learn market participant opinions on various policy options

Conclusion11. Final Recommendations Final report based on Cost Benefit Analysis and market feedback

Source: CEBS-CESR-CEIOPS Better Regulation Template

SPI Promotes EU Better Regulation

24

Better Regulation Steps in SPI Projects

P

r

o

b

l

e

m

I

d

e

n

ti

fi

c

Regula

tory

contex

t

P

o

li

c

y

o

b

j

e

c

ti

v

e

s

P

r

o

p

o

s

e

d

r

e

g

u

l

a

C

o

s

t

a

n

d

B

e

n

e

fi

t

a

C

o

s

t

a

n

d

B

e

n

e

fi

t

q

I

A

A

D

P

W

G

P

o

li

c

y

r

e

c

o

m

=====Scoping of Problem========║====Analysis== =║= Policy║=Conclusion=

Of Impact Consultation

Better regulation - having a full picture of their economic, social and environmental impacts through the structured Impact Assessment tool.


Page 32 of 335

7

25

Why to take the initiative to build up a SPI?

Country Banking Community

Industry

Consensus-Building

Financial

Modernization(RIA Analyses & Training)

Association of Banks SPI Platform

Proprietary VehiclePartnership Vehicle with

Authorities and other Partners

26

Romanian Banking Association-SPI comparative capabilities

High

Low

Low

Medium

Medium

CO

NVE

NIN

G

AN

ALY

TIC

SB

ENC

HM

AR

KIN

G

CO

NSE

NSU

SB

UIL

DIN

G

SEM

INA

RS

IMA

GE

INST

ITU

TIO

NA

L

SPI extends RBA

capabilities in public sphere

StrongerSPI

capabilities

Strong RBA-NBR link

SPI with MEF/NACP

Weak for both

(RBI)

Much stronger

RBA capabilities

Broader RBA Reach

SPI

RBA

27

Benefits out of the participation in the SPI partnership

• Participation in setting up the regulatory agenda

• Active participation in solution design• Enhancing the evidence-based practice• Structuring dialogue with public institutions• Better work efficiency• Knowledge sharing with public institutions

and other market participants28

Proposed next steps• Steps for building consensus within the banking community:

– EBF Associate’s Management decision to start the assessment of the opportunity for establishing SPI:

• bilateral discussions with Associate’s members’ top management

• seminar for banks’ staff – invitation letter, seminar agenda, long presentation, outline of the memo on the seminar conclusions;

– EBF Associate’s Management decision on initiating the partnership.

• Steps for initiating the partnership:– Bilateral discussions between EBF’s Associate’s Management’s representative and top

level representatives of the public authorities– Seminar for public authorities’ staff;

– Official proposal to Central Bank;– Joint invitation (Central Bank – Banking Association) addressed to other stakeholders

• Steps for establishing and running the partnership- Executive Committee set up- Preparation of public-private partnership project- Submission of request for funding to European Commission

• First implementation steps of project when funding has been secured- Recruiting SPI Secretariat- Training SPI Secretariat- Annual activity program


Page 33 of 335


Page 34 of 335

1

Annex I-3

SPI Romania Achievements 2007 Program

Updated October 2008

Project Analytical Output Practical Impact Expansion of Positive Credit Information Sharing

• Preliminary RIA on the net benefits of positive information sharing • Recommendations on expanding positive information sharing through moral suasion

Change in the National Authority for Supervision of Personal Data Processing intentions to forbid positive information sharing

Increase in market share of banks reporting positive

information to the Credit Bureau from 27% in July 2006 to 85% by the end of 2007 through self-regulatory decision

EUR 130 mln./year potential increase in lending volume

Rural Lending • Preliminary RIA on the net benefits of new rural lending features • Recommendations on revamping the rural lending based on deposit certificates for cereals, including comprehensive package regulatory proposals and implementation plan

Partially enacted through Government Decision no. 520/2008

Increase in the loans granted to farmers under low risk

conditions Implementation of a real cereal market EUR 104 mln./year additional loans


Page 35 of 335

2

Project Analytical Output Practical Impact Anti Money Laundering Law

• RIA on the net effects of changing the AML Law • Recommendations on amending the AML Law by aligning it to the Third Directive and FATF Recommendations and by rationalizing the AML

reporting system

Enacted by Government Emergency Ordinance no. 53/2008

EUR 11 mln./year net benefits for the banking community

Electronic Processing of Debit Instruments

• Preliminary RIA on the effects of replacing manual processing with electronic one • Recommendation to implement electronic processing of debit instruments • Amendment proposals for the regulatory framework

Creating the necessary regulatory framework for implementing the electronic solution through Governmental Emergency Ordinances no. 38 and 29 /2008 and NBR Norms no. 7 and 7/2008 on cheques, drafts and promissory notes and Technical Norms no. 4 and 5/2008 as endorsed by European Central Bank (CON/2008/7)

Building industry consensus for the electronic solution Finalizing the Electronic Payment System EUR 30 mln./year net benefits for banks

IFRS Loan Loss Provisioning

• Recommendations on the general principles for the new NBR provisioning

Reaching consensus among stakeholders on the regulating principles

NBR is drafting new regulations to be issued in 2009


Page 36 of 335

3

SPI Albania Achievements 2008 Program

As of January 2009

Project A nalytical Output Practical Impact Improving

Auction Procedures for

Immovable Collateral under

Foreclosure

Recommendations on improving the public bailiff service

Recommendations on the draft Law on

Private Bailiff Recommendations on amending the

Civil Procedure Code Regulatory Impact Assessment on the

Civil Procedure Code amendment proposals

Legislative Outcome Bailiff: Law approved by Parliament on December 11, 2008 Civil Procedure Code: Amendments approved by Parliament on

December 29, 2008 Economic Impact

Civil Procedure Code: Reduction in the time for foreclosure of immovable collateral by

120 working days, increasing thus efficiency of the enforcement process

Improvement of the Albania’s rank in the World Bank Doing Business Contract Enforcement section by 7 (seven) places.

Benefits or cost savings for the creditor would be achieved through the increased debt recovery ratio and the earlier usage of “frozen” funds i.e. bad loans under foreclosure. The benefits for the banking community would vary from 15.5 million to 18.5 million euros. In an annual basis these benefits amount to 5 - 7% of banks’ operational expenses depending on the recovery moment (in the first or in the second auction).

Benefits and cost savings for the debtor would be achieved firstly, through benefit transfers from banks / creditors to consumers / debtor. Over a five year period a sustainable portion of these benefits will be transferred to consumers in the form of lower interest rates or higher funds available for loans. Secondly, debtors will benefit from the improved enforcement system through reduced fees and other payments


Page 37 of 335

4

Project A nalytical Output Practical Impact and accrued interest paid to the creditor. A slight improvement in the efficiency of the process would save 0.4 million euros for the debtors. Cost saved through reduced fees and payments would be in addition to the costs saved in the form of accumulated accrued interests (the interest accrued until the debt is recovered).

IFRS

implementation in Bank of

Albania Rule Book

Recommendations on regulatory changes to be made in order to implement IFRS and an action plan on issuance of the regulatory amendments

Summary findings of the survey on the banks’ readiness to implement IFRS

Regulatory Outcome Discussed by Ban k o f Alba nia Su pervisory Council in Novemb er

2008 and forw arded to th e Supervision Departmen t for implementation in November 2008.

Other Impact The categorization of the regulations to be changed by BoA for IFRS

implementation, with reference on amending priority and on depth of impact, giving also the sense of change.

The action plan for the issuing the amendments in order to harmonize the banking framework with the IFRS platform, adjusted by the necessary prudential concerns.

Clarification on IFRS implementation time and procedures issued by the National Accounting Council in July 2008


Page 38 of 335

A Financial Modernization Hub

SPI PlatformSPI CommitteeSPI Secretariat

Asymmetry of Information

Lower C

osts and Higher C

ompetition

Rob

ust F

inan

cial

Con

tract

sMarket Completeness

Project 1

Project 3

Project 4

Project 5

Project 6Project 7Project 8

Project 9

Project 10

Project 11

Project 12 Project 2


SPI Secretariat supports SPI Project Working Group without external technical supportSPI Secretariat supports SPI Project Working Group with limited external technical support

External experts prepare project with SPI Project Working Group support based on SPI methodologies

Donor Project Technical Support: Major, Focused, Nil Donor Program Support: Build-Operate-Transfer

Donor 1Donor 2….

Donor ADonor BDonor CDonor D…..


Page 39 of 335

wb323932

Text Box

Annex I- 4


Page 40 of 335

1

Annex III-1

Questions and Answers discussion instrument This document is intended to help the idea promoter in providing more details and

clarifications to the EBF” Associate’s Management during or at the end of the

presentation.

Question Why should EBF Associate be interested in SPI concept? Answer SPI deals with issues that have an ex-ante agreement of importance

for both market and authorities. Banking Association do not waste

resources on issues that may not be finally of interest to the

authorities. Furthermore, SPI tackles these issues through working

groups where experts from the authorities work together with

banking experts, exchanging opinion and reaching agreements.

Given this context, SPI regulatory proposals have therefore better

chances for enactment than proposals coming only from the

Banking Association.

Question Is SPI an institution or only an agreement? Answer SPI can be either a legal entity or only an agreement between its

partners. Operating based on the agreement provides more

flexibility, while a clear legal status brings more sustainability in

time. The clear legal status also makes it possible to organize

revenue-generating activities and to raise contributions from

domestic and international sources. As a legal entity, it can be a

separate one or incorporated in one of the partner institutions

(Banking Institute or Association).

Question What previous experiences are with SPI partnerships? Answer SPI has been established and operated in Romania and in Albania,

the promoter being World Bank’s Convergence Program.

Convergence Program ensured also major part of financing,

management of the SPI Secretariat and knowledge transfer.

Question Where there any achievements in these 2 cases? Answer Both SPI Romania and Albania had notable achievements, in terms

of outcomes (regulatory and self regulatory proposals), outputs

(increase in banks’ business or decrease in the operating costs,

measured through Regulatory Impact Assessment), and convening

capacity (an impressive number of experts from a large spectacle of

institutions).

Question What happened with SPI in Romania and in Albania? Answer After about 2 years of operations, Convergence Program transferred

the financial and executive management to the local stakeholders. In

Romania, SPI became an organizational unit in the Romanian

Banking Institute (an existing entity having as shareholders


Page 41 of 335

2

Romanian Banking Association and National Bank of Romania). In

Albania, SPI has been absorbed by Albanian Banking Association

by hiring as Secretary General the SPI Director for Financial

Modernization Program and Analytics.

Question Why Convergence Program withdrew from these 2 countries? Is it still a promoter of the SPI platform?

Answer Convergence Program principle is to Build-Operate-Transfer and

it’s main objective is to transfer knowledge and practice of

operating the partnership for a country financial modernization.

Convergence Program had a limited mandate, but the it left a

valuable legacy in terms of a comprehensive library of documents

available on its website (www. convergence-see.eu) and on the SPI

websites (www.spi-romania.eu, www.spi-albania.eu)

and a practical toolkit for establishing and running SPI platform.

Question Are there any other simultaneous initiatives in other countries? Answer The toolkit on how to establish and run the SPI platform has been

offered by Convergence and EBF to all EBF Associates from South

Eastern Europe and EBF will support the initiaves, playing also the

role of information center in this respect.

Question How is going EBF to support the initiative of establishing SPI? Answer

Question How much does it cost to run a SPI partnership by year? What costs are to be covered?

Answer The costs of an SPI platform comprise salary costs for the SPI

Secretariat, equipment purchase and operating cost (office costs,

event organizing costs, procurement costs, etc). The annual budget

of an SPI platform with a minimum SPI Secretariat formula and

with the punctual involvement of foreign consultants is estimated to

about EUR 100,000. For a 10 project annual program, this

translates in about EUR 10,000/project.

Question What have been the funding sources in Romania and in Albania?

Answer Convergence Program covered the costs of SPI Secretariat and of

the foreign expertise used, while the Banking Association

undertook office and events costs. When SPI was transferred, in

Romania, Central Bank covered 60% and Banking Association 40%

of the annual SPI budget. In Albania, the Banking Association

covered all costs.

Question Who is going to cover the establishing costs? Answer EBF’s Associates are expected to cover the establishing costs that

consist of organizing 2 awareness – raising events. EBF will cover


Page 42 of 335



3

its participations in meetings and in seminars. The costs might

encompass also the participation of experts in SPI partnership,

Better Regulation and Regulatory Impact Assessment, if needed.

Question What would be the financing scheme for running an SPI platform?

Answer Knowing the financial constraints of a banking association,

attracting EU funding for financing the major part of the needs is

envisaged for SPI platform. The toolkit provides a complete

package on the request for funding. A part of the annual budget is to

be provided by SPI partners and it can take the form of cash or of

in-kind contributions (participation of experts, etc).

Question How many staff has the SPI Secretariat? Answer A 3 persons formula is the minimum one to cover needs and

consists of a General Manager with analytical and PR skills and

executive responsibilities, a Director for Analytics and Policy (or

similar) and a junior covering the office management needs.

Question Who is going to undertake responsibility of the next steps? Answer The Chairman of the Banking Association and/or the Secretary

General/Executive Director are to take actions for raising awareness

on SPI platform and for building consensus on its establishment.

Question Isn’t SPI overlapping the banking association activities? Answer SPI complements and expands the Banking Association’s work

which consists of building an industry position on various issues.

The experiences in Romania and in Albania showed that SPIs and

the Banking Associations used their competitive advantages to

cooperate and leverage effects of their activities. SPI operating

guidelines provide a clear cooperation framework, showing by stage

of a project what the each institution should do. Furthermore,

projects selected have demonstrable strong public and private gains,

not only industry benefits.

Question Who is going to train SPI Secretariat on project management, Better Regulation and Regulatory Impact Assessment?

Answer If the toolkit and the document library are not considered to be

enough to allow a self-learning process, experts from the other SPI

platforms, from Convergence Program and out of the Convergence

Program’s collaborators may be invited for training sessions.

Question What is the most critical factor for SPI success? Answer From Convergence experience in Romania and Albania, the most

critical success factor is the commitment by the banking community

to support an instrument that addresses the community’s objectives

to have a modern regulatory framework that allows the development

of business opportunities.


Page 43 of 335


Page 44 of 335

Annex III-2

Draft communication to Banks’ management on assessing the opportunity of establishing a public – private partnership for

financial sector modernization

To: Banks’CEOs Dear Banking Association Member, Special Projects Initiative – SPI is a public – private partnership for the financial sector modernization by promoting regulatory and self regulatory measures. SPI undertakes projects that reduce asymmetric information, reduce costs of transactions, increase opportunities for transactions, contribute to complete the market and improve competition, in a structured and effective manner. Please find attached a presentation providing more details on SPI concept, object, procedures and methodologies. The [Management] of the Banking Association, in their meeting of …., recognizing the merits of the SPI platform and given the EBF’s offered support, has decided to take preliminary steps in order to assess the opportunity of establishing the public – private partnership. We would like to run a series of bilateral meetings for getting your institutions’ opinions on the projects that could be tackled by an SPI platform, the benefits, concerns and critical points in establishing and operating an SPI platform. We would like also to assess your institutions’ availability to support the activity of the public – private partnership. Our secretariat will contact your offices for setting up the details of the meetings. We send you herewith enclosed also a questionnaire to help you in formulating project ideas that could be handled by an SPI. We will inform you on the results of this consultation session and on the respective further steps. Thank you for your availability. Best regards, …


Page 45 of 335


Page 46 of 335

1

1

SPI PARTNERSHIP FOR FINANCIAL SECTOR

MODERNIZATION

Presentation to banks’ top managementby [promotor][date] [place]

2



and results.





This presentation should enable EBF’’s Associate’s Management to

take the decision to undertake some preliminary steps for

establishing a SPI platform to support a large financial sector




More details may be offered by request. 1/ www.spi-albania.eu and www.spi-romania.eu have more details.

3

SPI Partnership (1) • SPI Partnership – a public-private cooperation

commitment for identifying commonly agreed solutions for financial sector modernization.

• SPI Partners - professional associations of the private financial institutions, regulating and supervising authorities of the financial market and of other closely related fields, academic institutions, international donors, etc.

• Banking Association • Central Bank • Ministry of Finance• Consumer Protection Agency• Financial Market Authority 4


– funding partially the financial needs of the SPI activities and applying for other donors’ support;

– SPI projects proposals and leadership;– members to all PWGs;– access to data;– empowering their representatives in SPI

Committee to endorse SPI documents;– actions for enactment of regulatory proposals



Page 47 of 335







wb323932

Text Box

Annex III-3

2

5



FINANCIAL

SECTOR

MODERNIZATION

CRITERIA


Asymmetric

information

Completeness of

the market

Increased

opportunities to

engage in financial

transactions

Reduced

transaction costs

Increased

competition

Business

development

Positive credit

information

sharing

1.Rural lending

2. Credit Rating

Agencies

Law on bank

guarantees

Loss-Given-Default

Database

Mortgage Loan

Database

Industry

competitiveness


implementation

1. Prudential IFRS


E-Settlement

3. AML Law

4. Law on Safety

Industry

reputation

1. Ombudsman


Total 2 3 3 5 1

Itali

an

Ban

kin

g A

sso

cia

tio

n

6


7

FINANCIAL

SECTOR

MODERNIZATI

ON CRITERIA


Asymmetric

information

Completeness of

the market

Increased opportunities

to engage in financial

transactions

Reduced transaction

costs

Increased

competition

Business

development


3. Stock exchange

4. Leasing

transactions5. Securitization6. AAB Strengthening

27. Consumer credit



10. Mortgage loans



13. Lending to PPPs



Industry

competitiveness


17. KYC policies

30. Revising capital

adequacy ratio

28. Corporate

governance and

requirements for

their administrators


activities

19. Reducing cash

transactions

20. Auction procedures for

buildings

21. AML reporting



31. Reviewing guidelines

on banks’ liquidation

32. BoA reporting33. Harmonizing accounting policies36. The impact of IFRS Implementation on the Banking Regulations

Industry

reputation

34. Improving

access to basic

banking products

24. Financial

ombudsman


rate (EIR) 26.

Consumer financial

education

35. Enhancing financial


Total 36 6 8 9 10 3


8

Bank of Albania Governor’s

Banking Forum Issues


Asymmetric

information

Completeness of the

market

Increased

opportunities to

engage in financial

transactions

Reduced

transaction

costs

Increased

competition

Transparency in bank-customer

relationship 0/1

Strengthening judicial system on

banking issues 1/8

Revising regulatory

act on Execution of

Procedures on Bank

accounts

The recognition of and protection from

the various risks

5/8

Extension of the credit bureau

services – 1.database for

businesses

2. scoring cards for

individuals;

Enhancing banks’ liquidity

risk management

Revising Foreign Currency

Open Position

Loan loss provisioning

under IFRS

The strengthening of internal control

0/1

Introduction of new products

1/7

Revising Public Procurement

Law

The functioning of the interbank market

1/5

Preparing a feasibility study

for a central depositary

The increase of funds circulation

through the system 1/2

Establishment of a national

settlement scheme for

payments in foreign currency

The building of full technological

capacities 1/2



0/3

The increase of ALL denominated

lending 0/3


Total :10 2 4 2 2



Page 48 of 335

3

9


Governor’s



Asymmetric information Completeness of the

market




Transparency in bank-

customer relationship

1/1

1.Regulating bank

communications of

“effective” interest rate

(EIR) offered to customers

Strengthening judicial system

on banking issues

7/8

2.The creation of a

complete regulatory

framework on the merge

and acquisitions of banks

3.Clarification of non-

residents’ banking status

4.Improving stability in the

regulating environment

5.Facilitating expansion of banks

activities

6.Increase the number of

specialized courts

7.Improving auction procedures

for movable collateral under

foreclosure

8.Reviewing banking

regulations on licensing

The recognition of and

protection from the various

risks 3/8

9.Modernizing moveable

collateral registries

10.Better functioning of

Electronic Register of

Commerce

11.Improving credit risk

management in consumer lending

The strengthening of internal

controls 1/1

12.Improving the lending

environment


6/7

13.Strengthening the stock

exchange

14. Developing pension

funds 15.Facilitating

leasing transactions

16.Facilitating structural lending

17.Promote project financing


The functioning of the

interbank market 4/5

19.Improving FX market 20.Harmonizing accounting

policies

21.Reducing paper-based

documents

22.Link deposit insurance

premiums to risk profiles

The increase of funds

circulation through the

system 1/2

23.Improving

transparency and equal

access to guarantee funds

The building of full

technological capacities

1/2

24.Optimizing Anti-Money

Laundering Reporting

Facilitate lending to excluded

groups

3/3

25.Improving access to basic

banking products

26.Facilitating agricultural lending

27.Facilitating lending to PPPs

The increase of ALL

denominated lending

3/3

28.Increasing mortgage loans

29.Facilitating lending to tourism

30.Lending to municipalities

Total: 30 4 5 9 8 4

10



10



0

10

20

30

40

50

60

70

80

90

0 170 220 240


Rural Lending

IFRS

Law on Safety

Bank Ombudsman

Cos

t Sav

ings

76%

Cost S

avin

gs Im

pact (%

of 2

007 ta

rget)

82%

182

73

236

Databases

134

99%








11


11








121212




Page 49 of 335

http://www.spi-romania.eu/spi-secretariat/activity-reports/












4

13

SPI Committee– Members: top level representatives of the SPI

Partners• Central Bank- Governor & Hosting Chairperson,• Banking Association - Chairman, • Other authorities – Senior Officials,

– Main responsibilities• Selecting the analytical projects to be undertaken;• Monitoring and shaping work-in-progress;• Endorsing SPI projects recommendations;• Monitoring enactment progress of regulatory proposals;• Intervening for speedy enactment and implementation.

- Meetings - quarterly

14


• Project Owner - top level of the main stakeholder; project oversight• Project Manager – is appointed by the Project Owner (usually out of the


• Co- Project Manager(s) – represent(s) the other main stakeholder(s) and second(s) the Project Manager in coordinating PWG meetings.

– Project Working GroupComposition: 6-10 representatives of public and private stakeholders, with specific expertise profiles.Responsibilities:



– PWG gathering– Meetings: 3-4 meetings over 3 months

15








16





• Operating guidelines


Page 50 of 335

5

17





Prob

lem

Iden

tific

ation

Regula

tory

context

Poli

cy

obje

ctive

s

Prop

osed

regu

lator

y

actio

n

Cost

and

Ben

efit

anal

ysis

Cost

and

Ben

efit

ques

tion

naire

IAA

D

PW

G

Poli

cy

reco

mme

ndati

on

18

Romanian Banking Association-SPI comparative capabilities

High

Low

Low

Medium

Medium

CO

NVE

NIN

G

AN

ALY

TIC

SB

ENC

HM

AR

KIN

G

CO

NSE

NSU

SB

UIL

DIN

G

SEM

INA

RS

IMA

GE

INST

ITU

TIO

NA

L

SPI extends RBA

capabilities in public sphere

StrongerSPI

capabilities

Strong RBA-NBR link

SPI with MEF/NACP

Weak for both

(RBI)

Much stronger

RBA capabilities

Broader RBA Reach

SPI

RBA

19




and other market participants20

SPI Platform - Costs and funding sources

• Annual budget - about EUR 100,000 – SPI Secretariat– Events– Office costs– International consultants

• Funding costs – major part EU funding- small participation of the Banking Association - in kind contributions of the other stakeholders


Page 51 of 335

6

21

Proposed next steps• Steps for building consensus within the banking community:

– EBF Associate’s Management decision to start the assessment of the opportunity for establishing SPI:

• bilateral discussions with Associate’s members’ top management

• seminar for banks’ staff – invitation letter, seminar agenda, long presentation, outline of the memo on the seminar conclusions;

– EBF Associate’s Management decision on initiating the partnership.

• Steps for initiating the partnership:– Bilateral discussions between EBF’s Associate’s Management’s representative and top

level representatives of the public authorities– Seminar for public authorities’ staff;

– Official proposal to Central Bank;– Joint invitation (Central Bank – Banking Association) addressed to other stakeholders


• First implementation steps of project after securing EU funding – Recruiting SPI Secretariat- Training SPI Secretariat- Annual activity program

22

Q & A session


Page 52 of 335

1

Annex III-4

FINANCIAL SECTOR MODERNIZATION PUBLIC CONSULTATION QUESTIONNAIRE

Financial sector modernization “Financial modernization refers to the process of financial innovation and organizational improvements in the financial system that reduces asymmetric information, increases the completeness of markets, increases opportunities for agents to engage in financial transactions through (explicit or implicit) contracts, reduces transaction costs and increases competition.” – An ECB Executive Board Member Dear Banking Association Member, Banking Association is interested in hearing the market’s opinion on practices, norms and regulations presently applicable in the our financial market that may need to be updated to enable the delivery of financial services activities at conditions that prevail in more developed EU countries. The changes should help meet one or more of the five major modernization objectives outlined by the European Central Bank, as summarized in the statement placed at the opening of this document. In line with the EU Better Regulation principles, we may consider setting up a structured platform to analyze these modernization proposals in partnership with regulatory authorities and with support from European Banking Federation. European Banking Federation and the World Bank’s Convergence Program put at our disposal a comprehensive toolkit in this respect. Similar platforms have been established in Romania (www.spi-romania.eu) and in Albania (www.spi-albania.eu). We cordially invite you to give your opinion by returning to the Banking Association the attached questionnaire duly filled. Section A offers a list of projects that were undertaken or were proposed in Romania and Albania cases by SPI stakeholders; we invite you to tick in the projects that might be of interest for our economy also. Section B gives you the possibility to formulate project proposals by market area. After consolidating your answers, the Banking Association will organize a public consultation with banks’ staff to discuss the possible elements of a modernization program and the feasibility to carry on proposed analytical initiatives in partnership with relevant public and private stakeholders. For any question you may have, please contact us at our secretariat.

Sincerely, Banking Association


Page 53 of 335

2

Section A: SPI Platforms portfolio of projects/project

proposals

No Project Proposal Yes Comments A. Projects undertaken in Romania in 2007

Reducing asymmetric information 1. Positive credit information reporting 2. Credit exposures stress testing techniques Completeness of the market 3. Revamping rural lending based on deposit

certificates

4. Credit rating agencies 5. M iFID implementation Increased opportunities for business 6. C onsumer financial education 7. B anking Ombudsman Reduced transaction costs 8. I mproving AML reporting 9. Electronic processing of debit instruments 10. Loss Given Default databases 11. Provisi oning under IFRS 12. Opti mizing banks’ security Increased competition 13. Mortgage loan database

B. Projects undertaken in Albania in 2008

Reducing asymmetric information 14. Impact of IFRS implementation on banking

regulation

Completeness of the market 15. Capital adequacy to credit and operational

risks

Reduced transaction costs 16. Redu cing cash transactions 17. Improving auction procedures under

collateral foreclosure

C. SPI Albania 2009 activity program

Reducing asymmetric information 18. Extension of the credit bureau services –

1.database for businesses 2. scoring cards for individuals;

Completeness of the market 19. Enhancing banks’ liquidity risk

management


Page 54 of 335

3

No Project Proposal Yes Comments 20. Revising Public Procurement Law 21. Preparing a fe asibility study for a ce ntral

depositary

22. Establishment of a national settlement scheme for payments in foreign currency

Increased opportunities for business23. Revising Foreign Currency Open Position 24. Loan loss provisioning under IFRS Reduced transaction costs 25. Revising regulatory act on Execution of

Procedures on Bank accounts

26. Unique and rationalized reporting system D. Other SPI Albania 2009 project proposals

Reducing asymmetric information 27. Modernizin g moveable collateral registries 28. Improving the lending environment 29. Better functioning of Electronic Register of

Commerce

30. Improving access to basic banking products Completeness of the market 31. The creation of a complete regulatory

framework on the merge and acquisitions of banks

32. Clarification of non-residents’ banking status

33. Strengthening the stock exchange 34. Developing pension funds 35. Facilitating leasing transactions Increased opportunities for business36. Improving stability in the regulating

environment

37. Facilitating structural lending 38. Promote project financing 39. I mproving FX market 40. Facilitating lending to PPPs 41. Facilitating agricultural lending 42. Facilitating lending to tourism 43. Lending to municipalities Reduced transaction costs 44. Facilitating expansion of banks activities 45. Increase the number of specialized courts 46. Improving auction procedures for movable

collateral under foreclosure

47. Improving credit risk management in consumer lending

48. Guarantees for SME-s Lending


Page 55 of 335

4

No Project Proposal Yes Comments 49. Harmonizing accounting policies 50. R educing paper-based documents Increased competition 51. .Regulating bank communications of

“effective” interest rate (EIR) offered to customers

52. Reviewing banking regulations on licensing 53. Link deposit insurance premiums to risk

profiles

54. Improving transparency and equal access to guarantee funds


Page 56 of 335

6

Section B: Identification of project proposals by market area B1. Lending

Examples of sources

of efficiency gains Reducing

information asymmetries


Opportunities to engage in financial

transactions

Reducing transaction costs

Increase competition

Increase of firms’ financial statement transparency

Increase of credit history disclosure

Provision of collateral

Increase of the number of markets

Modernization of legal systems/procedures

Improvement of financial markets responsiveness to real economy

Increase of market participants’ information


Page 57 of 335

7

Examples of sources of efficiency gains

Reducing information asymmetries



transactions



Reduction of administrative costs

Increase of on-line banking services

Modernization of antitrust regulation

Antitrust supervision

Support of national/international competition

Other project proposals


Page 58 of 335

8

B2. Payments

Examples of sources of efficiency gains

Reducing information asymmetries



transactions



Increase of credit history disclosure

Increase of the number of markets

Modernization of legal systems/procedures

Improvement of financial market responsiveness to real economy


Increase of payment/settlement systems efficiency




Page 59 of 335

9

Examples of sources





transactions








Page 60 of 335

10

B3. Deposits Examples of sources





transactions



Provision of collaterals Supply of innovative financial products and

services

Improvement of financial market responsiveness to real economy








Page 61 of 335

11

Redu cing information asymmetries



transactions





Page 62 of 335

Annex III-5

Check list for the bilateral meetings with the banking community

No. Issue to be checked

Notes

1. Understanding SPI Platform

2. Valuable aspects of a SPI Platform

3. Negative aspects

4. Concerns

5. Critical aspects

6. Potential projects

7. Opportunity to establish SPI Platform

8. Feasibility (with EU funding)

9. Availability to contribute to SPI

Platform’s activities, including

undertaking ownership for projects

10. Various suggestions (on strategy,

future steps, etc.)


Page 63 of 335


Page 64 of 335

Annex III-6

Invitation letter to the seminar on SPI Platform for the banking community

Dear Sir/Madam, Invitation to the Banking Association’s Seminar on SPI Platform – a Private - Public

Partnership for Financial Sector Modernization

Special Projects Initiative – SPI is a public – private partnership for the financial sector modernization by promoting regulatory and self regulatory measures. SPI undertakes projects that reduce asymmetric information, reduce costs of transactions, increase opportunities for transactions, contribute to complete the market and improve competition, in a structured and effective manner. The concept has been developed and implemented by World Bank’s Convergence Program in Romania and in Albania. The Banking Association is organizing public consultations on the opportunity and feasibility of adopting this cooperation platform in our country, one of the actions under these being a seminar on SPI Platform. The objective of the seminar is to introduce SPI Platform’s object, organization, projects, procedures and methodologies to the banking community and to have a prompt feedback on benefits and concerns, and on potential projects to be handled under such a public-private partnership framework. Please find enclosed the agenda of the seminar. The Banking Association has the pleasure to invite your institution to attend the seminar on SPI Platform that is to be held on [date] at [place]. As the seminar will detail more on technical aspects of the SPI Platform, the targeted audience is institutions’ middle management. Please confirm your attendance by [date] to the Banking Association’s Secretariat [phone, email address, persons]. We are looking forward to seeing you at the seminar.


Page 65 of 335


Page 66 of 335

Annex III-7

Agenda

Seminar SPI Platform – a Private – Public Partnership

for Financial Sector Modernization [place, date, time]

09:00 – 09:15 Distribution of Seminar Agenda and copies of the documents available 09:15 – 09:30 Welcome Speech (Banking Association Chairman) 09:30 – 12:00 First Session of the Seminar – Introducing SPI Platform

a. SPI Objective, Organization, Object and Achievements in other countries

b. SPI Methodologies and Procedures – Project Management and Better

Regulation 12:00 – 12:15 Coffee Break 12:15 – 13:00 Second Session – Brainstorming on SPI Platform

a. SWOT Analysis of SPI Platform b. Potential SPI Projects

13:15- 13:30 Closing Remarks (SPI Committee Members)


Page 67 of 335


Page 68 of 335

1

1

SPI Platform a Private – Public Partnership for Financial Sector Modernization

Presentation to the banking community

By Banking Association[date, place]

8

2

ForewordThis presentation is intended to offer a comprehensive image on the

SPI partnership, on its objective, governance, processes,

methodologies and results.







This presentation should enable the banking community to exercise a

SWOT analysis of the SPI Platform in the particular national context

and a project pipeline for an eventual country platform.

1/ www.spi-albania.eu and www.spi-romania.eu have more details.

3

First Session Introducing SPI Platform

a.Objective, Organization, Object and Achievements in other countries

4





Program helped authorities and market participants set up a

partnership (SPI Platform) that strengthens a country institutional

infrastructure with incentives and skills (analytical, consultative and

implementation) that support large-scale financial sector modernization

programs using EU Better Regulation methodology.





Page 69 of 335







wb323932

Text Box

Annex III-8

2

5


―Financial modernisation refers to the process of financial








6

Financial Stability and Financial Efficiency

Central Bank

Legislative and regulatoryauthorities

Financial Institutions

Firms / Associations of

firms

Consumers / Associations of

consumers

Legal systems

Central Bank

Financial markets

authorities

Financial StabilityGovernance, Risk Management, Capital and Liquidity

Efficiency

Optimal

Supply-Demand

Match

7

Financial Modernisation Challenges Illustrative Comparative Dimensions

Financial Stability• Authority vested in a small

number of institutions• ―Risk prevention‖ focus

• Codified best practice (international standards & codes)

• ―Super-equivalency‖ approach

• Regulation and supervision mutually reinforcing

• ―Better Regulation‖ creates more accountability

• Core sovereignty responsibility

Financial Efficiency• Authority dispersed across many

institutions• ―Enabling‖ focus

• No established conceptual framework

• Close institutional coordination• Limited implementation monitoring

feedback• ―Better Regulation‖ not sufficient to

capture efficiency gains • Users’ bottom-up advocacy

needed

8

How to Increase Financial Sector Efficiency?

Illustrative sources of efficiency gains

Sources of inefficiency1//

Lack of competition

Informational asymmetries

Incompleteness of markets

Lack of opportunities of engaging in fin. transactions

Transaction costs

The different amount of information available to agents (banks and clients) leads to inefficient transactions (both in prices and quantities)

The lack of suitable products and services prevents banks and potential clients from engaging in financial transactions

Legal system inefficiencies, the lack of banking skills, or of financial education of both consumers and firms prevents banks and potential clients from engaging in financial transactions

Stamp duties, registry taxes and other administrative costs may alter the prices of financial services and products, thus leading to inefficient transactions (both in prices and quantities)

Market power may lead to high prices and low traded quantities

• Increase of firms’ financial statement transparency

• Increase of credit history disclosure

• Provision of collaterals

• Modernization of legal systems / procedures

• Improvement of financial market responsiveness to real economy needs

• Increase of market participants’ information

• Increase of payment / settlement systems’ efficiency

• Reduction of administrative costs

• Increase of on-line banking services

• Moderniza-tion of antitrust regulation

• Antitrust supervision

• Increase of the number of financial markets

Financial efficiency is the condition under which resources available in

a financial system are allocated towards the most valuable investment

opportunities at the lowest possible costs.

1/ Drawn from: European Central Bank, Financial Integration in Europe, Ch.2 ,―Financial Development Concepts and Measures‖, April 2008

Illustrative (better) market outcomes • More lending to

SMEs

• More financial products available to exporting firms

• More mortgage lending • Enlargement of banks’ client base

• More customer oriented pricing policies


Page 70 of 335

http://www.ecb.int/pub/pdf/other/financialintegrationineurope200804en.pdf

3

9



• SPI Partners• Central Bank• Banking Association• Ministry of Finance• Consumer Protection Agency• Financial Market Authority• [SPI Technical Partner]


10

SPI Partnership (2)

Funds

Human resources

Data


Financial sector

modernization


institutional strengthsMoU

11


• Partial costs of SPI Secretariat activities (banking association);

• SPI projects proposals and leadership;• members to all PWGs;• access to data;• empowering their representatives in SPI

Committee to endorse SPI documents;• actions for enactment of regulatory proposals


12

SPI Romania Partners• National Bank of Romania• National Authority for Consumers Protection

• Ministry of Economy and Finance

• Ministry of Agriculture and Rural Development

• Ministry of Interior and Administration Reform

• Anti-Money Laundering Office

• TransFonD

• Credit Bureau

• National Authority for the Supervision of Personal

Data Processing

• Rural Credit Guarantee Fund

• Grading Commission for Comestible Seeds

• Romanian Commodities Exchange

• Romanian Stock Exchange

• National Securities Comission

• The National Association for Consumers’ Protection

and Promotion of Programs and Strategies from

Romania• Italian Banking Association• OECD• International Finance Corporation• World Bank

• Romanian Banking Association• Raiffeisen Bank

• Raiffeisen Banca pentru Locuinţe

• OTP Bank

• Banc Post

• CEC

• BCR

• Alpha Bank

• BRD-GSG

• UniCredit Ţiriac Bank

• RIB Romanian International Bank

• Credit Europe Bank

• ING Romania

• Citibank

• ABN AMRO

• ATE Bank Romania

• Coface Romania

• Cargill

• KPMG

• Deloitte

• Clifford Chance

• Algoritmics

• Bearing Point

• Financial Ombudsman Service, UK

• Goodwood Financial Consulting


Page 71 of 335

4

1313

SPI Albania Partners• Albanian Association of Banks

• Alpha Bank• Banka Popullore• Credins Bank• Credit Bank of Albania• Emporiki Bank • First Investment Bank• International Commercial Bank• Intesa Sanpaolo Bank• Italian Bank for Development• National Bank of Greece• National Commercial Bank• Pro Credit Bank• Raiffeisen Bank• Tirana Bank• United Bank of Albania • Union Bank• Albanian Mobile Communications • Vodafone Albania

• Bank of Albania

• Ministry of Finance• Ministry of Economy, Trade and




141414

Mr. Fatos Ibrahimi, First Deputy Governor, Bank of Albania Mr. Nezir Haldedaj, General Treasury Director, Ministry of Finance Ms. Anila Jani, Market Surveillance Director, Ministry of Economy, Trade and Energy

Mr. Pierfrancesco Gaggi, Italian Banking Association

Mr. Libero Catalano, Chairman, Association of Albanian Banks

Mr. Keler Gjika, Deputy Chairman, Financial Supervisory Authority

Mr. Luigi Passamonti, Head of Convergence Program, The World Bank

Prof. Dr. Adrian Civici, Rector, European University of Tirana

SOLUTION FINDING (Based on RIA-based public-private consultations)

SOLUTION ENDORSEMENT AND ENACTMENT


TECHNICAL CONSENSUS-BUILDING

SPI Committee



SPI SecretariatMrs. Ramona Bratu, Head, SPI Regional Operations

DirectorMrs. Anuela Ristani, Director of Operations

Mrs. Evis Gjebrea, Consultant

Mrs. Endrita Xhaferaj, Director Financial

Modernization Program and Analytics

15


• Central Bank- Governor & Hosting Chairperson,• Banking Association - Chairman, • Other authorities – Senior Officials, • SPI Technical Partner (non voting)

– The nominal list of SPI Committee members and observers and of their alternates is attached to the operating guidelines.


- Meetings - quarterly 16


• Project Owner - represents the main stakeholder at top management level and ensures project oversight

» including signing off final SPI Committee recommendations;• Project Manager – is appointed by the Project Owner (usually out of the PO’s

institution management staff) and chairs PWG meetings; • Deputy Project Manager(s) – represent(s) the other main stakeholder(s) and

second(s) the Project Manager in coordinating PWG meetings.– Project Working Group

Composition: 6-10 representatives of public and private stakeholders, with specific expertise profiles.

Responsibilities:

– Actively participating in the meetings;– Providing contributions (their institutions’ experience, parts of documents);

– Validation of RIA questionnaire;– Providing data/filling in questionnaires;– Validation of RIA findings;– Approval of position/policy documents;– Supporting enactment activities.

– PWG gathering

• ToRs• List of eligible persons – in consultation with stakeholders• Invitation letters – to be signed by SPI Committee members

– Meetings: 3-4 meetings over 3 months


Page 72 of 335

5

17

SPI Secretariat (1)

SPI GeneralManager

SPI Director, Financial Modernization Program and Analytics

Office manager

•Central Bank background

•Policy design experience

•Good writing skills

•Excellent organization skills

•Communications

•Commercial banking background

•Analytical skills

•Strategic thinking

Experts

18

SPI Secretariat (2)• Director for Financial Modernization Program and Analytics

– Project-related responsibilities:• Run consultations for proposing the annual financial ,modernization program• Project ToRs drafting• Drafting list of eligible persons/project in consultation with stakeholders; Drafting, getting

signatures and sending invitation letters• Preparing background studies • Summarizing individual contributions• Preparing documents for PWG discussions• Preparing draft RIA questionnaire• Collecting data and performing calculations• Preparing draft ToRs for the expert• Preparing SPI Committee summary documents

• Office Manager – Project-related responsibilities:

• Organizing PWGs meetings• Preparing PWG meeting minutes• Mobilizing International expertise

— Other responsibilities• Planning and reporting• Organizing events• Taking care of logistics• SPI Committee secretary

• About 30 documents/month and about 60 different actions/month

19

SPI Secretariat (3) 10 GOLDEN RULES FOR CONSENSUS - BUILDING

• Gaining PWGs confidence through a very good preparation of the project papers and of PWG meetings

• Maintaining a neutral position in PWG meetings• Focusing PWGs discussions• Accurate minutes of PWGs meetings• Keeping a clear track on disputed issues• Asking each party’s arguments on disputed issues

• Looking for international experience for disputed issues• Asking for third parties’ opinions on disputed issues

• Searching for middle-way solutions• Asking for PWGs’ approval on documents, particularly

for SPI Committee recommendations.20



FINANCIAL

SECTOR

MODERNIZATION

CRITERIA


Asymmetric

information

Completeness of

the market

Increased

opportunities to

engage in financial

transactions

Reduced

transaction costs

Increased

competition

Business

development

Positive credit

information

sharing

1.Rural lending

2. Credit Rating

Agencies

Law on bank

guarantees

Loss-Given-Default

Database

Mortgage Loan

Database

Industry

competitiveness


implementation

1. Prudential IFRS


E-Settlement

3. AML Law

4. Law on Safety

Industry

reputation

1. Ombudsman


Total 2 3 3 5 1

Itali

an

Ban

kin

g A

ssoci

ati

on


Page 73 of 335

6

21


22

FINANCIAL

SECTOR

MODERNIZATI

ON CRITERIA


Asymmetric

information

Completeness of

the market



transactions

Reduced transaction

costs

Increased

competition

Business

development


3. Stock exchange

4. Leasing


27. Consumer credit



10. Mortgage loans



13. Lending to PPPs



Industry

competitiveness


17. KYC policies


adequacy ratio

28. Corporate

governance and

requirements for



activities

19. Reducing cash

transactions


buildings

21. AML reporting






Industry

reputation

34. Improving

access to basic

banking products

24. Financial

ombudsman


rate (EIR) 26.

Consumer financial

education



Total 36 6 8 9 10 3


23




Asymmetric

information

Completeness of the

market

Increased

opportunities to

engage in financial

transactions

Reduced

transaction

costs

Increased

competition


relationship 0/1


banking issues 1/8

Revising regulatory

act on Execution of

Procedures on Bank

accounts


the various risks

5/8



businesses


individuals;


risk management


Open Position


under IFRS


0/1


1/7


Law


1/5









capacities 1/2

Unique and

rationalized

reporting system


0/3


lending 0/3


Total :10 2 4 2 2


24


Governor’s




market






1/1

1.Regulating bank

communications of




on banking issues

7/8

2.The creation of a

complete regulatory








activities


specialized courts



foreclosure

8.Reviewing banking




risks 3/8





Commerce




controls 1/1


environment


6/7


exchange










policies


documents





system 1/2

23.Improving





1/2




groups

3/3


banking products



The increase of ALL

denominated lending

3/3




Total: 30 4 5 9 8 4


Page 74 of 335

7

25



25



0

10

20

30

40

50

60

70

80

90

0 170 220 240


Rural Lending

IFRS

Law on Safety

Bank Ombudsman

Cos

t Sav

ings

76%

Cost S

avin

gs Im

pact (%

of 2

007 ta

rget)

82%

182

73

236

Databases

134

99%



Self regulatory actions completed

1. Expansion of positive information sharing2. Ombudsman3. Consumer financial education4. MiFID5. Credit exposures stress testing techniques

Regulatory changes underway

6. Law on goods safeguard, values and persons protection 7. Electronic processing of debit instruments8. Amendments of the anti-money laundering law9. IFRS loan loss provisioning

Regulatory changes to be initiated

10. Rural lending

Proposals to be completed in 2008

11.Law on bank letters of guarantee12.Mortgage loan servicing and loss given default databases13.Roland Berger study

Abandoned: 1 project

14.Credit rating agencies

26


26








27

First Session Introducing SPI Platform

b. Methodologies and Procedures

28





• Operating guidelines – please see www.spi-albania.eu


Page 75 of 335








8

29


Scoping of problem

1. Problem identification To understand if a market/regulatory failure creates the case for regulatory

intervention.


objectives.



solution”).

Analysis of impact

5. Costs to users To identify and state the costs borne by consumers




Consultations

9. Data Questionnaire To collect market structure data to feed into cost and benefit analysis


Conclusion

11. Final Recommendations Final report based on Cost Benefit Analysis and market feedback



30


Prob

lem

Iden

tific

ation

Regula

tory

context

Poli

cy

obje

ctive

s

Prop

osed

regu

lator

y

actio

n

Cost

and

Ben

efit

anal

ysis

Cost

and

Ben

efit

ques

tion

naire

IAA

D

PW

G

Poli

cy

reco

mme

ndati

on




31

Banking Association

Central Bank

Other SPI

Partners SPI

Secretariat

SPI pipeline

SPI Projects

SPI Committee

– project approval

projects of public-private interest

EU priorities, other countries, interviews,

research

Banks

1. Issue identification and selection

SPI Project Phases (1)

-Consult with authorities on their plans for regulatory changes-Consult with entire banking system through a questionnaire-Conduct interviews with selected banks to identify the most critical issues that need a resolution in collaboration with authorities-Post the preliminary list of projects on website for public consultations-Use preliminary RIA to prioritize issues

32

-Experts for PWG-Support for data collection and consultations -RIA findings validation

-Identifies the needed expertise-Searches for solutions in international experience/EU legislation - Identifies the needs for international/local consultants- Arranges for the consultants’ support

- Prepares documents for discussions- Drafts RIA questionnaire (as part of the RIA)- Collects data and performs RIA calculations- Organizes seminars and other supporting events - Collects feedback from SPI stakeholders- Collects and aggregates individual contributions- Prepares documents presenting the solutions

2. Solution searching

SPI partners

SPI Secretariat



Page 76 of 335

9

33

3. Consensus building

Central Bank- Revizes proposed solutions

- Provides input on disputed issues- NBR Board endorsement for

final recommendation

Banking Association

- Banks review solutions- Provide input on disputed issues-BA Board endorsement for



- Asks for independent opinions on disputed issues


-Performs RIA for disputed issues in order to facilitate the best

choice

SPI Secretariat


34

4. Solution

enactment

NBR, RBA and SPI Secretariat coordinate

actions in respect of full range of SPI

projects

SPI Secretariat

-Prepares the law / regulations enactment packages

-Prepares SPI Committee letters to the legislative initiator

or to the Central Bank for its specific regulations

- Provides detailed description of RIA to the legislative

initiator or to the Central Bank Board

- Follows up with the legislative initiator

- Notifies Central Bank on the initiation of the public

consultation process

- Sends SPI Secretariat’s submission under the public


- Arranges and/or attends the meetings with institutions

involved in the enactment process

- Prepares other documents as required by the legislative

initiator


35

Summary• SPI – public – private partnership for

financial sector modernization• Local ownership• Local expertise• Sound governance• Programmatic approach• Result oriented• Disciplined program management• Evidence-based methodology

36




and other market participants


Page 77 of 335

10

37

Second Session Brainstorming on SPI Platform

38

SWOT Analysis of SPI Platform (1)

• Strengths - attributes that are helpful to achieving the objective – ……

– ……

– …..

– …..

39

• Weaknesses - attributes that are harmful to achieving the objective– …..

– …..

– …..

– …..


40

• Opportunities - external conditions that are helpful to achieving the objective– …..

– …..

– …..

– …..



Page 78 of 335

11

41

• Threats - external conditions which could do damage to the objective – …..

– …..

– …..

– …..


42

SWOT Analysis - SummaryStrengths Weaknesses

Opportunities Threats

43

Potential SPI Projects

FINANCIAL SECTOR

MODERNIZATION

CRITERIA


Asymmetric

information

Completeness of

the market

Increased

opportunities to

engage in financial

transactions

Reduced

transaction costs

Increased

competition



Industry reputation

44


Thank you for your participation!


Page 79 of 335


Page 80 of 335

Annex III-9

Outline of the Memo

on the results of the consultation session on the opportunity and feasibility of establishing a SPI platform

I. Summary of the consultations

- Relevance of the consultations - Consultation - Main findings of the consultation session - Conclusions

II. Details of the consultations

- Statistics of the consultations (number of banks participating in the consultations out of total number of banks, number of staff participating, etc.)

- Bilateral meetings with banks’ top management

o Instruments used o Feedback

Opportunity Concerns Potential pipeline Other issues

- Seminar with banks’ mid level management o Instruments used o Feedback

Opportunities Threats Potential pipeline Other issues


Page 81 of 335


Page 82 of 335

Annex IV-1

Outline of the Memo

on the results of the consultation session on the opportunity and feasibility of establishing a SPI platform

I. Summary of the consultations

- Relevance of the consultations - Consultation - Main findings of the consultation session - Conclusions

II. Details of the consultations

- Statistics of the consultations (number of authorities participating in the consultations out of total number of public authorities, number of staff participating, etc.)

- Bilateral meetings with authorities top management

o Instruments used o Feedback

Opportunity Concerns Potential pipeline Other issues

- Seminar with authorities mid level management o Instruments used o Feedback

Opportunities Threats Potential pipeline Other issues


Page 83 of 335


Page 84 of 335

Annex IV-2

Draft letter to public authorities on assessing the opportunity of establishing a public – private partnership for financial sector

modernization

To: Top level of the public authorities (Governor, Minister, President) Dear Sir, Special Projects Initiative – SPI is a public – private partnership for the financial sector modernization by promoting regulatory and self regulatory measures. SPI undertakes projects that reduce asymmetric information, reduce costs of transactions, increase opportunities for transactions, contribute to complete the market and improve competition, considered as priorities by both market participants and public authorities. SPI Platforms have been implemented in Romania and in Albania. The Banking Association, in consultation with the banking community, recognizing the merits of the SPI platform, would like to discuss with potential partners on the opportunity and feasibility of establishing an SPI Platform in our country. We would like to run a series of bilateral meetings with the regulatory authorities in order to assess the potential of this initiative in our country. We would highly appreciate the chance to meet you and to present details on how the partnership could be operated and the benefits of this cooperation framework. Thank you for your availability. Sincerely, …


Page 85 of 335


Page 86 of 335

1

1


Presentation to the public authorities’ top managementBy Banking Association

[date, place]

2



and results.





This presentation should enable public authorities’ management to

have a first reaction to the introduced idea of establishing a SPI

platform to support a large financial sector modernization program.



More details may be offered by request.


3





Program helped authorities and market participants set up a partnership

(SPI Platform) that strengthens a country institutional infrastructure with

incentives and skills (analytical, consultative and implementation) that

support large-scale financial sector modernization programs using EU

Better Regulation methodology.




4


“Financial modernisation refers to the process of financial









Page 87 of 335







wb323932

Text Box

Annex IV-3

2

5

Financial Stability and Financial Efficiency

Central Bank

Legislative and regulatoryauthorities

Financial Institutions

Firms / Associations of

firms

Consumers / Associations of

consumers

Legal systems

Central Bank

Financial markets

authorities

Financial StabilityGovernance, Risk Management, Capital and Liquidity

EfficiencyOptimal

Supply-Demand Match

6

Financial Modernization Challenges Illustrative Comparative Dimensions

Financial Stability• Authority vested in a small

number of institutions• “Risk prevention” focus

• Codified best practice (international standards & codes)

• “Super-equivalency” approach

• Regulation and supervision mutually reinforcing

• “Better Regulation” creates more accountability

• Core sovereignty responsibility

Financial Efficiency• Authority dispersed across many

institutions• “Enabling” focus

• No established conceptual framework

• Close institutional coordination• Limited implementation monitoring

feedback• “Better Regulation” not sufficient to

capture efficiency gains • Users’ bottom-up advocacy

needed

7



• SPI Partners• Central Bank• Banking Association• Ministry of Finance• Consumer Protection Agency• Financial Market Authority• [SPI Technical Partner]


8



• SPI projects proposals and leadership;• members to all PWGs;• access to data;• empowering their representatives in SPI

Committee to endorse SPI documents;• actions for enactment of regulatory proposals



Page 88 of 335

3

9

SPI Romania Partners• National Bank of Romania• National Authority for Consumers Protection • Ministry of Economy and Finance• Ministry of Agriculture and Rural Development• Ministry of Interior and Administration Reform• Anti-Money Laundering Office• TransFonD• Credit Bureau• National Authority for the Supervision of Personal

Data Processing • Rural Credit Guarantee Fund• Grading Commission for Comestible Seeds • Romanian Commodities Exchange• Romanian Stock Exchange• National Securities Comission• The National Association for Consumers’ Protection

and Promotion of Programs and Strategies from Romania

• Italian Banking Association• OECD• International Finance Corporation• World Bank

• Romanian Banking Association• Raiffeisen Bank • Raiffeisen Banca pentru Locuinţe• OTP Bank• Banc Post• CEC• BCR• Alpha Bank• BRD-GSG• UniCredit Ţiriac Bank• RIB Romanian International Bank• Credit Europe Bank• ING Romania• Citibank• ABN AMRO• ATE Bank Romania• Coface Romania• Cargill• KPMG • Deloitte• Clifford Chance• Algoritmics• Bearing Point• Financial Ombudsman Service, UK• Goodwood Financial Consulting 10

10

SPI Albania Partners• Albanian Association of Banks• Alpha Bank• Banka Popullore• Credins Bank• Credit Bank of Albania• Emporiki Bank • First Investment Bank• International Commercial Bank• Intesa Sanpaolo Bank• Italian Bank for Development• National Bank of Greece• National Commercial Bank• Pro Credit Bank• Raiffeisen Bank• Tirana Bank• United Bank of Albania • Union Bank• Albanian Mobile Communications • Vodafone Albania

• Bank of Albania• Ministry of Finance• Ministry of Economy, Trade and




111111











SPI Committee



SPI SecretariatMrs. Ramona Bratu, Head, SPI Regional Operations DirectorMrs. Anuela Ristani, Director of Operations

Mrs. Evis Gjebrea, Consultant Mrs. Endrita Xhaferaj, Director Financial Modernization Program and Analytics

12


• Central Bank- Governor & Hosting Chairperson,• Banking Association - Chairman, • Other authorities – Senior Officials, • SPI Technical Partner (non voting)





Page 89 of 335

4

13



» including signing off final SPI Committee recommendations;• Project Manager – is appointed by the Project Owner (usually out of the PO’s

institution management staff) and chairs PWG meetings; • Deputy Project Manager(s) – represent(s) the other main stakeholder(s) and

second(s) the Project Manager in coordinating PWG meetings.– Project Working Group


Responsibilities:– Actively participating in the meetings;– Providing contributions (their institutions’ experience, parts of documents);

– Validation of RIA questionnaire;– Providing data/filling in questionnaires;– Validation of RIA findings;– Approval of position/policy documents;– Supporting enactment activities.

– PWG gathering• ToRs• List of eligible persons – in consultation with stakeholders• Invitation letters – to be signed by SPI Committee members

– Meetings: 3-4 meetings over 3 months14








15



FINANCIAL

SECTOR

MODERNIZATION

CRITERIA


Asymmetric

information

Completeness of

the market

Increased

opportunities to

engage in financial

transactions

Reduced

transaction costs

Increased

competition

Business

development

Positive credit

information

sharing

1.Rural lending

2. Credit Rating

Agencies

Law on bank

guarantees

Loss-Given-Default

Database

Mortgage Loan

Database

Industry

competitiveness


implementation

1. Prudential IFRS


E-Settlement

3. AML Law

4. Law on Safety

Industry

reputation

1. Ombudsman


Total 2 3 3 5 1

Ita

lia

n B

an

kin

g A

sso

cia

tio

n

16



Page 90 of 335

5

17

FINANCIAL

SECTOR

MODERNIZATI

ON CRITERIA


Asymmetric

information

Completeness of

the market



transactions

Reduced transaction

costs

Increased

competition

Business

development


3. Stock exchange

4. Leasing


27. Consumer credit



10. Mortgage loans



13. Lending to PPPs



Industry

competitiveness


17. KYC policies


adequacy ratio

28. Corporate

governance and

requirements for



activities

19. Reducing cash

transactions


buildings

21. AML reporting






Industry

reputation

34. Improving

access to basic

banking products

24. Financial

ombudsman


rate (EIR) 26.

Consumer financial

education



Total 36 6 8 9 10 3


18




Asymmetric

information

Completeness of the

market

Increased

opportunities to

engage in financial

transactions

Reduced

transaction

costs

Increased

competition


relationship 0/1


banking issues 1/8

Revising regulatory

act on Execution of

Procedures on Bank

accounts


the various risks

5/8



businesses


individuals;


risk management


Open Position


under IFRS


0/1


1/7


Law


1/5









capacities 1/2



0/3


lending 0/3


Total :10 2 4 2 2


19


Governor’s




market






1/1

1.Regulating bank

communications of




on banking issues

7/8

2.The creation of a

complete regulatory








activities


specialized courts



foreclosure

8.Reviewing banking




risks 3/8





Commerce




controls 1/1


environment


6/7


exchange










policies


documents





system 1/2

23.Improving





1/2




groups

3/3


banking products



The increase of ALL

denominated lending

3/3




Total: 30 4 5 9 8 4

20

SPI Projects proposed by Public Authorities

FINANCIAL SECTOR

MODERNIZATION

CRITERIA


Asymmetric

information

Completeness of

the market

Increased

opportunities to

engage in financial

transactions

Reduced

transaction costs

Increased

competition


Information on basic

bank products

Credit Rating

Agencies

TBills OTC market


under IFRS

Revising Foreign

Currency Open Position

Loss-Given-Default

Database

Banks’ contributions

to DGF


Stress testing Enhancing banks’

liquidity risk

management

Revising capital

adequacy ratio

Corporate

governance and

requirements for


Revising Public

Procurement Law

Preparing a feasibility

study for a central

depositary

Prudential IFRS

Impact of IFRS on

banking regulations

Industry reputation

The creation of a

complete regulatory

framework on the

merge and

acquisitions of banks

Responsible

borrowing


Page 91 of 335

6

21



21



0

10

20

30

40

50

60

70

80

90

0 170 220 240


Rural Lending

IFRS

Law on Safety

Bank Ombudsman

Cos

t Sav

ings

76%

Cost S

avin

gs Im

pact (%

of 2

007 ta

rget)

82%

182

73

236

Databases

134

99%








22


22








23





• Operating guidelines – please see www.spi-albania.eu

24


Scoping of problem


intervention.


objectives.



solution”).

Analysis of impact





Consultations



Conclusion





Page 92 of 335








7

25


P

r

o

b

l

e

m

I

d

e

n

ti

fi

c

Regula

tory

contex

t

P

o

li

c

y

o

b

j

e

c

ti

v

e

s

P

r

o

p

o

s

e

d

r

e

g

u

l

a

C

o

s

t

a

n

d

B

e

n

e

fi

t

a

C

o

s

t

a

n

d

B

e

n

e

fi

t

q

I

A

A

D

P

W

G

P

o

li

c

y

r

e

c

o

m




26

Proposed next steps• Steps for initiating the partnership:

– Bilateral discussions between EBF’s Associate’s Management’s representative and top level representatives of the public authorities

– Seminar for public authorities’ staff;

– Official proposal to Central Bank;– Joint invitation (Central Bank – Banking Association) addressed to

other stakeholders


• First implementation steps of project after securing EU funding

– Recruiting SPI Secretariat- Training SPI Secretariat- Annual activity program

27

Benefits for public authorities out of their participation in the SPI partnership• Increase in the regulatory capacity • Strengthening its evidence-based

methodologies• Structuring dialogue with banks• Better work efficiency• Knowledge sharing with market

participants and other authorities• Introducing/enhancing the public good

perspective

28

Q & A session


Page 93 of 335


Page 94 of 335

Annex V-1

Draft Invitation letter to the Central Bank and to the Ministry of Finance/Ministry of Economy to enter into SPI Partnership for

financial sector modernization

To: His Excellency Central Bank Governor His Excellency Minister of Finance/Economy Dear Sir, The bilateral meetings with the public authorities and the seminar organized for the middle management staff of the public authorities revealed a genuine interest in establishing a SPI Platform in our country. Encouraged by the favorable results of these consultations and by the banking community’s support, the Banking Association is hereby addressing the invitation to establish the SPI partnership, by appointing a top level management representative in the SPI Committee, the supervising body of the partnership. The attached note is presenting details on how SPI platform acts, each of the partner’s responsibilities, costs and benefits under the partnership. The mandate of the SPI Committee at this stage is to organize the partnership by inviting other institutions to join it and to take the necessary steps in order to secure European Union funding for the partnership activities. Once the financial needs are covered, SPI Committee’s duties will be to approve the activities to be performed by SPI Platform, to endorse the regulatory/self-regulatory proposals formulated by the Project Working Groups and to act for their endorsement. We express our trust that establishing the SPI partnership will enhance and complement the fruitful cooperation between our institutions for the sustainable development of the financial sector. Sincerely, Chairman of the Banking Association


Page 95 of 335


Page 96 of 335

1

Annex V-2

Note for authorities’ decision to enter in SPI partnership

The SPI (Special Projects Initiative) public – private partnership is a Platform for

institutional cooperation between the market players and relevant authorities for

addressing financial sector modernization opportunities of a country.

The SPI partners are professional associations of the private financial institutions,

regulating and supervising authorities of the financial market and of other closely

related fields, academic institutions, international donors, etc. In [country] the

potential partners could be, besides the Banking Association, the Central Bank and the

Ministry of Finance/Economy the following institutions: [according to the preliminary

discussions].

SPI Platform may be incorporated or not as a legal entity, the legal status will be

discussed and proposed further by the SPI Executive Committee.

SPI is handling financial modernization issues that refer to:

- reducing asymmetric information

- completing the market

- increasing opportunities of entering into financial transactions

- reducing transaction costs

- enhancing competition on the market.

This taxonomy is drawn from the European Central Bank taxonomy to measure

progress on financial integration.

Central Bank has a veto right on the SPI activity plan and while elaborated under the

partnership, the regulations are to be approved and enacted by the Central Bank

governing bodies or by the Ministry of Finance/Economy.

Experiences in Romania and Albania showed that the SPI Platform can handle, after

the initial running in period, a set of 10 financial modernization projects per year.

SPI Romania 2007 12-project activity program

Positive credit information reporting

Electronic processing of debit instruments

Improving AML reporting

Revamping rural lending based on deposit certificates

Consumer financial education

Banking Ombudsman

Credit rating agencies

Stress testing

Provisioning under IFRS

Mortgage loan and Loss Given Default databases

MiFID implementation

Optimizing banks’ security


Page 97 of 335

2

SPI Albania 2009 10-project activity program





Revising Foreign Currency Open Position



Establishment of a national settlement scheme for payments in foreign

currency

Expansion of the credit bureau services - database for businesses

Expansion of the credit bureau services - scoring cards for individuals

Some of above mentioned projects referred to prudential issues, as central banks

appreciated that they can use information from banks or from consulting companies

on the readiness to implement regulatory provisions, on the impact on banks and on

setting the implementation period, on the clarity of the regulations.

SPI’s strength and solidity are given by its partners’ commitment to collaboration,

by its strong governance and by its work methodology.

The supervising body of the SPI Platform is the SPI Committee gathering top level

representatives of the partner institutions. SPI Committee has as main responsibilities

to decide on the activity program,

to monitor its execution, and

to endorse and promote the outputs of the program.

The SPI Committee’s mission at this stage is to establish the partnership by inviting

other institutions to join, to identify financing sources and to support the funding

application process.

The actual execution of the activity program is entrusted to Public-Private Working

Groups established by project gathering experts from all the stakeholders, with a

strong management team reflecting the main stakeholders of the issue to be solved.

The SPI Committee and the project working groups rely heavily on the expertise and

work of a small team – SPI Secretariat – that is permanently dedicated to the

partnership. SPI Secretariat has to cover a mix of secretarial, analytical and

communication responsibilities and project-related responsibilities. Running SPI

projects require strong organization capabilities as it supposes to handle the

relationship with about one hundred local and international experts. To make the most

of the experts’ time and knowledge, with as little interference as possible in their

official daily responsibilities, the SPI Secretariat prepares most of the analytical work.

SPI operating principles are:

a. local ownership – it is granted by the decision powers of and the support provided

by the local stakeholders. Local stakeholders i) decide on the SPI program, ii) con-

tribute to the activity through large mobilization of their experts and by covering a

share of its operating expenses and iii) identify solutions and choose the ones that

addresses best their concerns and accommodates their interests;


Page 98 of 335

http://spi-albania.eu/en/2009-program/enhancing-banks-liquidity-risk-management/

3

b. programmatic focus - the issues to be tackled under SPI are proposed by its

partners, through extensive consultation. They are prioritized according to their

importance, to the strategic objectives or policy priorities decided by the industry or

authorities and are approved by SPI Committee as annual financial modernization

program. In Albania, for example, the annual program for 2009 was built up in the

context of the policy priorities of the Albanian Banking system, discussed in Bank of

Albania’s Banking Forum and other professional meetings;

c. mobilization of local expertise - the annual program is executed by public-private

working groups of local experts, led by a Project Management Group;

d. involvement of foreign experts to fill local knowledge gaps - the Project Working

Groups carry out analyses and prepare proposals for regulatory or self-regulatory

changes with the significant support of the SPI Secretariat. When necessary, Project

Working Groups invite international experts to provide complementary perspectives

to their expertise;

e. disciplined program management - in order to reach the objectives in an effective

way, Project Working Groups run the projects according to specific and very detailed

Terms of Reference prepared by the SPI Secretariat. The project steps are based on a

standard documentation, based on the EU Better Regulation methodology, to be

prepared and discussed in 4 Project Working Group meetings within about 3 months.

Project Working Groups’ recommendations are signed off by the Project Management

Group and eventually endorsed by the SPI Committee before being transmitted to

relevant authorities for their consideration;

f. evidence-based analytical methods to search for solutions – projects are executed

according to EU Better Regulations methodology whose main principles are the

consultations on policy options with stakeholders and use of Regulatory Impact

Assessment as a tool for providing supporting evidence for regulatory proposals;

g. full transparency of the work - the governance framework, activities, projects and

documents are made available to the public through SPI website and/or on the

websites of the SPI partners;

h. strong practical impact orientation – the outcomes of the SPI are not studies or

proposals, but enacted regulatory or self-regulatory changes.

The costs of an SPI Platform comprise salary costs for the SPI Secretariat, equipment

purchase and operating cost (office costs, event organizing costs, etc). The annual

budget of an SPI Platform with the above referred minimum SPI Secretariat formula

and with the punctual involvement of foreign consultants is estimated to about EUR

100,0001. For a 10 project annual program, this translates in about EUR

10,000/project. The costs are to be covered in major part out of EU funding.

1 To be revised according to each country’s context and conditions (salaries, SPI Secretariat formula,

involvement of foreign technical assistance, etc.).


Page 99 of 335


Page 100 of 335

Annex V-3

Draft Joint Invitation Letter to other SPI Potential Partners To: Top level representatives of public authorities and private institutions Dear Sir, Central Bank, Ministry of Finance/Economy and the Banking Association have decided to enter into the SPI partnership. As you know, SPI Platform handles financial sector modernization projects under the coordination of the SPI Committee, gathering high level representatives of the partner institution. The SPI partners commit themselves to put together financial, human and in-kind resources to identify commonly agreed solution to problems in their common interest. Please find attached a note on SPI partnership, activities, results and costs. We are writing to invite you to join the SPI partnership by appointing a representative as [Permanent Observer/Member] in the SPI Committee that supervises the activities of SPI Platform. As a partner institution, you will be invited to propose projects, to participate with your experts in solution designing and to support the enactment of regulatory proposals. The SPI Committee’s main responsibilities at this stage consist of raising awareness on the partnership and on supporting the process of securing the financial sustainability of the SPI Platform. Once the financial needs are covered, SPI Committee’s duties will be to approve the activities to be performed by SPI Platform, to endorse the regulatory/self-regulatory proposals formulated by the Project Working Groups and to act for their endorsement. We trust that your involvement in the SPI Committee as a [Permanent Observer/Member] would add value to the quality of SPI Secretariat’s work and would strengthen the connection of the SPI Platform with the financial market’s actors. Thank you. Best regards,


Page 101 of 335


Page 102 of 335

1

Annex V-4

SPI Committee Operating Guidelines in the initiation stage of the public – private

partnership

Context Enhancing the financial sector contribution to growth requires a large-scale fine-tuning of micro-regulations that affect the efficiency of financial sector intermediation. These actions have to take place in close cooperation between financial authorities, members of the banking and financial industry, and users of financial services. To accelerate this process, main financial sector stakeholders have agreed to launch the “SPI Financial Sector Modernization Platform” (“SPI Platform”) and, in order to support it, to establish a high-level public-private Steering Committee (the “SPI Committee”) that will initiate, oversee and act upon analytical projects that hold the greatest potential for their contribution to financial sector modernization. SPI is placed in the broader context of a regional financial sector modernization program that will promote the launch of similar activities in neighboring countries to ensure maximum regional cooperation and coordination. ARTICLE 1: SPI COMMITTEE PURPOSE IN THE INITIATION STAGE OF THE SPI PARTNERSHIP Section 1. Mission Statement and Authority The SPI Committee represents a high level commitment to public-private collaboration to implement financial sector modernization projects.

SPI Committee Five Core Principles in the initiation stage of the public – private partnership

The SPI Committee represents a high level commitment to public-private collaboration to promote financial sector modernization.

The SPI Committee acts for building awareness on SPI partnership.

The SPI Committee commits to support fund raising for the SPI Platform.

The SPI Committee decides on SPI Secretariat composition and activities.

The SPI Committee selects unanimously the Financial Sector

Modernization Program.


Page 103 of 335

2

Its founding members are the Central Bank, Ministry of Finance/Ministry of Economy and the Banking Association. The SPI Committee is responsible for building awareness on the SPI partnership, for supporting the fund raising for SPI Platform’s activities, for setting up the SPI Secretariat function and team and to select the analytical projects to be undertaken as part of the First SPI Modernization Program. The SPI Committee may decide to establish relationships with authorities and civil society institutions, domestic and international institutions with a key role in securing funding for the SPI Platform activities. The links may involve SPI Committee membership, formation of specific SPI Committee consultative panels or other ad hoc arrangements as necessary. ARTICLE 2: SPI COMMITTEE MEMBERSHIP Section 1. Members The SPI Committee is composed of three founding members (hereinafter, the “SPI Committee Members”) as follows:

1. Governor of Central Bank (Hosting Chairperson); 2. Minister/State Secretary of the Ministry of Finance/Economy; 3. Chairman of the Banking Association.

The SPI Committee Members operate in their personal capacity, their actions and decisions in the SPI Committee cannot be deemed having being taken pursuant to the general powers and authority that are vested with each of them by her or his institution. Each SPI Committee member may appoint an Alternate SPI Committee member. The SPI Committee may invite representatives of other institutions to attend its meetings as permanent observers in order to enhance relevance and effectiveness of SPI Committee-sponsored initiatives. Annex I contains the list of the SPI Committee members and permanent observers and of their alternates. Section 2. Term The SPI Committee shall be established at the launch of SPI Partnership that is, on [date]. ARTICLE 3: SPI COMMITTEE ACTIVITIES IN THE INITIATION STAGE General Remarks: SPI Committee Members or their Alternates shall attend regularly all the meetings to underline a high-level commitment to public-private dialogue. They must be able to actively participate in Committee meetings and projects.


Page 104 of 335

3

The specific role of SPI Committee is to:

1. Raise awareness on the SPI Partnership through joint or individual actions, through letters or statements, by taking care of posting on their institutions’ websites information on the partnership;

2. Support fund raising for the SPI Platform through various means, as deemed necessary over time, for applying with EU institutions and other international donors;

3. Decide on the design of the SPI Secretariat functions, participate in SPI Secretariat selection and support training activities of the SPI Secretariat members in their institutions;

4. Review the pipeline of micro-regulatory issues that require resolution and approve the proposals for individual analytical projects prepared by the SPI Secretariat consistently with the priorities for financial sector modernization.

ARTICLE 4: SPI COMMITTEE MEETINGS Section 1. Frequency, venue and chairmanship The SPI Committee will meet at least two times in this stage: for approving the funding application and to approve SPI Secretariat team and the first activity program. The SPI Committee Member hosting the meeting will also act as a chairperson of the respective meeting. Section 2. Notice of meeting, agenda and quorum Notice of the meeting will be provided in advance, with an agenda and respective meeting materials e-mailed/mailed to the SPI Committee Members seven days prior to the meeting. The SPI Committee meeting agenda shall be prepared by the Banking Association Secretariat, in consultation with SPI Committee Members. A draft will be distributed to SPI Committee Members prior to the meeting. Any SPI Committee Member may request inclusion of items in the agenda. S/he will do so by contacting in written form the Banking Association Secretariat before the meeting. A quorum shall be required to conduct the business of the SPI Committee. A quorum is defined as a simple majority of the members. Section 3. Meeting Records Minutes of these SPI Committee meetings will be kept and maintained by the Banking Association Secretariat. Approved minutes will be distributed to the SPI Committee Members no later than a week after their approval. Meeting decisions will be made publicly available in ways to be determined.


Page 105 of 335

4

Section 4. Decision Making and Method of Vote SPI Committee decisions shall be taken by consensus among the SPI Committee Members present in the meeting. Section 5. Compensation No SPI Committee Member will receive salary or any other honorarium for their services under these bylaws. ARTICLE 5: OPERATING GUIDELINES AMENDMENTS These guidelines shall govern the SPI Committee in the initiation stage of the public – private partnership and new guidelines shall be adopted when the partnership will be operating. The SPI Committee may adopt special rules of order if required. These rules can be amended at any regular meeting of the SPI Committee by consensus, provided that the amendment has been submitted in writing at a previous meeting. [place, date] Central Bank Governor Chairman of Banking Association

Minister/State Secretary of the Ministry of Finance/Economy


Page 106 of 335

5

List of SPI Committee members and permanent observers and of their alternates

SPI Stakeholder SPI Committee Members

SPI Committee alternate members

Central Bank

Ministry of Finance/Economy

Banking Association

SPI Committee Permanent Observers

[Financial Supervision Authority]

[Ministry of Economy and Finance]


Page 107 of 335


Page 108 of 335

Annex V-5

Draft communication on SPI Partnership launching

Special Projects Initiative – SPI is a public – private partnership for the financial sector modernization by promoting regulatory and self regulatory measures. SPI undertakes projects that reduce asymmetric information, reduce costs of transactions, increase opportunities for transactions, contribute to complete the market and improve competition, in a structured and effective manner. The Central Bank, the Ministry of Finance/Economy, the Banking Association and [the other SPI partner institutions] have decided to enter into the SPI partnership. The SPI Committee members, gathering top level representatives of the partner institutions had their first meeting on […], marking the launch of the SPI Partnership. The SPI Committee represents a high level commitment to public-private collaboration to promote financial sector modernization. Its mandate in this initiation stage is to act for building awareness on SPI partnership, to support fund raising for the SPI Platform, to decide on SPI Secretariat composition and activities, and to select unanimously the first Financial Sector Modernization Program. We are kindly inviting all public and private institutions, civil society and academia actors, international donors and international financial institution to join us in this initiative to accelerate financial sector modernization and to grant us their valuable support. Central Bank Ministry of Finance Banking Association


Page 109 of 335


Page 110 of 335

1

Annex VI-1 Samples of funding applications

I. SUMMARY PROPOSAL FOR FIRST INITIATIVE FUNDING OF SPI ALBANIA (December 2008)

1. Brief summary of the objectives of the proposed technical assistance

The objective of the proposed technical assistance is to make available three local experts that will assist the Albanian banking community to prepare about ten regulatory or self-regulatory proposals in 2009 under the SPI Albania program (details below). The reform proposals address important financial sector modernization issues in terms of five market efficiency criteria as follows: 1) asymmetry of information, 2) completeness of markets and products, 3) possibility to engage in financial transactions, 4) cost of transactions and competition issues. The reform proposals, which are presently being finalized through an extensive consultation process, include the following topics: A. Issues raised by the Governor of Bank of Albania in his Banking Forum addresses.

These are as follows: The publication of the results of banks’ activity/transparency in bank-customer

relationship The publication of the results of banks’ activity/transparency in bank-customer

relationship The recognition of and protection from the various risks The strengthening of internal control Introduction of new products The functioning of the interbank market The increase of funds circulation through the system The building of full technological capacities The increase of ALL denominated lending Improvement of bank’s governance B. Projects that have already been assigned top priority selected in 2008. These are as

follows: Facilitating leasing transactions Developing credit scoring cards for individuals C. Projects that the authorities want to undertake as part of the Doing Business 2009

Reform package. They comprise the following: Closing of business Contract enforcement Credit registry Private investor protection


Page 111 of 335

2

The 2009 program will be finalized in January 2009. By that time SPI Albania intends to submit the Project Application to the FIRST Initiative. SPI Albania is a public-partnership to promote large-scale financial sector modernization in Albania which has started operating in May 2008, with initial World Bank’s Convergence Program technical and funding support. SPI Albania runs projects aiming at proposing regulatory and self-regulatory (industry) solutions for business development, reducing transaction costs and increasing reputation. SPI Albania handles public –private interest modernization projects, as proposed by stakeholders and agreed by the SPI Committee. The SPI Committee gathers top level representatives of Bank of Albania, Ministry of Finance, Ministry of Economy (the consumer protection representative), Authority for the Financial Market and Albanian Association of Banks. The solution finding to the existing problems is entrusted to Project Working Groups (PWGs), gathering representatives of all stakeholders, with support from a full-time SPI Secretariat.

2. Issues to be addressed by the proposed technical assistance

The recipient of technical assistance is the SPI Albania Secretariat that works under the oversight of the SPI Albania Committee. The SPI Albania Secretariat consists of a Director for Analytics and Policy and a Director for Operations, coordinated by a General Manager. The financing request refers to cover the cost of the SPI Albania staff for one year starting from March 2009. The SPI Secretariat is the executive manager for SPI Albania projects. It performs research in the local and international experience on specific issues, plans the project, runs banking surveys and consultations with involved parties, performs Regulatory Impact Assessments for the proposed amendments, prepares all documents based on before mentioned and on individual contributions of the PWGs members, using EU Better Regulation methodology. The SPI Secretariat plans, prepares the meeting and SPI Committee documents (as a technical secretariat). SPI Albania staff is currently Convergence Program’s World Bank consultants, with contracts running through February 2009 for the professional staff and through June 2009 for the acting General Manager. SPI Albania is planning to hire a full-time General Manager as from March 2009.

3. Recipient agency’s role in the area to be addressed by the proposed technical assistance

The SPI Albania Committee considers that the most suitable SPI Albania partner institution to become the employer-of-record of the SPI Albania Secretariat staff is the Albanian Association of Banks. The SPI Albania staff, employed by the Association of Albanian Banks, will operate exclusively under the oversight of the SPI Committee. The SPI Albania proposals will continue to be prepared by experts mobilized from Albanian public institutions and financial intermediaries. In 2008, SPI Albania has mobilized 14 experts from 6 public institutions. The inter-agency cooperation is regulated by the SPI Committee Operating Guidelines (available on the www.spi-albania.eu website).


Page 112 of 335

3

4. Financial sector development context

SPI Albania projects address regulatory obstacles to financial intermediation in terms of the market efficiency criteria outlined under 1. above. SPI Albania 2008 projects are: Improving Auction Procedures for Immovable Collateral under Foreclosure, The impact on the banking regulation of the IFRS implementation, Reducing Cash Transactions, Reviewing the Capital Adequacy Regulation, Consumer Financial Education. In less then 6 months of activity, SPI Albania succeeded to prepare recommendations on modifying the Civil Procedure Code in respect of auction procedures for immovable collaterals under foreclosure, on the bailiff service and on implementing IFRS in the banking regulations. The Project Working Group proposals have been endorsed by the SPI Committee and sent, under SPI Committee signatures, to the respective regulatory bodies for enactment. Extensive information on the projects and their outcomes can be found on SPI Albania website www.spi-albania.eu. The website contains also documents on SPI Albania and SPI Committee governance, approved by the SPI Committee in its first meeting in June 2008. The documents are showing the commitment and responsibilities assumed by all the parties participating in this private-public partnership.

5. Are there any efforts being undertaken by the recipient, other government agencies, domestic stakeholders, bilateral or multilateral development partners to address the issues identified in 2? Why are other sources of funding not available?

As stated above, all public and private partners of SPI Albania assumed their contributions to the partnership, being financial and/or by providing their staff’s expertise to the PWGs for solution identification and for proposal enactment. AAB approved the extension of its financial support for ensuring the office facilities and for organizing events for 2009. AAB started also to discuss on the possibility to set up a SPI Albania NGO financed out of the banks ’contributions and from international funds. Based on the SPI Albania 2008 results, AAB will engage in consensus-building among its members in 2009 with a view to raise the membership fees in 2010 to cover the SPI Albania Secretariat expenses.

6. Expected outputs of the proposed technical assistance and how they are expected to contribute to achieving the stated objectives of the recipient.

As shown also on the website, the outputs of the SPI Albania activities are regulatory or self-regulatory PWG recommendations that are promoted to the regulatory authorities for enactment or throughout the banking community for application.

7. Expected outcomes [results] of the proposed technical assistance

The outcomes of the SPI Albania activities are enactment of actual regulatory and legislative changes. Based on the SPI Romania benchmark (www.spi-romania.eu), it is reasonable to estimate that 75% of the SPI outputs turn into SPI outcomes with a time lag of about one year which is the time span in parliamentary democracies to enact legislative proposals. Furthermore, each regulatory proposal is associated with an estimated quantitative impact calculated through Regulatory Impact Assessment techniques, in terms of net benefits consisting of cost savings and/or additional lending.


Page 113 of 335

4

8. Support/endorsement of the government agency or entity exercising oversight of the recipient The SPI Committee, with membership from Bank of Albania, Ministry of Finance, Ministry of Economy, Energy and Trade, Authority for Financial Market and Association of Albanian Banks, is fully committed to the SPI Albania activities as shown by the cover letter to this summary proposal.

II. INITIAL INQUIRY ABOUT FIRST FUNDING (May 2009)

1. Brief Summary of the objectives of the proposed technical assistance The main objective of the proposed technical assistance is to promote financial market development and Albania’s economic development by establishing a guarantee scheme for SMEs, by facilitating lending to PPPs and by modernizing the movable collateral register. All three projects are intended to contribute to a better access to finance under manageable risk conditions and with lower costs. These projects will contribute further to SMEs development and to infrastructure building in Albania.

2. Issues to be addressed by the proposed technical assistance

Most of the businesses in Albania is SME type, but banks are reluctant in lending to them because of high risks associated to SMEs. The coverage of a guarantee scheme would boost SMEs expansion. Many of high value infrastructure projects are undertaken by PPPs and in Albania there is no specific PPPs regulatory framework. The lending procedures against moveable collateral are not rapid and the evidence is not very reliable. The moveable collateral register is not accessible online. On the other hand, even if the registry exists, as there is no compulsoriness to check with this register before purchasing, pledged goods can be sold with negative consequences on buyers and banks. The proposed technical assistance consists in identifying solutions in order to establish a SMEs guarantee scheme, to revise the existing regulations on PPPs in order to improve the credit mechanisms for these partnerships, and to improve the functioning of the moveable collateral register as well as its regulatory framework. The solutions should be identified based on the international experience adapted to the local realities and through extensive consultations with stakeholders. The enactment of the solutions should be supported by quantitative impact assessment showing the net benefits for the stakeholders.

3. Recipient agency’s role in the area to be addressed by the proposed technical assistance

The recipient is Ministry of Finance, as part of the SPI Albania partnership (gathering also Bank of Albania, Albanian Association of Banks, Financial Supervision Authority, and the Ministry of Economy, Trade and Energy – the consumer protection department). MoF will contribute with members in the Project Working Groups and will undertake ownership of projects, by appointing a Project Owner and a Project Manager for each of the projects. Albanian Association of Banks/Ministry of Justice will appoint a Co-Project Manager. Given the nature of the projects, representatives of SMEs or corporate


Page 114 of 335

5

professional associations, of the Ministry of Economy, Trade and Energy, and of Bank of Albania will be invited to join the PWG. MoF and AAB will play an important role in identifying the solutions that would answer best to the needs, will provide data for the impact assessment and will act for enacting the solutions. 4. Financial sector development context The financial sector is the most advanced area of the Albanian economy, with the banking industry at the top. The banking community’s role in supporting the real sector’ development should enhance but under a robust risk management framework, in order to prevent the occurrence of systemic crisis.

The proposed SPI Albania projects are addressing financial intermediation efficiency issues by creating more opportunities to engage in business transactions under better risk management conditions. They match also the priorities raised in Banking Forum speeches by the Bank of Albania Governor (the recognition of and protection from various risks, the introduction of new products and the building of full technological capacities) and to the Government of Albania development strategy. Their implementation should also produce an improvement of the World Bank Doing Business ranking and should promote the economic development of Albania through increased access to finance by SMEs, through mobilization of additional financing sources for infrastructure investments) and through the improvement of the capacity of market participants to manage risks.

4. Are there any efforts being undertaken by the recipient, other

government agencies, domestic stakeholders, bilateral or multilateral development partners to address the issues identified in 2? Why are other sources of funding not available?

FIRST’s technical assistance would complement the human and other resources of the local stakeholders (through PWGs) and of the Convergence Program (SPI Secretariat). SPI Project Working Group involvement will consist of the following: a) validation of the project’s ToR to ensure it meets the information requirements to prepare a sound actionable proposal in the local context; b) definition of the coverage of the note on international experience to meet local needs; c) agreement with the “Scoping of Problem” note to ensure adequate identification of issues as stake and possible policy options; d) input into the design of the impact questionnaire to cover relevant economic drivers; e) discussion of the implications of the impact questionnaire findings for the proposed solution; f) discussion and validation of the detailed proposed solution elaborated by the expert. The estimated value of in kind contribution of the local stakeholders is the opportunity cost for about 25 experts dedicating a total of 800 hours. Convergence Program’s contribution is the cost of SPI Secretariat’s following activities for the 3 projects: a) convening the PWGs that are entrusted with the projects; b) preparing the minutes of the PWG meetings; c) distributing questionnaires and collecting the findings; d) assisting FIRST consultants in consensus-building activities with local stakeholders; e) organizing enactment support activities.


Page 115 of 335

6

6. Expected outputs of the proposed technical assistance and how they are expected to contribute to achieving the stated objectives of the recipient The projects proposed outputs are:

- a feasibility study on the establishment of a guarantee scheme, including identification of financial structures;

- a position document with the proposals for legislative amendments and regulatory actions by the relevant line Ministry to facilitate lending to PPPS;

- a position document with the proposals of regulatory amendments and implementation of actions to modernize the movable collateral registry.

7. Expected outcomes [results] of the proposed technical assistance

The outcomes of the projects will be more loans granted to the real economy through SMEs and PPPs, the development of Albania’s private sector and of its infrastructure, as well as an increase in the general welfare.

8. Support/endorsement of the government agency or entity exercising oversight of the recipient

The SPI Committee, with membership from Bank of Albania, Ministry of Finance, Ministry of Economy, Energy and Trade, Authority for Financial Market and Association of Albanian Banks, is fully committed to the SPI Albania activities and to the proposed projects undertaken as part of its Annual Financial Modernization Program.

SPI Committee Members:

Mr. Fatos Ibrahimi First Deputy Governor Bank of Albania Mr. Libero Catalano Chairman Association of Albanian BanksMr. Nezir Haldedaj General Treasury Director Ministry of Finance Mr. Keler Gjika Deputy Chairman Financial Supervisory AuthorityMs. Anila Jani Market Surveillance Director Ministry of Economy


Page 116 of 335

1.1 Project title (max 200 characters)

1.2 Project acronym (max 50 characters)

EU Member States N. N.AUSTRIA 2

BULGARIA 1

GREECE

HUNGARY

ITALY 2

ROMANIA 1 2

SLOVAKIA

SLOVENIA

8

3.1 Official name of the Institution (in original language)

Legal status (select) : Cofinancing Sources

Street and Number

Post code 70125

Country Location according NUTS II

Telephone No Fax No

E-mail

Web Site

Title Mr.

Family Name

First Name

Position

Telephone No Fax No

E-mail

ITALY

3.5 Contact person

Non EU Member States

AoI 1.2: Develop the enabling environment for innovative entrepreneurship

2. Number of participants in the project

BOSNIA-HERZEGOVINA

FORMER YUGOSLAV REPUBLIC OF MACEDONIA

3. Project Applicant

Notarangelo

+390805406554

[email protected]

Bari

Regional public authority

3.2 Official name of the Institution (in English) Region Apulia - Mediterranean Department

State

Regione Puglia - Settore Mediterraneo

www.europuglia.it; www.regione.puglia.it;

1.3 Priority Axis

Priority Axis 1: Facilitation of Innovation and Entrepreneurship

[email protected]

City

3.3 Type of Institution

+390805406577 +390805406554

Puglia

1. Project identification

Special Projects Initiative for the Financial Sector Modernisation of South-East Europe

SPI SEE

ALBANIA

SERBIA

CROATIA

MONTENEGRO

Total number of project's participants

UKRAINE

REPUBLIC OF MOLDOVA

+390805406557

Bernardo

Director of Department

Via Gobetti, 263.4 Full address and contact references

Public Governed by private lawGoverned by public law


Page 117 of 335

wb323932

Text Box

Annex VI-2

4.Project duration from year 20 08 month 10

10 month 09 24

5.1 Short project description (max 1000 characters)

5.2 Main problem(s) or challenge(s) to be addressed (max 2000 characters)

5.3 Main objectives of the project (max 2000 characters)

Number of months of durationto year 20

catalyse cooperation among financial authorities, local banking communities, and civil society in promoting and implementing a strong framework of regulatory reforms designed to improve financial intermediation, with particular emphasis on the needs of SMEs; support an informed dialogue between regulators and regulatees on the technical aspects of the identified reforms through fostering local analytical and business implementation culture; facilitate consensus building among stakeholders and public communication before official action is initiated and making it last during its implementation; monitor implementation of the SPI process undertaken. These objectives are pursued by management and operational project’s bodies: the Management Committee - MC and its Secretariat; the SPI Technical Committee - TC, transnational Team of experts ; SPI National Committees – NC, local stakeholders representatives; SPI national Secretariats – NS, operational local teams.

5.Project description

Nowadays, the financial sectors in South-East Europe continue to provide limited support to entrepreneurial and innovative activities, despite considerable quantitative growth and qualitative progress towards EU practices this decade. Their main business focus remains large enterprises and the vastly under-serviced household sector. The flow of debt and equity financing to higher risk client segments, namely the small and medium-sized enterprises, is constrained by a combination of financial infrastructure weaknesses (legal, regulatory and information-sharing) and an ill-suited banking and financial products. All this represents an obstacle to the internationalisation process of the SMEs located in less developed areas of the South East Europe, as well as an obstacle to the process of actual economic cooperation among the whole Area.

Project implementation has not started prior to the submission of this Expression of Interest

SPI is a process, based on the experience gained by EU institutions in building the Single Financial Market, aimed to modernise a territory’s financial system. Using evidence-based analysis supported by market consultations (Better Regulation), the SPI helps public and private stakeholders identify various policy options to achieve the intended policy goal supported by an assessment of costs and benefits of each option. The SPI approach is characterised by: an ex-ante agreement among stakeholders on issues needing reforms; quantification of the economic impact of the proposed changes; analytical and consensus-building discussions within public-private working groups supported by expert advise; on going focus on enactment of the proposals. The main beneficiaries of the SPI process are: enterprises active in SEE, financial intermediaries and national/EU policy makers. SPI applies at both national and transnational level.

SEE countries are characterised by large disparities in economic development, as new member, candidate and SAA countries are still a long way to go in their process of economic convergence with old EU Countries of the same Area. Their enterprises need large investments to strengthen their capacity to innovate and grow and thus participate in the growth process, and reap the fruits of economic growth. This cannot be achieved without developing a strong, vibrant and modern financial system: a system where information is of better quality and more easily accessible; where a wide range of markets for products and services is available to users; where agents have growing opportunities to access resources and engage in international transactions at competitive prices; and in a geographic context where the law is based on shared rules.

The main objective of the SPI SEE initiative is to implement a co-ordinated programme aimed to modernise the financial systems of the Partner Countries in order to create a positive environment for the development of SMEs of EU and neighboring partner countries and reap common benefits for businesses and local communities. As defined by the European Central Bank, financial sector modernisation is a long-term process through which the financial sector strengthens its structure to address asymmetric information, incompleteness of market structures, lack of products for borrowers and depositors, high transaction costs and increased competition. As the EU-15 experience shows (e.g., the Financial Sector Action Plan by EU), modernisation involves a large number of legal, regulatory and self-regulatory changes over a protracted period of time to have a collective impact on the behaviour of banks and users. The SPI SEE initiative is aimed to:


Page 118 of 335

5.4 Overview of the main activities (max 1000 characters)

5.5 Main expected outputs and results (max 1000 characters)

5.6 Transnational approach (max 1000 characters)

5.7 Relevance of the project to the programme's strategy (max 1000 characters)

5.8 Synergies with other EU funded projects, programmes, policies and initiatives (max 1000 characters)

6.1 Estimated total budget 1,920,000.00 €ERDF contribution 1,445,000.00 €

51,000.00 € 0.00 €

0.00 € 136,000.00 €

0.00 € 0.00 €

Albania

6. Budget

SPI SEE initiative is coherent with the EU “Financial Sector Action Plan”: it is aimed to modernise the financial sector of the partner Countries, fostering their convergence to a consistent international regulatory framework, with the aim of making SEE Area more attractive and competitive. In fact, EU financial integration is a process which calls for a very attentive monitoring as regards its impact in terms of financial stability of the whole area. Project applicant Region Apulia, Managing Authority of NPPA Italy-Albania 2004-2006, has funded 2 projects having the improvement of financial sectors transnational co-operation process and the development of credit access transnational facilities as main aim. Within the framework of the “Italo-Albanian Centre for Socio-Economic Researches”, Region Apulia has supported activities of the World Bank’s “Convergence Programme” focused on awareness-building for the benefits of public-private cooperation in financial sector modernisation

Bosnia Herzegovina

Croatia Serbia

IPA Contribution

SPI SEE initiative is fully aligned to the Programme’s strategy as:- it can rely on a high quality partnership, committed to achieve the project’s objectives;- it will be able to gain transparent and measurable outputs and results, standardised and transferable to other Programme’s areas; - it has a clear transnational focus, aimed to produce common benefits for the involved Countries and their local communities. In accordance with the SEE Programmes’ general objective, this initiative fosters economic integration of the partners’ areas, therefore contributing to cohesion, stability and competitiveness of the markets of these Countries. Furthermore, the proved success of the SPI process ensures the good use of the EU and national funds. After the completion of this initiative, the involved areas will have a robust infrastructure to process financial sector modernization which will result into more sustainable economic results and overall attractiveness to conduct innovative activities.

former Yugoslav Republic of Macedonia

Montenegro

Project’s main outputs and results are directly deriving from the abovementioned activities: - operational planning of project’s activity; -MC meetings’ minutes;- 4 national financial modernisation operational planning; 10 projects of national reform proposals for each location; agreements for the implementation of 3 joint transnational financial modernisation projects; enactment of the projects;- 1 transnational training session for about 50 trainees from authorities and market participants of the partner Countries;- 2 national training sessions (1 Bulgaria, 1 Montenegro) for a total of about 80 trainees from local authorities and market participants;- 10 information seminars for financial institutions and enterprises; -project communication plan; 1 transnational launch event; 8 national communication events; 1 transnational final event; project’s web site; communication materials: brochures, posters, roll-ups, publications, etc; -monitoring and evaluation plan, tools and reports.

The rigorous transnational governance of the project ensured by the management bodies allows the enacting of national processes in a wider transnational cooperation perspective. The organisation of the project activities is based on a continuous exchange of competencies and experiences. This favours the homogenisation of the capacities of Partner Countries to intervene into the national modernisation processes and get to the operational standards need by the single EU market. In fact, all partners share the responsibilities of the project implementation. SPI process is characterised by: the participation methodology, ensuring the joint responsibility of the actions; the organisational asset of the activities, ensuring the joint staffing, even for national activities; the cooperation framework of EU funds and national co-financing, ensuring the joint financing among Partners. All this is finalised at gaining those regional policy goals on which success is built the whole project.

Set up of the MC and its Secretariat, project preparation and management-all partners. NSs prepare the national reform proposals(functional to the projects’ success of regional financial modernisation),coordinating local Working Groups of experts, to be approved by NCs. TC selects 3 regional financial modernisation projects and helps NSs and NCs developing the SPI process finalised to achieve the common goals. National SPI proposals are enacted. Location:Albania,Bulgaria,Romania,Montenegro-BoA,AAB,FSC,RBA,BoM,AMB. To support the above, Better Regulation Capacity Building transnational (location:Italy-IFOC, R. Apulia)and national (location:Bulgaria,Montenegro–FSC,BoM,AMB) sessions to strengthen the policy analysis and consultation skills of partner Countries. Financial institutions and enterprises information actions-Location:Italy-IFOC. Horizontal activity:Communication–Location:all partner Countries-all partners; Monitoring and Evaluation-Location:all partner Countries-R. Apulia


Page 119 of 335

official name and location phone number and email address

I.FO.C. Agenzia Formativa (IFOC) 00390805559504 [email protected]

Governed by public law

StateFinancial Supervision Commission (FSC) 0035929404601

[email protected]

StateRomanian Banking Association (RBA) 00400213275095

[email protected] by public law

State


Bank of Albania (BoA)00355042222152 [email protected]

PublicState

Albanian Association of Banks (AAB)003554253609 [email protected]

Governed by public lawState

Central Bank of Montenegro (BoM)00382 81 665 363 [email protected]

Public

State

Association of Montenegrin Banks (AMB)

00382 20 232 028 [email protected]

Governed by public law

State


Joint development of the project's idea

7.4 Relevance of the partnership (max 2000 characters)

7.1 List of partners from EU Member States

Status

ALBANIA National public authority

ALBANIA

The SPI is not devoid of risks: firstly, the follow up on the completion of the SPI goals and the mechanisms to implement the regulatory changes might be resisted by some interest groups; secondly, the partnership among local stakeholders involved into regulatory changes can be fragile. To handle these risks, the involvement of subjects, nationally recognized as authoritative organizations, having the institutional operational competence, is necessary. SPI SEE Applicant, Region Apulia - Mediterranean Department, in the first half of 2008, has participated into awareness-building actions for the modernization of the financial sector of Adriatic Countries, originally promoted by the World Bank’s Convergence Program. This experience has paved the way for the setting up of relations among key Institutions of SEE Area operating in the financial sector. Hence, the justification for the composition of SEE SPI partnership, made of National Central Banks, National Banks’ Associations, other

The potential beneficiaries will cooperate in at least two of the following ways (tick the boxes)

7. Partnership

Non-governmental or non profit organisation

7.2 List of partners from EU candidates or potential candidate countries

National public authority

Joint Implementation of the activities Joint staffing Joint financing


ITALY

BULGARIA

ROMANIA


Members of the partnership and implemented activities don't have an industrial or commercial character

National public authorityMONTENEGRO

Partner

MONTENEGRO

Country

Cofinancing Sources

Chamber of commerce, collective business support actor

Country Type

7.3 List of partners from neighbouring countries

Partner

Partner Status Cofinancing Sources

Country Type Status

Type


Page 120 of 335

public organizations of the financial sector (Bank of Albania, Association of Albanian Banks, Bulgarian Financial Supervision Commission, Bank of Montenegro, Association of Montenegrin Banks, Romanian Banking Association).The involvement of I.FO.C, company of the Chamber of Commerce of Bari, is functional to the SPI financial institutions and enterprises information actions, with regard to the increased opportunities of business cooperation offered by the modernization of the financial sector of SEE Area. Region Apulia and I.FO.C can rely on a long experience of management of EU funds, and will support other partners in the correct fulfillment of the procedures foreseen in Interreg SEE. Furthermore, Region Apulia – Mediterranean Department will make available to the partnership the know-how gained in its own long lasting experience as Managing Authority of Interreg IIIA Italy/Albania Programme and NPPA Italy/Albania, and as National Executive Body within Interreg IIIA Italy-Greece.


Page 121 of 335

8.1 Justification for the project’s approval (max 1000 characters)

Date of submission 0:00:00

Reference number

00/01/2008

8. Self-assessment of the project idea

Time of submission

SPI SEE initiative is strategic to the EU objective of a single, cohesive and secure financial market, as SPI process is based on dialogue and collaboration between public authorities and market participants, local and transnational, which are key undertakings to marry private sector incentives and public policy measures. Market participants, on one hand, have to recognize the public policy dimension of their profit making activities, by understanding how the authorities look at the short – and long – term risks of these activities. The authorities, on the other hand, have to understand how regulations can be designed in way which do not unnecessarily harm, and possibly enhance, the value-creation capacity of the markets. Both parties must learn to speak the same language, and become partners in financial sector modernization. Moreover, this initiative is coherent in its micro-objectives, activities, eligibility criteria of the partnership and quality of the contents to SEE Programme.

TO BE FILLED IN BY THE JTS


Page 122 of 335

1

“Bank – Enterprise Adriatic Observatory”

Project

Draft 13 September 2009

Annex VI-3

2

1. Project Identification

1.1 Priority Axis

Priority 1 – Economic, Social and Institutional Cooperation

Measure 1.4 – Institutional Cooperation

1.2 Project Lead Partner

Apulia Region – Mediterranean Department

1.3 Project Summary

The project is designed to identify the main causes of the ineffectiveness of the Adriatic Eastern Countries’ financial markets to supply financial services towards local Small and Medium Enterprises (SMEs) and to make workable proposals to address them through regulatory actions, institution-building activities and professional training. As a consequence, it will be possible to define and implement institutional actions aimed at supporting banks in supplying services for SMEs. These empirical assessment activities related to the themes of financial modernisation (according to the definition adopted by the European Central Bank to measure progress in financial integration) and support of innovation will be carried out by National “Bank - Enterprise Observatories”. Such activities will be oriented to the outlining of strategic intervention measures as well as to the preparation of regulatory reform proposals to be implemented in order to allow the approximation of the Balkan Countries’ financial characteristics to EU standards. The setting-up of National Observatories will create the opportunity for the establishment of a regional “Bank - Enterprise Adriatic Observatory”. Its main goal is to summarize the previous activities carried out through the Observatories at national level, as well as to provide the required information to facilitate Balkan Countries banks and financial systems’ modernization in a regional context. The activities of the Adriatic Observatory will provide incentives for the launch of a Programme supporting financial modernisation within the Adriatic basin. To this end, the Adriatic Observatory will coordinate the project activities and will be responsible for promoting reference work and research activities addressed to the launch of the above mentioned financial modernisation (e.g. drawing up of Special Studies).

1.4 Project Duration from year: 2010 months: 06

to year: 2013 months: 06

2. Partnership

2.1 Description of the partnership


Page 123 of 335

3

To promote financial sector modernisation in selected South-East European (SEE) Countries, the project partnership is composed by both Banking Associations and Central Banks and institutional bodies such as Apulia Region. Financial modernisation requires a set of sophisticated analytical, organizational and consultation skills and a mix of competences to achieve the project's objectives and allow a sound implementation of the project itself.

Considering the technical issues the project faces, the partnership involves technical partners able to operationally contribute to the effective project management. This notwithstanding, a strong commitment by public institutions is necessary. To strengthen institutional cooperation, it is envisaged that the Apulia Region will be in charge of leading the whole project.

At the same time, the geographical balance is well guaranteed. The project partners come from both sides of the Adriatic sea according to the IPA Programme requirements. Finally, the partnership distinctive approach is based on a flexible cooperation between technical and institutional partners.

2.2 Lead Partner

Abbreviation and Name of the Lead Partner's Institution in English - Apulia Region – Mediterranean Department

Name of the Lead Partner’s Institution in original language – Regione Puglia – Assessorato al Mediterraneo

Type of institution – Public Authority

Legal Status – Public

Street and Number – Via Gobetti 26, 70125 BARI (ITALY)

2.3 LP Organisation (human resources, equipment, budget, other)

The LP organisation is fully in line with the project's requirements. Within the Apulia Region, the Mediterranean Department is in charge of managing several European Programmes and projects with particular reference to the European Territorial Cooperation Objective. As a consequence, the Region can manage the project thanks to its technical competencies and its structured organisation as follows:

Human Resources:

The Apulia Region can count on a skilled working group composed manly by the Region staff with a further support guaranteed by external experts.

2.4 Description of the previous experience in INTERREG and other relevant EU funded projects

Apulia Region - Mediterranean Department relies on a long experience of management of EU funds relevant for the project. It has been Managing Authority of INTERREG IIIA Italy/Albania and NPPA Italy/Albania and National Executive Body within INTERREG IIIA Italy-Greece. It has been LP of the

4

Aquifalc project (INTERREG IIIA Italy-Albania/CARDS Programme) promoting the strengthening of economic and institutional governance between Albany and EU Member States. In the framework of Adri.Eur.O.P project (NTERREG IIIA Adriatic Programme) aimed at supporting the ongoing political process of the Adriatic Euroregion, Apulia Region coordinated the Euroadriatic Communication Network. Moreover, it has supported World Bank Convergence Programme's activities focused on awareness-building in financial sector modernisation and led and participated in several INTERREG projects within MEDOCC, CADSES, ARCHIMED, INTERREG IIIC. This previous experience represents a real added value and a sound professional background.

2.3 Contribution of the LP to the project

Thanks to its previous experience and to the lessons learnt from it, Apulia Region is able to bring a real contribution to the project implementation. In particular, following the process of Balkan Countries financial sector modernisation supported by the World Bank’s Convergence Program, the Apulia Region acquired operational competencies, in-depth knowledge and real awareness on the very technical sector to which the project is addressed.

At the same time, thanks to its nature and to its own network the Region can contribute to obtain a sound institutional cooperation to achieve project's objective and to make cooperation among projects partners effective considering the different bodies involved.

As already underlined, the financial modernisation requires a strong commitment by regional Governors and, for this reason, Apulia Region will contribute to the project, supporting a collaborative approach between authorities and market participants.

2.4 Competences, capacity, and know how of the LP in implementation project activities and results

The Apulia Region has a sound experience in implementing projects activities and results. The Mediterranean Department, actually, is the office responsible for managing Programmes and cooperation projects.

It is highlighted that Apulia Region has been eligible in a very high number of INTERREG Programmes allowing the participation to many projects. Thanks to this significant experience, the Apulia Region developed specific competences, technical capacities and an effective know how to be transferred to its project partners.

Pursuant to its experience and professional skills, the Region has developed an efficient methodological approach to draw up and implement project activities and results.

This method allows to reach general and specific objectives of the project thanks to a logical interconnection among activities and results.

3. Project Description

3.1 Problem and/or challenge to be addressed


Page 124 of 335

5

While featuring different levels of economic development and different economic structures, Balkan Countries need to diversify their economies through the strengthening of their respective financial systems in order to promote a process of “catching up” with the reality of the EU Western Countries. These Countries are facing serious challenges in the financial sector, including a chronic shortage of financial products and services that adequately meets the needs of a competitive and knowledge-based economy. Such weaknesses create great obstacles to SMEs internationalisation process, hindering their economical cooperation development within the whole Adriatic area. Moreover, the financial sector of Eastern Adriatic Countries provides limited support to entrepreneurial activities. SMEs in particular need large investments in order to strengthen their capacity to innovate and grow and thus participate to the economic convergence process, considering EU integration as a strategic perspective.

3.2 Logical Framework

Glob

al Ob

jectiv

es

The project’s main objective is the establishment of an area of growth, development and cooperation throughout the Adriatic Countries involved in its implementation. As a long term objective, it aims at supporting the arrangement of Eastern Countries’ SMEs economic-financial characteristics to create an Italian-Balkan free trade area through the financial systems modernisation. To reach this goal, the project intends to strengthen and support Balkan banks in supplying services to local SMEs thanks to the implementation of activities addressed at reaching a better knowledge of their needs.

Spec

ific O

bjec

tive

The project aims to the identification of the ineffectiveness of local financial markets towards SMEs financial needs and of their main causes. Moreover, it will seek to identify the measures to be promoted in order to support the financial modernisation process of the partner Countries. This objective will be reached through the setting up of a network of National Banks-Enterprises Observatories providing a wide-range of activities supporting local SMEs financial modernisation. SMEs will be steadily supported to reach European economic-financial standards. In particular, the Observatories activities will be functional to the understanding and subsequent resolution of banks-enterprises relationship issues, which is considered a key issue for the enhancement of financial system modernisation. Thus, it represents the starting point for the strengthening of financial policies supporting SMEs’ efficiency. In such a way, a correspondence between public actions objectives and private sector needs will be achieved and the project partners will be provided with appropriate tools to promote financial modernisation.

Expe

cted

resu

lts

1. Enhancement of the knowledge of SMEs’ main economic-financial characteristcs and of the context in which they

operate, as well as of the obstacles occurred during their process of financial modernisation. 2. Identification of new local development scenarios and options of regulatory reforms as a basis for the approximation of the economic-financial characteristics of Balkan Countries to EU’s standards. 3. Creation of a cross-border network which allows to establish the basis for the gradual approximation of economic-and-financial characteristics of SME’s operating in the Balkan area to EU’s standards through the exchange of experiences and the setting up of joint initiatives. This network is connected to the launching of financial modernisation Programmes to be implemented throughout the Eastern Adriatic Countries, based on the successful methodology of the World Bank’s Convergence Programme (www.convergence-see.eu). Strengthening of capacities about micro-macro economics and financial studies and research of the Albania’s, Bosnia-Herzegovina’s and Montenegro’s socioeconomic actors. Improvement of the skills of personnel in Istitutional, banking and SMEs to increase the effectiveness of the bank-enterprise relationship. Enhancement of a dialogue between banks and enterprises to facilitate the connections and operative aspects such as the “access to finance”.

6

Activ

ities

Creation of National Bank-Enterprise Observatories Creation and submission of a questionnaire Analysis of the data emerging from the survey Setting-up of National Bank-Enterprise Roundtables Drawing up of Strategic National Documents Creation of an Adriatic Bank-Enterprise Observatory Setting-up of Cross-border Bank-Enterprise Roundtables Updating of the questionnaires by the National Observatories Drawing-up of a Cross-Border Strategic Document Updating of the Strategic Documents by the National Observatories Start up of the Financial Modernisation Programme Creation of the Adriatic Observatory (with a participation of 50% of the Aoulia Region’sBank-Enterprise Observatory, with the balance covered by Albanian, Bosnia-Herzegovina and Montenegro Institutions) in order to transfer: the decades-long experience and Know-how of the Apulia Region’s Banks-Enterprises Observatory in socioeconomic research, monitoring and studies; the deep knowledge of connections and relations between Banks and Enterprises; the definition of policies addressed to the economic development of local territory. Training courses for involved people aiming at the enhancement, from the side of Enterprises, of the capacity to make industrial and financial planning; from the side of the Banks, of the assessment and supporting of the such industrial and financial planning; from the side of the Public Institution, of the capacity to identify effective policies that remove inefficiencies and bottlenecks in the bank-enterprise relationship. Workshops, cultural exchange, know-how transfer addressed to the understanding of dynamics that underline the complexity of the connections among Public Institution, Banks and Enterprises, such as the creation of mutual forms of union based on Italian model “Consortium of Warranty” or the setting up of Warranty Fund to support Enterprises access to finance whether for investment creditor for cash credit

3.3 Correspondence between activities and outputs

Activities Outputs

Creation of National Bank-Enterprise Observatories Bank-Enterprise Observatories

Creation and submission of a questionnaire Questionnaires

Analysis of the data emerging from the survey Documents on the survey results

Setting-up of National Bank-Enterprise roundtables Documents concerning the National Bank-Enterprise roundtables

Drawing up of Strategic National Documents Strategic National Documents


Page 125 of 335

7

Creation of an Adriatic Bank – Enterprise Observatory Adriatic Bank - Enterprise Observatory

Setting up of Cross-border Bank - Enterprise Roundtables Documents concening the Cross-border Bank -Enterprise Roundtables

Updating Activity of the questionnaires by the National Observatories Updated questionnaires

Drawing up of a Cross-Border Strategic Document Cross-Border Strategic Document

Updating Activity of the Strategic Documents by the National Observatories Action Plan

Start up of the financial modernisation Programme Special Studies/ Comparison

Studies

3.4 Methodological Approach

The methodological approach, which builds on the World Bank’s successful experience within the Convergence Programme (www.convergence-see.eu), is mainly based on flexible cooperation between technical and institutional partners. The project methodology relies on an in-depth and field analysis oriented to gather important information on partner Countries SMEs' needs. It would be possible to achieve the necessary knowledge to define the financial regulatory reform proposals supporting Balkan Countries in the arrangement of their financial characteristics to EU standards. Such proposals will be coherent with on-going SMEs financial needs and will be discussed and detected in the framework of Bank-Enterprise Roundtables comprising financial stakeholders, SMEs' representatives and other experts, including from International Financial Institutions. The financial regulatory reform proposals will be organised into concrete intervention recommendations to be followed at both national and Adriatic level.

3.5 Target groups / Final Beneficiaries

The main project’s beneficiaries are SMEs located in participating Regions of the Balkan Area that face difficulties in accessing the financial modernisation paths, as well as banks proving financial services to them. Moreover, Local and Regional Authorities, policy as well as decision makers and local, national and European stakeholders and business support organisations responsible for ensuring economic and financial development and cohesion of their regions supporting SMEs will benefit from the project's implementation. In addition, the whole economy of the Adriatic area, included Apulian's

8

SMEs investing in Balkan countries, will benefit from the arrangement of the economic-and-financial characteristics of Eastern Countries to EU ones.

3.6 Level of Cross Border Cooperation

Joint Development Yes Joint Staff Yes Joint Implementation

Yes Joint Financing Yes

3.7 Cross Border Approach (how the project will realize one/more of the previous joint cooperation system

The project promotes the development of joint frameworks to address common financial-and-economic challenges realised by the National Observatories. To reach this goal the Observatories’ activities will be carried out in tight and steady cooperation and dialogue among them, through the Apulia Region’s Observatory who will coordination their activities. Moreover the survey, analysis, study, documents editing and regulatory proposal activities at national level will be, from time to time, updated as a result of their cross-border review to maximize the development potential of national activities for the whole cross-border area. The setting up of the Adriatic Observatory, as well as the definition of a common strategic Action Plan at regional level represent key tools in order to define actions to be realised at territorial level, allowing the subsequent definition of a common strategy of action throughout the whole regional Adriatic macro-area.

3.8 Capitalisation of the results

A transition time is foreseen to translate the work output of the Adriatic Observatory into the financial Modernisation Programme, whose setting up will represent the main instrument to convert analyses into financial modernisation reforms. The Observatory will carry out Special Studies to deepen the understanding of SMEs’ characteristics, particularly at the cross-border level, as an input into policy formulation. After project closure, the Observatory will continue to develop the monitoring activities of the financial systems modernisation carried out at national level and the fulfillment of further specific comparison studies.

3.9 Coherence of the Project

3.9.1 Coherence of the Project with the Programme’s overall objective/strategy

The project deals with the main objective of the IPA Programme, namely the “strengthening of the sustainable development capacity of the Adriatic Region through an agreed strategy of actions among the partners of the eligible territories”, with a particular emphasis on the improvement of competitiveness through economic, social and institutional cooperation (Priority 1). As far as it is concerned, the project strategy is built in order to contribute to sustainable regional development and competitiveness of the Adriatic area both in its approach and in the extensive involvement of regional


Page 126 of 335

9

partners in the project implementation. In particular, the joint analysis of SME needs as well as the definition of regulatory reform proposals within the Adriatic basin carried out by the Observatories will foster the establishment of a cross-border network with the aim of promoting cohesion and supporting a widespread Adriatic economic-and-financial area of cooperation.

3.9.2 Coherence of the project with the national and local strategies of the involved territories

Many initiatives have been carried out at national level with the support of the World Bank and other International Financial Institutions in order to promote financial modernisation. The Convergence Programme, launched in 2005, supported a wide range of activities concerning financial sector modernisation through public-private cooperation aimed at overcoming the local authorities' knowledge gap on financial markets through the undertaking of a financial modernisation process coherent with EU standards. In 2008, the Bank of Albania and the Association of Albanian Banks launched SPI (Special Projects Initiative) Albania Financial Sector Modernisation Programme (www.spi-albania.eu), supported by the World Bank’s Convergence Programme. SPI is a public-private partnership that has developed a range of tools in order to enhance the modernisation of the Albanese financial sector, with a particular emphasis on banking issues.

3.9.3 Coherence of the project with the EU sector and horizontal policies

In line with the Lisbon Agenda of making the EU “the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion” the project enhances the opportunities to create a better environment for SMEs business support and provides the Eastern Adriatic Regions with the opportunity to develop a financial system able to compete at European level, especially in the context of enlargement. Moreover, it matches with the Guiding Principles for Sustainable Development with particular reference to the issues related to the involvement of business and social partners, the strengthening of policy integration and the promotion of use of best available knowledge as well as with the European Market Integration policy's issues.

4. Project Description

4.1 WP0 Project Preparation

WP Responsible Partner Apulia Region

Description

This WP concerns all the activities carried out in order to allow the project preparation, i.e. the proposal and the definition of the project. The project is inspired by the contents and activities

10

implemented by the World Bank’s Convergence Programme and SPI projects in Albania (www.spi-albania.eu) and Romania (www.spi-romania.eu), aiming to foster both an analytical culture on financial policy matters in Balkan Countries and enhance a collaborative approach between authorities and market participants. For this purpose, several meetings with the World Bank experts have taken place during the preparation of this proposal. In addition, partnership meetings have been set up in order to share contents, objectives, results as well as activities following the logical framework approach.

from year: 2009 Months 01 to year: 2009 months: 06

- Activity 1

Description

The preparation activities started with the development of the project proposal and the outlining of the project contents by the Lead Partner Region with the support of the World Bank’s Convergence Programme. A project template implemented through the support of Logical Framework approach has beeen shared throughout project preparation with potential partners. This phase of the project praparation foresees thus the definition of the budget lines.

- Activity 2

Description

Meetings with the World Bank experts to define specific project contents

WP 1 – Transnational Project Management and Coordination

WP Responsible Partner da definire

Description

Coordination activity includes project management, both at administrative and operational level. This activity will be fully implemented by the Lead Partner (Apulia Region), in close cooperation with the Programme managing bodies and in particular: Steering Committee and Partner Board. The Observatory set up in Apulia will have the role of coordinator and will be responsible of sharing its expertise with other Bank-Enterprise Observatories. The Apulia Region Observatory will, thus, support all partner Countries involved in the setting up and implementation of the Observatories themselves and towards all the activities of survey, reporting and regulatory reform proposals.

from year: 2010 months: 01 to year: 2012 months: 12


Page 127 of 335

11

- Activity 1

Description

This activity foresees the setting up of the project Steering Commitee aimed at supporting Apulia Region in the coordination and management activities, involving World Bank's experts and technical support. It will carry out activities of identifying needed expertise, approve the draft questionnaire and Documents at both national and crossborder level, participate to the organisation of seminars and other supporting events and review the reform proposals suggested by the Working Roundtables.

- Activity 2

Description

The National Observatories representatives merge into a Partner Board having the role of sharing the activities carried out by the Observatories themselves at national level and submit the projects' Documents drawn up to the Steering Committee, as well as share the reform proposals detected at national level in the framework of the national Working Roundtables. It represents the starting point from which the Adriatic Bank-Enterprise Observatories will be set up.

WP 2 – Communication and dissemination


Description

Communication and dissemination activities (e.g. website platform, training and know-how-transfer workshops, seminars, etc.) will be carried out by the responsible regional partner/s. Such activities have two objectives: first of all all, project results and outputs will be distributed among a general public and financial experts at national level in order to create the necessary framework to build the Modernisation Programme envisaged. Secondly, project results and outputs will be disseminated within the framework of the competent Authorities in order to support the necessary regulatory reforms to promote financial modernisation. Further outputs include the project launching conference and thematic workshops, two dissemination ongoing seminars and a final conference to spread the lessons and toolkits developed during the life of the project.


- Activity 1

Description

12

This activity aims at creating a website platform for the diffusion and sharing of the results of the thematic in depth-analysis on financial SMEs characteristics. The platform will, thus, support the exchange of experiences and the capitalization of results. At the same time, a project web site will be created. Thanks to this tool, all the information concerning the activities' progress and the main reached goals of the project will be available to the users.

- Activity 2

Description

This activity envisages the publication of the main project outputs produced, i.e. Strategic Documents at both national and crossborder level and the Action Plan.

- Activity 3

Description

The project communication activities foresee the organization of thematic workshops, two dissemination ongoing seminars, technical meetings and both a launching and closure events for the promotion of the results.

WP 3 – Creation of National Observatories


Description

In the framework of WP3 the activities concerning a better knowldege of SMEs financial needs will be carried out. This WP is aimed at providing an in-depth knowledge of the connections between banking systems and SMEs in all the Countries involved in the project implementation through the exchange of practices and competences. These activities will be implemented by the establishment and start up of National Bank-Enterprise Observatories investigating and reporting Balkan Countries' SMEs' reality. The main tool to reach this goal will be the creation of a questionnaire whose contents and methodologies of examination will be implemented by different Observatories by means of their close cooperation. The questionnaire will be submitted to a SMEs sample to obtain information regarding the modernisation status of financial systems supporting SMEs, detect the main tools through which SMEs can have access to finance innovation support and find out local financial market inefficiencies.


- Activity 1

Description


Page 128 of 335

13

This activity is addressed to the creation and start up of National Bank-Enterprise Observatories representing the main tool for the promotion of institutional cooperation aimed at exchanging competences. The Observatories will start up and carry out the analysis-and-examination activities as regards the main characteristics and needs of SMEs in the Balkan Countries concerning financial modernisation and support for entrepreneurial innovation issues.

- Activity 2

Description

In cooperation and coordination with all the survey activities carried out by the international institutions (e.g. the World Bank and the European Bank for the Reconstruction and Development), this activity will create and test an ad-hoc questionnaire that will be presented to a SMEs sample in the different Countries taking part in the project and has the final purpose of finding out the main economic-and-financial obstacles which may occur. Particular attention will be paid to the themes regarding access to bank credit, financing innovation and internationalisation of SMEs.

- Activity 3

Description

This activity is focused on the joint analysis of the data coming out from the survey allowing to develop a pattern of the economic-and-financial characteristics of SMEs operating in the Countries concerned, paying great attention to the definition of the obstacles arising in financing innovation. The survey's results will outline important aspects marking the situation of SMEs and constituting the basis for the definition of the future tools intended to promote financial systems modernisation.

WP 4 – Analysis and benchmarking


Description

On the basis of the previous WP's results, this activity will define all the possible intervention strategies at national level in order to support financial innovation for SMEs through the setting up of Bank - Enterprise Roundtables. They will work out a Strategic Document for each Country involved in the project's activities on the basis of the analysis of the data emerging from the survey. These activities are geared to support the future implementation of the necessary regulative reforms for the strengthening of beneficiary Countries economic-and-financial characteristics to bring them to EU’s standards and will start simultaneously with the final phase of the data analysis with the aim of creating a strong connection among such activities. The working out-and-structuring phase of the Documents will be followed by the same Documents diffusion activities aimed to promote an in-depth knowledge of the fulfilled activities’ results towards the main stakeholders at national level.

14


- Activity 1

Description

In order to analyse the survey's results Bank-Enterprise Roundtables will be set up. In this framework, the regulatory reform proposals supporting banks in supplying services to SMEs will be concerted. Such joint Roundtables will be based on the methodology applied by the World Bank’s Convergence Programme and will expect the participation of project's beneficiaries and other relevant experts.

- Activity 2

Description

In the framework of the Strategic Documents, the main interventions to be implemented at national level will be defined and the activities to support financial modernisation will be explained. Each Document will provide a definition of the intervention to be implemented and a complete list of the proposed support measures pointing out the necessary regulatory reforms to guarantee the arrangement of the economic-and-financial characteristics of Eastern Countries to EU ones.

WP 5 – Creation of an Adriatic Banks Enterprises Observatory


Description

This WP is aimed at the definition of the main actions to be envisaged at Adriatic level to propose a common strategy in the whole project's target area necessary to guarantee the financial modernisation of SMEs. The main tool to promote the overall strategy at Adriatic level is represented by the creation of an "Adriatic Bank-Enterprise Observatory" that will represent the synthesis and linking point of the activities developed by the Observatories at national level. Nevertheless, the Activities developed by the National Observatories will not end after defining the respective Strategic Documents. Actually, they foresee on-going updating and implementation of the Documents, running parallel to the progress of the project activities.


- Activity 1

Description


Page 129 of 335

15

An "Adriatic Bank-Enterprise Observatory" will be created, being the bearer of joint instances shared by the different Countries and the main tool and point of reference to provide the necessary knowledge to speed up the modernisation of the bank-and-financial systems of Balkan Countries. The creation of the Adriatic Observatory will be the arrival point of the process for the creation of the Bank - Enterprise Observatories at national level.

- Activity 2

Description

Joint roundtables based on the methodology dexperimented by the Convergence Programme will be created. The setting-up of the cross-border Bank-Enterprise Roundtables activity is developed through the tight connection between the two main sub-components of which it is made up: a) the analysis of the data arising from the Bank-Enterprise Roundtables at national level (WP 4); b) the analysis of what has been reported in the produced National Strategic Documents (WP 4).

- Activity 3

Description

The questionnaires submitted to SMEs will be revised and subsequently updated by the National Observatories, with the Adriatic Observatory coordination, according to the revision activity of the emerged data at cross-border level. After this updating, they will be further analysed by the sample of SMEs which was previously detected to obtain additional information for creating a reference and exhaustive scenario of SMEs’ needs.

WP 6 – Setting up of crossborder network


Description

This WP aims at overviewing the results of the activities developed by the Bank-Enterprise Roundtables at national level (WP 4), through the setting up of cross border roundtables functional for a joint definition of strategic action lines that will be illustrated through the following elaboration of a Strategic Cross-Border Document. The document is addressed to a joint definition of the regulative reforms to be implemented at Adriatic macro area level to support the arrangement of the economic-and-financial characteristics of Balkan Countries. In this way, the activity of mapping and displaying SMEs needs will become more organic and coherent with the definition of an analysis framework to be applied to the whole Adriatic context.


16

- Activity 1

Description

This activity aims at drawing-up a Cross-Border Strategic Document in which the main lines of action and activities for the support of the financial modernisation of the Balkan Countries will be explained, thanks to Roundtables’ results (WP 5). The Document will contain a list of the proposed support measures of the strategic actions to be created, as well as of the regulatory reforms to be implemented to guarantee the above-mentioned arrangement of the economic-and-financial characteristics.

- Activity 2

Description

This activity foresees the on-going updating and implementation of the National Strategic Documents, as a result of the drawing-up of a Cross-Border Strategic Document providing remarkable cues for the re-definition of the contents of each Document. The updating activities will be the basis for the definition of a joint strategic Action Plan at regional level, coordinated by the Adriatic Observatory, being the starting point for the foreseen financial modernisation Programme's implementation.

- Activity 3

Description

In order to guarantee the setting up of the Financial Modernisation Programme the Adriatic Observatory will carry out the following activities: i) develop meetings with the bodies in charge to start up the Programme ii) carry out Special Studies on strategic aspects at cross-border level iii) monitoring the financial systems modernisation activities carried out at national level iv) promote specific comparison studies for the definition of the characteristics of SMEs and territorial clusters.


Page 130 of 335

Annex VI-4 TAIEX is the Technical Assistance and Information Exchange instrument managed by the Directorate-General

Enlargement of the European Commission1. TAIEX supports partner countries with regard to the

approximation, application and enforcement of EU legislation. It is largely demand driven and facilitates the

delivery of appropriate tailor-made expertise to address issues at short notice.

TAIEX’ main tasks are:

To provide short term technical assistance and advice on the transposition of EU legislation into the

national legislation of beneficiary countries and on the subsequent administration, implementation and

enforcement of such legislation.

To bring ENPI partner countries closer to the European Union, through increased economic

integration and a deepening of political cooperation by sharing the experience gained during the

enlargement process.

To provide technical training and peer assistance to partners and stakeholders of the beneficiary

countries.

To be an information broker by gathering and making available information.

To provide database tools for facilitating and monitoring the approximation progress as well as to

identify further technical assistance needs.

Technical assistance through the TAIEX instrument comes in many different forms and across a wide

range of areas. Partner administrations can benefit from TAIEX’s flexibility to help meet wider

training needs in EU legislation by reaching a significant number of officials. At the same time, it is

important to retain an awareness of and be responsive to more targeted requests. In this regard, the

expert and study visit format, depending entirely on requests received from beneficiary partners,

provides a complementary institution building service.

As with other TAIEX training formats, experts and study visits are designed to provide short term

assistance to beneficiary countries on the approximation and implementation of EU legislation. Study

visits are visits made by a limited number of officials of the beneficiary countries to Member State

administrations. They give an opportunity to the beneficiaries to work alongside Member State

officials to discuss legislation, experience first-hand administrative procedures and infrastructure and

see examples of best practices.

Expert missions on the other hand involve usually one or two Member State experts travelling to

beneficiary partner countries. They provide an opportunity to discuss draft legislation, present

examples of best practices and lend assistance where requested. The preferred format is working

sessions involving an exchange of knowledge between the beneficiary countries and the experts.

The TAIEX mandate to provide assistance covers the following groups of beneficiary countries:

Croatia, Turkey, former Yugoslav Republic of Macedonia;

1 http://ec.europa.eu/enlargement/taiex/what-is-taiex/index_en.htm


Page 131 of 335

http://ec.europa.eu/enlargement/taiex/what-is-taiex/index_en.htm

Albania, Bosnia and Herzegovina, Montenegro, Serbia and Kosovo (as defined in UN Security

Council Resolution 1244 of 10 June 1999);

Bulgaria, Romania;

Turkish Cypriot community in the northern part of Cyprus;

Algeria, Armenia, Azerbaijan, Belarus, Egypt, Georgia, Israel, Jordan, Lebanon, Libya, Moldova,

Morocco, the Palestinian Authority, Syria, Tunisia, Ukraine and Russia.

The beneficiaries of TAIEX assistance includes those sectors, both public and private, who have a role to play

in the beneficiary countries in the transposition, implementation and enforcement of EU legislation or in the

case of the ENPI countries, in deepening economic and political cooperation by sharing the experience gained

during the enlargement process. The main target groups are:

Civil servants working in public administrations; at national and sub-national level and in associations

of local authorities;

The Judiciary and Law Enforcement authorities;

Parliaments and civil servants working in Parliaments and Legislative Councils;

Professional and commercial associations representing social partners, as well as representatives

of trade unions and employers’ associations;

Interpreters, revisers and translators of legislative texts.


Page 132 of 335

Rue de la Loi 200, B-1049 Bruxelles/Wetstraat 200, B-1049 Brussels - Belgium - Office: CHAR 03/149

Telephone: switchboard +32-2-296 73 07 Fax: +32-2-296 76 94 Page 1 of 6

Application form for TAIEX Expert Mission Project title: Expert Mission on Revising Public Procurement Law

N.B.: only type-written and fully completed applications will be accepted Beneficiary country: Albania

Beneficiary Ministry/Service: Ministry of Finance

Date of submission:

Objective of the Expert Mission: To provide inormation on successful legal frameworks of EU member states for the improvement of Government debt contracting process in order to cover the acquisition of financial and other supporting services

1. Authorisation from Hierarchy (Head of EU integration department or technical dept.)

Title1: Dr.

First name: Xhentil

Surname: Demiraj

Function: General Director of Debt Department

Office Tel.: +355 42248968

Office Fax: +355 42248968

E-mail: [email protected]

Date of consultation:

Supporting comments: Project Terms of References (attached)

Signature (if applicable):

Please complete and return to:

European Commission , Institution Building unit (TAIEX) Rue de la Loi 200, B-1049 Brussels

Fax: +32-2-296 76 94 E-mail: [email protected]

1 Personal data contained in this document will be processed in accordance with the privacy statement of the TAIEX instrument (See http://taiex.ec.europa.eu/privacystatement) and in compliance with the Regulation (EC) N° 45/2001.


Page 133 of 335

wb323932

Text Box

Annex VI-5



2. Expert Mission Content

a) What will the Member State Expert(s) focus on during the visit?

Legislation Implementation Institutional development

b) EU legislation concerned (please give reference to regulations, directives etc.) and chapter of the Acquis and details of provisions for discussion CELEX N°/Natural number: Directive 2004/18/EC

Type of legislation: Directive

Screening chapter:

c) Outline your current situation concerning the EU legislation indicated and mention any recent developments that may be relevant in this regard (e.g. give details of the stage of preparation of the legislation, outline the timetable for the adoption of the legislation) In Albania, foreign and domestic borrowing is governed by the Law no. 9665 dated 18.12.2006 on “State borrowing, state debt and state guarantee loans in the Republic of Albania”. According to article 26 of this law, in cases when Ministry of Finance obtains loans from private banks for financing public investments projects, creditor’s selection is made through public procurement procedures. Recently foreign borrowing has gained momentum due to the access the country has to borrowing on the international financial markets, based on an improvement in 2007 of the country rating by Moody’s. It is also the Government strategy to reduce domestic borrowing and increase foreign borrowing for financing investment projects and fiscal deficit, as outlined in the Public Debt Strategy for 2008-2010. When contracting complex international loans, Ministry of Finance would need financial and other supporting services (eg. legal services) in order to better assess costs, risks and to increase its negotiating capabilities. The acquisition of such services should be treated as public procurement. Article 7 of the Law no. 9643 dated 20.11.2006 excludes from the jurisdiction of the law financial services related to purchase, sale or title transfer or other financial instruments. This provision restrains Ministry of Finance’s possibility to improve the contracting skills and power and it hampers banks to offering the necessary financial services. This situation may have negative consequences for the Ministry of Finance in contracting international loans such as: • Delays in contracting foreign loans, as the analysis is to be handled with internal limited resources, with results on liquidity and costs; • Increase in the transaction cost risk due to limited analytics capabilities. In this context, there is a need to revise the public procurement law to include clear provisions on financial services.

d) Is there any planned or currently running PHARE/CARDS/TWINNING or other project

that is dealing with the issues covered by the request? Yes No If yes, please indicate details:


Page 134 of 335



e) Draft programme for the Expert mission: Please list in detail the issues you would like to discuss with the Member State expert, such as implementing regulations, infrastructure, strategies, training and any other elements of relevance: The program for the expert mission should cover the following issues: 1. Outline of specific EU guidelines with regards to the member countries Public Procurement legal Framework 2. EU countires experiences in transposing the abovementioned guidelines in their legislation 3. Best practices of legal frameworks in EU countries that have facilitated individual countries acess to foreing borrowing improves, thus allieviating Government financing needs. 4. EU experience in specific provisions that reduce the transaction costs for the Government and increases transparency.

3. Logistical aspects

a) Is there a Member State Administration/Organisation from which you wish to receive the expertise? (this information is mandatory for applicants from beneficiary Member States)

Preferred Country (choice cannot always be guaranteed)

Hosting Member State Authority/Institution (if known)

Do you know the Member State expert from whom you wish to receive expertise?

Title:

First Name:

Surname:

Ministry or Institution:

Department:

Function:

Office address (street/number/office number)

Post code:

City:

Office Tel:

Office Fax:

E-mail:


Page 135 of 335



Have you had previous contact with your selected host Institution/Organisation/Expert? Yes No

b) When would you like to receive the Expert?

Date/Year: 2009

Calendar week: 23-27

Duration (maximum 5 working days): 1 working day

c) Language knowledge (please state the language(s) and indicate your level of competence)

1st language: English Very Good Good Fair Poor

2nd language: Very Good Good Fair Poor

3rd language: Very Good Good Fair Poor

4. List of Participants Data received from you is to be used for the organisation of TAIEX events only, and for no other purpose unless stated. You are entitled to have your data deleted or removed from our database at any time. 1. Details of the applicant acting as main co-ordinator requesting the Expertise Title (Mr., Ms.) : Mr.

First Name: Xhentil

Surname: Demiraj

Ministry or Institution: Ministry of Finance

Department: Debt Department

Function: General Director

Office address (street/number/office number): Blv. Deshmoret e Kombit

Post code:

City: Tirana

Office Tel: +355 42248968

Office Fax: +355 42248968

Email: [email protected]

Will you also participate to the expert mission? Yes No

2. Details of the person(s) participating to the Expertise a)

Title (Mr., Ms.) : Ms.

First Name: Milbana Treska/Tole, Member, Middle Office Director

email: [email protected]


Page 136 of 335



Surname: Treska/ Tole

Ministry or Institution: Ministry of Finance

Department: Middle Office

Function: Directr

Office address (street/number/office number): Blv. Deshmoret e Kombit

Post code: 0000

City: Tirana

Office Tel:

Office Fax:

E-Mail: [email protected]

b)

Title (Mr., Ms.) : Ms.

First Name: Anilda

Surname: Sefgjini

Ministry or Institution: Public Procurement Agency

Department: all

Function: Deputy Director

Office address (street/number/office number):

Post code:

City:

Office Tel:

Office Fax:

E-Mail:

c)

Title (Mr., Ms.) :

First Name:

Surname:


Department:

Function:


Post code:

City:

Office Tel:

Office Fax:

E-Mail:

d)

Title (Mr., Ms.) :


Page 137 of 335



First Name:

Surname:


Department:

Function:


Post code:

City:

Office Tel:

Office Fax:

E-Mail:

Please note: The information contained in this form will be made available

on-line to the Mission and the Embassy of your country in Brussels.

All applications received directly from the Western Balkans' administrations will be forwarded to the EU

Delegation in the country concerned, and in the case of Kosovo(UNSCR1244) to the EC-Liaison Office, for a

preliminary evaluation.


Page 138 of 335

Expert Mission on Revising Debt

Contracting Regulatory

Framework

INT MARKT IND/EXP 34260

organised in co-operation with

Ministry of Finance of Albania

Venue:

The Ministry of Finance of Albania

Blvd "Deshmoret e Kombit" Nr. 1

Tirana, Albania

24-26 November 2009

For more information on TAIEX assistance and to download presentations of

this event, please go to: http://ec.europa.eu/enlargement/taiex.


Page 139 of 335

wb323932

Text Box

Annex VI-6

INT MARKT IND/EXP 34260 2/6

Aim of the mission:

The aim of the assistance is to provide the best information and knowledge related to

successful legal frameworks of EU member states for the improvement of Government debt contracting process in order to cover the acquisition of advisory, technical and other supporting services associated with Albania’s debt borrowing in the framework of the SPI Albania project on Revising the Debt Contracting Regulatory Framework. Also, to help the Ministry of Finance formulate comprehensive and clear definition on advisory, technical and other supporting services related to Albania’s debt borrowing and draft the relevant regulatory proposal. The Ministry of Finance is taking care of all the necessary facilities. SPI Albania will support with the logistics. Expected participants are: Mr. Xhentil Demiraj-General Debt Management Director, Ministry of Finance Mrs. Milbana Treska-Middle Office Director, General Debt Management, Ministry of Finance Ms. Xhorlin Pojani-Lawer, General Debt Management, Ministry of Finance Mrs. Anilda Sefgjini- Deputy Director, Albanian Procurement Agency Ms. Evis Gjebrea- Consultant, SPI Albania Financial Modernization Program Mrs. Anuela Ristani- Operations Director, SPI Albania Mrs. Elona Koci-Raiffeisen Bank Mr. Ardian Ceco- Senior Manager, Corporate & Marketing, IntesaSanPaolo Bank Ms. Jola Gjuzi-Lawer, Kalo and Associates Legal Company Mr. Fatos Lazimi-Lawer, Kalo and Associates Legal Company Ms. Artiola Agalliu-Alpha Bank, Albania Mrs. Greta Minxhozi- SPI Albania Observer, Senior Officer at the World Bank Office, Tirana Ms. Ajola Xoxa-Lawer, Tonnuci Legal Studio Mr. Ervin Braho- Lawer, Tonucci Legal Studio For a full understanding of the project and its outputs delivered so far please browse: http://www.spi-albania.eu/en/2009-program/debt-procurement/


Page 140 of 335

http://www.spi-albania.eu/en/2009-program/debt-procurement/


Day I : Tuesday 24 November 2009

Chair : -

09:30 Welcome and introduction of expert by the Ministry of Finance staff

10:00 – 12.30 Meeting

Subjects:

Discuss the note on advisory, technical and other supporting services

associated with Albania’s borrowing prepared by the SPI Secretariat on July

2009

Power Point Presentation by Evis Gjebrea-SPI Albania.

EU countries experiences in transposing directive 2004/18/EC in their national

legislation with particular emphasis on the definition of advisory, technical

and other supporting services related to Government’s borrowing.

Presentation by the EU Expert.

To browse the note please visit this site:

http://www.spi-

albania.eu/admin/js/filemanager/files/web/2009program/procurementlaw/secondmeeti

ng/02%20SPI%20Albania%20-%20Debt%20Contracting%20project-

%20Final%20Note%20on%20advisory%20technical%20services.pdf

12:30 Lunch Break

14:00 -17.00 Meeting


Page 141 of 335

http://www.spi-albania.eu/admin/js/filemanager/files/web/2009program/procurementlaw/secondmeeting/02%20SPI%20Albania%20-%20Debt%20Contracting%20project-%20Final%20Note%20on%20advisory%20technical%20services.pdf





Subjects:

Discuss the International Experience note prepared by SPI Secretariat with

input from the Albanian legal studio Kalo& Associates in regulating

procurement environment for advisory, technical and other supporting

services related to debt borrowing.

Power Point Presentation by Evis Gjebrea and Kalo & Associates Legal

Studio.

Providing other EU countries experiences on the legal framework adopted for

covering such services.

Presentation by the EU Expert.

To browse the note please visit the site:

http://www.spi-

albania.eu/admin/js/filemanager/files/web/2009program/procurementlaw/secondmeeti

ng/SPI%20Albania%20Debt%20Contracting%20Project%20International%20Experi

ence.pdf

17:00 End of Day I


Page 142 of 335

http://www.spi-albania.eu/admin/js/filemanager/files/web/2009program/procurementlaw/secondmeeting/SPI%20Albania%20Debt%20Contracting%20Project%20International%20Experience.pdf





Day II : Wednesday 25 November 2009

Chair : -

10:00 – 12.30 Meeting

Subjects:

Discuss in detail individual experiences of Slovenia, Italia and Slovakia

through further exploration of the formulation of their regulations (acts or

procedures) in dealing with advisory, technical and other supporting services

associated to Government debt’s borrowing that could help in the formulation

of the Albanian regulation/s.

Presentation by Evis Gjebrea, SPI Albania to the extent of the input expected to be

received from the Ministries of Finances of Slovenia and Slovakia.

Presentation by EU Expert.

12:30 Lunch Break

14:00 -17.00 Meeting

Subjects:

Best practices of legal frameworks in EU countries that have facilitated

individual countries access to debt borrowing, thus alleviating Government

financing needs.


17:00 End of Day II


Page 143 of 335


Day III : Thursday 26 November 2009

Chair : -

10:00 – 12.30 Meeting

Subjects:

Best practices of legal frameworks in EU countries that have facilitated

individual countries access to debt borrowing, thus alleviating Government

financing needs.


12:30 Lunch Break

14:00 -17.00 Meeting

Subjects:

Draft paper with suggestions and recommendations on drafting the regulatory

proposal.


17:00 End of Day III

This meeting is being organised by the

Technical Assistance Information Exchange Instrument

of the European Commission

CHAR 03/149, B - 1049 Brussels

Telephone: +32-2-296 73 07, Fax: +32-2-296 76 94

Web site http://taiex.ec.europa.eu/


Page 144 of 335

1

Annex VII-1

SPI Secretariat Terms of Reference

Context Central Bank and the Banking Association launched a financial sector modernization program. The Program is placed under the oversight of a high-level committee SPI Committee and orchestrated by a SPI Secretariat. The program relies on project working groups, mobilizing the best expertise available in the financial system, be it from the financial authorities, the banking community or from other organizations, to formulate proposals for self-regulatory or regulatory measures. Under SPI Committee oversight, and with support from the Convergence Program, the SPI Secretariat supports the analyses formulated by the working groups with qualitative and quantitative evidence and adds an international perspective to the documents submitted for SPI Committee endorsement. The SPI Secretariat strives to help public and private stakeholders achieve commonly-agreed solutions with evidence-based analytical approaches. Through reliance on regulatory impact assessment (RIA) techniques and associated public consultation sessions, the SPI Secretariat aims at building a Better Regulation culture in the country. 1. SPI Secretariat project –related activities 1.1. Preparatory activities 1.1.1. Project selection and approval SPI Secretariat prepares the questionnaire for facilitating project proposals. SPI Secretariat runs the consultations with all stakeholders on projects to be

undertaken. SPI Secretariat conducts interviews with selected banks and public authorities to

identify the most critical issues that need a resolution under a public-private aegis. Based on the results of the surveys, with Convergence Program’s support, SPI

Secretariat builds up a draft annual project portfolio taking into consideration previous accomplished projects and a balanced approach of the financial modernization issues.

SPI Secretariat consults SPI stakeholders for attaching priorities to the proposed projects.

Based on SPI stakeholders’ pre-agreement, SPI Secretariat prepares a program matrix, stating the description of the issues to be solved, the objectives, stakeholders for each of the issues and their expected contributions, with proposed starting dates.

SPI Secretariat asks for SPI Committee approval of the proposed annual modernization program.


Page 145 of 335

2

1.1.2. Project-related activities

SPI Secretariat, drafts the Project ToRs (Terms of Reference) with the following structure:

o background information; o project objective; o strategy; o methodology (steps, output, contributions); o proposed PWG (Project Working Groups) composition; o proposed TAN (Technical Anchor).

SPI Secretariat proposes the Project Working Groups composition having in view the fair representation of the relevant stakeholders and the leadership.

SPI Secretariat proposes, in consultation with Central Bank and the Banking Association, a list of persons to be appointed in the PWG/a list of banks to be invited to appoint members in the PWG.

In order to ensure a fair representation, SPI Secretariat divides the banking community by clusters (by bank size) and makes sure that clusters are properly represented in PWGs.

SPI Secretariat prepares the invitation/appointment letters. SPI Committee members/their representatives/POs sign the letters jointly or

separately (as agreed) in order to invite/appoint PWG members. Based on the confirmation received, SPI Secretariat contacts PMT (Project

Mangement Team), sending the draft ToRs. SPI Secretariat has meeting(s) with PMT in order to get feedback on the draft

project ToRs, on the adequacy of the PWG composition and on the first documents prepared by SPI Secretariat.

SPI Secretariat presents them the SPI Platform concept, structure, activities and methodology, emphasizing the responsibilities’ sharing among SPI Secretariat and PWG members.

SPI Secretariat re-runs the appointment procedure in case PMT decides that changes in PWG composition are needed.

In order to ensure the same level of knowledge for the PWG members, SPI Secretariat and PMT share the responsibility of preparing:

o a compilation of the regulatory framework, or o a background study, or o a note on international experience, or o the scoping the problem documents, as the case may be.

1.2. Project activities SPI Secretariat convenes PWG meetings, contributes to/prepares background

documentation, provides international benchmarking (directly or through contracted experts), centralizes individual contributions, ensures consensus – building and writes final documents to be presented for SPI Committee approval.

SPI Secretariat sends the meeting proposal with the agenda, ToRs and background documentation.

With the package for the first PWG meeting, SPI Secretariat forwards also the questionnaire for evaluating their activity in order to get PWG members familiarized and to follow the assessment criteria during the project life.


Page 146 of 335

3

At the beginning of the first PWG meeting, SPI Secretariat performs an introductory presentation on SPI Platform.

In setting up the meeting details (date and venue), SPI Secretariat consults with PMT and/or the Banking Association.

SPI Secretariat drafts the minutes of the meetings and sends them to PWG for approval.

In case the meeting is held online, SPI Secretariat includes in the meeting package the proposed draft minutes of the meeting.

SPI Secretariat follows up with PWG members for the individual contributions. SPI Secretariat aggregates individual contributions and prepares intermediary and

final documents. SPI Secretariat, with Convergence Program support, contracts the expert and

handles the relationship with this one. SPI Secretariat makes suggestions on institutions to be contacted for the project

accomplishment and drafts proposed letters to be signed by PMT (preferably PO). SPI Secretariat attends meetings and discussions with the partner institutions. In case the project objectives or strategy will need to be changed due to objective

factors, SPI Secretariat drafts the proposed amendments to the project ToRs, stating reasons and further actions. Based on PWG approval, SPI Secretariat will inform the SPI Committee accordingly.

SPI Secretariat prepares draft questionnaires for quantitative impact assessment of the PWG proposals or for other surveys/consultations with stakeholders.

SPI Secretariat coordinates with the respective institutions in running surveys. SPI Secretariat collects answers to the questionnaires and prepares draft summary

findings of the surveys. 1.3. PWG recommendations Based on the discussions within PWG meetings, on PWG members’ individual

contributions and on research in the international experience, SPI Secretariat drafts PWG recommendations.

SPI Secretariat will seek for PO’s (Project Owner) and/or PM’s (Project Management) approval on the document sent for SPI Committee’s endorsement.

SPI Secretariat follows up with the respective public authorities on enactment of the PWG Recommendations, asking for and supporting SPI Committee/PMT interventions.

SPI is organizing strategies/activities for awareness building on the project outcomes.

2. SPI Secretariat non – project related activities SPI Secretariat manages the relationship with the banking community,

international banks, local experts (e.g., Deloitte) and other TA providers (e.g., IFC PEP, EBRD).

SPI Secretariat manages relationships with potential funding sources for expertise (e.g., public and private donors).

SPI Secretariat prepares SPI Committee meetings agenda, keep meetings record and distribute minutes to members.


Page 147 of 335

4

SPI Secretariat submits periodical activity reports to Convergence, stakeholders and SPI Committee.

SPI Secretariat presents budgets for approval to the SPI Committee. SPI Secretariat feeds the website and manages SPI’s relationship with press

through stakeholders. SPI Secretariat organizes, in cooperation with PWG, SPI Committee members and

experts, and under Convergence coordination, for awareness raising or for disseminating projects’ outcomes.


Page 148 of 335

1

Annex VII-2

SPI Secretariat responsibilities sharing

SPI General Manager responsibilities

Supervise SPI Secretariat’s day-to-day activities; Coordinate SPI Secretariat’s interactions with SPI partner institutions and the

donor community; Convince SPI partner institutions to undertake projects ownership; Coordinate SPI Secretariat activity planning; Coordinate the preparation of SPI project documents assuring that they meet

the quality standards required by the SPI Committee; Lead the activities for annual program preparation; Prepare analytical documents such as SPI annual financial modernization

programs, project ToRs, research notes, documents on SPI status and activities, presentations etc.;

Develop the institutional relationships, both locally and regionally; Coordinate SPI participation in regional partnerships and with other similar

platforms; Build up and propose strategies to promote enactment of SPI proposals; Report to SPI Committee, to SPI partner institutions and to donors on SPI

activities and achievements; Coordinate SPI Committee meetings organization and preparation (agenda,

documents, discussion check list, etc); Participate in SPI Committee meetings; Ensure the efficient allocation of SPI resources; Improve the current operating rules and procedures and ensure the institutional

development of SPI Platform; Coordinate the communication with press and public, including the

comprehensive, accurate and timely information posted on SPI Albania website.

SPI Director for Analytics and Policy responsibilities

Under the oversight of SPI General Manager, run the consultations with SPI partner institution for building up the project pipeline;

Perform preliminary research in understanding the project proposals and to assess their importance;

Prepare the ToRs for each specific selected analytical assignment, including reference to the necessary/expected involvement of domestic and international experts, to the project stakeholders and project planning;


Page 149 of 335

2

Manage the day-to-day project work, interfacing with local counterparts and ensuring that assignments are run on time and output is of adequate quality.

Prepare SPI projects documents according to EU Better Regulation; Prepare additional research notes and presentations, discussion platforms for

the Project Working Groups; Prepare draft questionnaires for consultations and analyze the findings of the

consultations; Prepare Project Working group meetings and documentation, keep the meeting

records; Maintain accurate evidence of the divergent points and seek to build consensus

among Project Working Group members; Support SPI regional activities.

Office Manager responsibilities

Create and maintain SPI databases on: o Financial sector; o Partner institutions and their participation in the Project Working

Groups; o Contacts of the SPI community; o Project Working Groups meetings and members’ participation;

Execute office supplies and related payments; Prepare and post on website, based on General Manager approval, news and

documents; Create and maintain SPI archives; Keep the evidence of SPI resources; Announcing SPI Project Working group meetings and ensuring members

presence; Take care of the SPI Project Working Group logistics; Perform basic analytical tasks such as collecting relevant regulations and

literature; Collect and centralize feedback of the consultations; Arrange the logistics of the consultants’ participation in the SPI projects; Take care of the logistics for SPI Committee meetings and SPI events; Perform other secretarial tasks.


Page 150 of 335

Annex VII-3

Sample of job add for the SPI General Manager position SPI GENERAL MANAGER SPI (Special Projects Initiative) is a public-private partnership to accelerate financial sector modernization launched in [date] by Central Bank and the Banking Association. SPI operates under the auspices of a high-level SPI Committee, through a small SPI Secretariat which prepares proposals for micro-regulatory reforms, designed by working groups where authorities and market participants collaborate closely. On behalf of the SPI Committee, the Banking Association invites applications to the SPI General Manager position. I. Description of Core Responsibilities: The SPI General Manager will be responsible to lead the SPI Secretariat activities in order to ensure the time and quality achievements of the SPI Albania objectives. He/she will be also supporting the process of ensuring the sustainability of the SPI Secretariat functions and the overall SPI activities. He/she will undertake some analytical tasks in order to cover the eventual gaps and will have to set up and implement communication strategies with SPI partner institutions, with SPI community, with multiple institutions domestically and internationally. SPI General Manager will have the responsibility of managing resources and to ensure institutional development of the SPI platform, including improvement of processes and methods. II. Professional Requirements: • Entrepreneurial desire to build a new institution, under limited guidance, coping with ambiguity and uncertainties; • Strong motivation to work hard under tight deadlines to meet ambitious objectives; • Exceptionally developed interpersonal skills; • Broad exposure to financial sector policy and business issues (min. 10-12 years); • Proven business development and project management skills; • Good analytical and quantitative skills; • Excellent written and verbal communication skills, also in English; • MBA or Masters in Finance/Economics/Law strongly preferred. III. Application: Interested candidates are invited to submit their CVs with a cover letter no later than [date] to [contact]. IV. Conditions: Competitive salary and broad exposure to high level financial sector representatives.


Page 151 of 335

1

Annex VII-4

Draft message to the SPI Secretariat candidates

Dear Candidate, We will be pleased to have an in-depth discussion with you on your interest in joining the SPI Secretariat as [position]. We envisage the discussion to take place in three rounds, as follows: Round One On [date] we envisage to have an one hour discussion in order to know you better and to assess your compatibility with the SPI Platform requirements. 1. You need to make yourself completely familiar with the material shown on the www.spi-albania.eu and/or on the banking association’s website. In particular, you are be invited to read about SPI Albania governance framework, the SPI Secretariat responsibilities, and the activity programs. 2. As indicated in the job ad, SPI Secretariat staff needs to show entrepreneurial

desire to build a new institution therefore you should be prepared to expose your views on SPI mandate and strategy.

3. You will be asked also to assess your appropriateness for the job given your

professional and personal background. You will be notified on the results of this round.

Round Two Round two planned for [date] is a technical discussion to take about one hour in order to test your analytical and planning capabilities.

1. Selected candidates will be asked to identify at least 3 possible modernization projects that could be handled by SPI Platform.

2. Selected candidates will be asked to select one of your proposals and develop it as am SPI Project, having as benchmark the project ToRs on www.spi-albania.eu.

Participant candidates will be notified on the results of this round. Round Three The third round planned to be on [date] and is dedicated to assessing team compatibilities and to team building. Selected candidates will be asked to meet their potential colleagues and share thoughts on their strengths and weaknesses, on team working and on cooperation on different issues. The output of this round will be the SPI Secretariat proposed team.


Page 152 of 335

2

Round Four By [date], the proposed SPI Secretariat team will present their candidacies within SPI Committee meeting, when a decision will be reached. Our commitment is to have a transparent and thorough selection process to give the SPI Secretariat the professional legitimacy it needs to do its work. Please do not hesitate to contact me.


Page 153 of 335


Page 154 of 335

1

Annex VII-5

Outline of the report on the selection process of the SPI Secretariat

I. Summary of the selection process for SPI Albania General Manager

1. Statistics

Total number of candidates: Number of shortlisted candidates Number of interviewed candidates Number of interviews

2. Selection process The selection process was a transparent and thorough one, intended to give the SPI Secretariat management the professional legitimacy needed to do its work. The vacancies were advertised in [newspapers] and on [websites]. The selection process was organized in four rounds. Round One Date: Interviewing panel: Objective: to know better the candidates (their personality and professional background) and to assess their compatibility with the SPI Platform requirements. Supporting documents: CVs and letters of intent, SPI governance framework, the SPI Secretariat responsibilities, and the activity programs from www.spi-albania.eu Summary of discussions: Results:

Round Two Date: Interviewing panel: Objective: to test selected candidates’ understanding on SPI projects, as well as their analytical and planning capabilities. Summary of discussions: Results:


Page 155 of 335

2

Round Three Date: Interviewing panel: Objective: to assess team compatibilities and to build SPI team. Summary of discussions: Results: II. Presentation of the proposed SPI Secretariat Justification for selection of each SPI Secretariat member III. SPI Committee discussions The fourth and last round of the selection process is the current one. SPI Committee is kindly requested to meet the proposed SPI Secretariat team and to allow them presenting their candidacies, in order to have the final decision on their recruitment.


Page 156 of 335

1

SPI SECRETARIAT SELF-TRAINING SUPPORT

ForewordThis presentation is intended to guide SPI Secretariat through its self

training session on the SPI partnership, on its objective, governance,

processes, methodologies and results.



The assertions in the presentation should be backed by a collection

of documents available on www.spi-albania.eu, www.spi-romania.eu,

and www.convergence-see.eu. Assembling a comprehensive

package could be an interesting and self-learning exercise for the SPI

General Manager.

The presentation provides also some practical example and gives

SPI Secretariat to have team exercises in order to consolidate their

understanding.




• SPI Partners• Central Bank• Banking Association• [Ministry of Finance]• [Consumer Protection Agency]• [Financial Market Authority]


SPI Partnership (2)

Funds

Human resources

Data


Financial sector

modernization


institutional strengthsMoU



• SPI projects proposals and leadership;• members to all PWGs;• access to data;• empowering their representatives in SPI Committee to

endorse SPI documents;• actions for enactment of regulatory proposals endorsed by

SPI Committee.

• Supporting document: SPI Operating Guidelines (tool kit)

SPI Romania Partners• National Bank of Romania• National Authority for Consumers Protection

• Ministry of Economy and Finance

• Ministry of Agriculture and Rural Development

• Ministry of Interior and Administration Reform

• Anti-Money Laundering Office

• TransFonD

• Credit Bureau

• National Authority for the Supervision of Personal

Data Processing

• Rural Credit Guarantee Fund

• Grading Commission for Comestible Seeds

• Romanian Commodities Exchange

• Romanian Stock Exchange

• National Securities Comission

• The National Association for Consumers’ Protection

and Promotion of Programs and Strategies from

Romania• Italian Banking Association• OECD• International Finance Corporation• World Bank

• Romanian Banking Association• Raiffeisen Bank

• Raiffeisen Banca pentru Locuinţe

• OTP Bank

• Banc Post

• CEC

• BCR

• Alpha Bank

• BRD-GSG

• UniCredit Ţiriac Bank

• RIB Romanian International Bank

• Credit Europe Bank

• ING Romania

• Citibank

• ABN AMRO

• ATE Bank Romania

• Coface Romania

• Cargill

• KPMG

• Deloitte

• Clifford Chance

• Algoritmics

• Bearing Point

• Financial Ombudsman Service, UK

• Goodwood Financial Consulting


Page 157 of 335







http://www.convergence-see.eu/









wb323932

Text Box

Annex VII-6

2

7

SPI Albania Partners• Albanian Association of Banks

• Alpha Bank• Banka Popullore• Credins Bank• Credit Bank of Albania• Emporiki Bank • First Investment Bank• International Commercial Bank• Intesa Sanpaolo Bank• Italian Bank for Development• National Bank of Greece• National Commercial Bank• Pro Credit Bank• Raiffeisen Bank• Tirana Bank• United Bank of Albania • Union Bank• Albanian Mobile Communications • Vodafone Albania

• Bank of Albania

• Ministry of Finance• Ministry of Economy, Trade and




88











SPI Committee



SPI SecretariatMrs. Ramona Bratu, Head, SPI Regional Operations

DirectorMrs. Anuela Ristani, Director of Operations

Mrs. Evis Gjebrea, Consultant

Mrs. Endrita Xhaferaj, Director Financial

Modernization Program and Analytics

SPI Committee (1)– Members:

• Central Bank- Governor & Hosting Chairperson,• Banking Association - Chairman, • Other authorities – Senior Officials,




SPI Committee (2)• Meetings: quarterly• SPI Committee meeting package:SPI Committee meeting agenda – 2 weeks

beforeSPI Committee documents for approval

(project proposals, project status reports, Project Working Group Recommendations)SPI Committee documents for discussions

(institutional, staffing and strategic matters)SPI Committee documents for information

(activity reports)SPI Committee meeting minutes – drafted

before the meetingSPI Committee decision/communication

letters

SPI Committee (3)Meeting Agenda Template

SPI Committee Meeting[Date]

[Location]

Participants:

AGENDA

Welcome address

Activities [estimated time][documents]

Institutional and organizational framework [estimated time][documents]

End of Meeting

SPI Committee (4)Meeting Minutes Template

Topics Discussions/ Decisions Main Follow-Up Actions

Activities

Institutional and Organizational Framework


Page 158 of 335

3

SPI Committee (5)Decision/communication letter sample



» including signing off final SPI Committee recommendations;• Project Manager – is appointed by the Project Owner (usually out of the


• Deputy Project Manager(s) – represent(s) the other main stakeholder(s) and second(s) the Project Manager in coordinating PWG meetings.

– Project Working Group


Responsibilities:



– PWG gathering

• ToRs• List of eligible persons – in consultation with stakeholders• Invitation letters – to be signed by SPI Committee members

– Meetings: 3-4 meetings over 3 months

SPI Albania PWGs membersPROJECT Project Owner

Project ManagerProject Deputy

Manager

Members

Improving Auction Procedures for Immovable Collateral under Foreclosure

National

Commercial Bank

Seyhan Pencapligil

National

Commercial Bank

Veronika Prifti

Bank of Albania

Rudina GorishtiErion Lena, Alpha Bank Mirela Behluli, Appraisers’ AssociationAndon Daka, Credins Bank Alban Mehmeti, Altin Hysi, Emporiki Bank Kimmo Vikman, EURALIUS Andin Jakova, Eduart Reci, International Commercial BankDorina Mehmeti, International Finance Cooperation Rezarta Bitri, Ministry of JusticeRudina Ziu, Raiffeisen Bank Ernal Dobi, Tirana BankArta Taipi, United Bank of Albania

The impact on the banking regulations of the IFRS implementation

Bank of Albania

Indrit BankaBank of Albania

Miranda RamajBanka Popullore

Armand MuharremiAdela Xhemali, Silvana Osmani, American Bank of Albania Ilda Markollari, Alpha Bank Ilir Pustina, Bank of Albania Nuriona Sokoli, Deloitte Merita Musliu, Eralda Gurga, Emporiki BankTeit Gjini, Ernst & Young Lyela Rama, Financial Supervision AuthorityAlbana Hallvaxhiu, Popular Bank Elvira Tartari, Adela Leka,, ProCredit Bank Julia Manushi, Raiffeisen Bank Andin Jakova, Zinaida Cako, International Commercial Bank Skender Emini, National Commercial Bank Kledi Kodra, PriceWaterhouseCoopersArben Zace, Ministry of Finance Romira Hoxha, KPMGLirola Keri, National Accounting Council Agim Saqe, National Bank of Greece

Reducing cash transactions

Raiffeisen Bank

Oliver WhittleRaiffeisen Bank

Robert WrightBank of Albania

Dashmir HalilajLiliana Nanaj, American Bank of Albania Griselda Cela, Credins Bank Elird Qendro, Mirela Pekmezi, Italian Bank of Development Jonida Vaso, Union Bank

Reviweing Capital Adequacy Regulation

Bank of Albania

Indrit BankaBank of Albania

Miranda RamajAmerican Bank of

AlbaniaAdela Xhemali

Alma Dhamo, American Bank of AlbaniaFlorian Dervishi, First Investment BankAdela Leka, ProCredit BankBrunilda Jacovi, National Bank of GreeceEntela GJyzari, Banka Popullore

SPI Secretariat (1)

SPI GeneralManager

SPI Director, Financial Modernization Program and Analytics

Office manager

•Central Bank background

•Policy design experience

•Good writing skills

•Excellent organization skills

•Communications

•Commercial banking background

•Analytical skills

•Strategic thinking

Experts

SPI Secretariat (2)• General responsibilities:

• Manage relationships with the banking community, international banks, local experts (e.g., Deloitte) and other TA providers (e.g., IFC PEP, EBRD,…);

• Manage relationships with potential funding sources for expertise (e.g., public and private donors);

• Manage technical relationships with foreign experts and consult with technical staff of the authorities during projects;

• Prepare analytical studies supporting proposed regulatory changes (with full RIA);

• Build up and maintain necessary databases and evidence;• Prepare final SPI Committee proposal (backed by analytical study);• Prepare SPI Committee meetings agenda, keep meetings record and

distribute minutes to members;• Submit periodical activity reports to Convergence, stakeholders and

SPI Committee;• Present SPI Annual Business Plan quarter/annual working plans and

budgets for approval to the SPI Committee;• Contribute to Convergence papers, presentation, and reports (i.e.,

annual reports);• Feed the website and manage SPI’s relationship with press through

stakeholders

SPI Secretariat (3)• Project –related responsibilities - a

• Project ToRs drafting:

– background information – interviews with stakeholders and research;

– Project Objective;– Strategy;– Better Regulation Methodology (steps, output, contributions)

• Drafting list of eligible persons/project in consultation with

stakeholders

• Drafting, getting signatures and sending invitation letters

• Organizing PWGs meetings:

– Meeting details – in cooperation with PMT– Invitation with agenda and documents for discussions


Page 159 of 335

4

SPI Secretariat (4)• Project –related responsibilities - b

• Preparing background studies

– based on interviews, research, international benchmark, compilation of regulations

• Preparing PWG meeting minutes

– Venue, date, meeting number– Participants– Agenda/meeting objective– Summary of discussions and conclusions– Next steps– Future meeting

• Summarizing individual contributions

SPI Secretariat (5)• Project –related responsibilities - c

• Preparing documents for PWG discussions

• Preparing draft RIA questionnaire

• Collecting data and performing calculations

• Mobilizing International expertise

– Identifying, with Convergence/IFC support, international experts. Procurement – direct, through Convergence/IFC; indirect – through donors and other international institutions (WB, etc)

• Preparing draft ToRs for the expert

– Supporting contracting process– Handling the relationship with the expert– Endorsing, together with PMT, the payment to the expert

• Preparing SPI Committee summary documents

SPI Secretariat (6)– Another important responsibility: Organizing events

• in cooperation with PWG, SPI Committee members and experts, under Convergence coordination – for awareness raising or for disseminating projects’ outcomes

1. Draft event agenda2. Identify potential speakers and panelists3. Draft participants’ list

4. Draft action plan and budget5. Seek for budget approval6. Investigate speakers’ availability

7. Investigate logistic possibilities8. Draft invitation letter to be sent to speakers9. Send invitation letters with draft agenda 10. Gather event package11. Send final agenda12. Prepare summary of presentations and discussions of the event13. Send the summary with event package14. Send thank you letters to speakers, minutes and event package15. Post the summary and package on the website

Banking

Association

Other SPI

stakeholders SPI

Secretariat

SPI pipeline

SPI Projects

SPI Committee




research

Banks


SPI Secretariat responsibilities by project phase (1)


Central Bank



FINANCIAL

SECTOR

MODERNIZATION

CRITERIA


Asymmetric

information

Completeness of

the market

Increased

opportunities to

engage in financial

transactions

Reduced

transaction costs

Increased

competition

Business

development

Positive credit

information

sharing

1.Rural lending

2. Credit Rating

Agencies

Law on bank

guarantees

Loss-Given-Default

Database

Mortgage Loan

Database

Industry

competitiveness


implementation

1. Prudential IFRS


E-Settlement

3. AML Law

4. Law on Safety

Industry

reputation

1. Ombudsman


Total 2 3 3 5 1

Ita

lia

n B

an

kin

g A

sso

cia

tio

n



Page 160 of 335

5

FINANCIAL

SECTOR

MODERNIZATI

ON CRITERIA


Asymmetric

information

Completeness of

the market



transactions

Reduced transaction

costs

Increased

competition

Business

development


3. Stock exchange

4. Leasing


27. Consumer credit



10. Mortgage loans



13. Lending to PPPs



Industry

competitiveness


17. KYC policies


adequacy ratio

28. Corporate

governance and

requirements for



activities

19. Reducing cash

transactions


buildings

21. AML reporting






Industry

reputation

34. Improving

access to basic

banking products

24. Financial

ombudsman


rate (EIR) 26.

Consumer financial

education



Total 36 6 8 9 10 3





Asymmetric

information

Completeness of the

market

Increased

opportunities to

engage in financial

transactions

Reduced

transaction

costs

Increased

competition


relationship 0/1


banking issues 1/8

Revising regulatory

act on Execution of

Procedures on Bank

accounts


the various risks

5/8



businesses


individuals;


risk management


Open Position


under IFRS


0/1


1/7


Law


1/5









capacities 1/2

Unique and

rationalized reporting system


0/3


lending 0/3


Total :10 2 4 2 2



Governor’s




market






1/1

1.Regulating bank

communications of




on banking issues

7/8

2.The creation of a

complete regulatory








activities


specialized courts



foreclosure

8.Reviewing banking




risks 3/8





Commerce




controls 1/1


environment


6/7


exchange










policies


documents





system 1/2

23.Improving





1/2




groups

3/3


banking products



The increase of ALL

denominated lending

3/3




Total: 30 4 5 9 8 4


-Identifies the needed expertise-Searches for solutions in international experience/EU legislation - Identifies the needs for international/local consultants- Arranges for the consultants’ support

- Prepares documents for discussions- Drafts RIA questionnaire (as part of the RIA)- Collects data and performs RIA calculations- Organizes seminars and other supporting events - Collects feedback from SPI stakeholders- Collects and aggregates individual contributions- Prepares documents presenting the solutions


Central Bank

Banking Association

Other stakeholders

SPI Secretariat



Central Bank- Revises proposed solutions

- Provides input on disputed issues- Central Bank Board endorsement

for


Banking Association- Banks review solutions- Provide input on disputed issues-BA Board endorsement for






choice

SPI Secretariat


10 GOLDEN RULES FOR CONSENSUS -

BUILDING

• Gaining PWGs confidence through a very good preparation of the project papers and of PWG meetings

• Maintaining a neutral position in PWG meetings• Focusing PWGs discussions• Accurate minutes of PWGs meetings• Keeping a clear track on disputed issues• Asking each party’s arguments on disputed issues

• Looking for international experience for disputed issues• Asking for third parties’ opinions on disputed issues

• Searching for middle-way solutions• Asking for PWGs’ approval on documents, particularly

for SPI Committee recommendations.


Page 161 of 335

6

4. Solution

enactment

SPI stakeholders and SPI Secretariat

coordinate actions in respect of full

range of SPI projects

SPI Secretariat



or to the Central Bank Board for regulations






- Sends SPI Secretariat submission under the public





initiator




32



0

10

20

30

40

50

60

70

80

90

0 170 220 240


Rural Lending

IFRS

Law on Safety

Bank Ombudsman

Cos

t Sav

ings

76%

Cost S

avin

gs Im

pact (%

of 2

007 ta

rget)

82%

182

73

236

Databases

134

99%



Self regulatory actions completed

1. Expansion of positive information sharing2. Ombudsman3. Consumer financial education4. MiFID5. Credit exposures stress testing techniques


Regulatory changes to be initiated

10. Rural lending




33








SPI Methodology (1)• EU Better Regulation Approach,

developed by the European Commission, is aiming at: – simplifying and improving existing regulation;– better design new regulation; and – reinforcing the respect and the effectiveness

of the rules, in line with the EU proportionality principle

• “Better laws” - having a full picture of their economic, social and environmental impacts

• Impacts assessed through the structured Impact Assessment tool.


Scoping of problem


intervention.


objectives.



solution”).

Analysis of impact





Consultations



Conclusion


SPI Methodology (2)


SPI Methodology (3)Better Regulation Steps in SPI Projects

Prob

lem

Iden

tific

ation

Regula

tory

context

Poli

cy

obje

ctive

s

Prop

osed

regu

lator

y

actio

n

Cost

and

Ben

efit

anal

ysis

Cost

and

Ben

efit

ques

tion

naire

IAA

D

PW

G

Poli

cy

reco

mme

ndati

on





Page 162 of 335





7

Impact assessment – IA - a set of logical steps which structure the preparation of policy proposals. IA enhances the policy making process through:

- providing a coherent framework to conduct evidence-based policy making, that spans the regulatory policy making process from beginning to end;

- the use of market and regulatory failure analysis ensures accurate identification of problems and the threats they pose to regulatory objectives, which are reflected in effective and efficient policy solutions amongst a wider range of possible policies;

- saving time in the long run by reducing the risk of regulatory failure;

- formal and informal consultation with stakeholders and by enhancing the transparency of the policy making process and keeping all affected parties informed that results in enhanced credibility and accountability of the policy making process.

Impact assessment is an aid to political decision-making, not a substitute for it.

SPI Methodology (4)Quantitative Impact Assessment Steps Understanding the base line – current situation Understanding the regulatory proposals Identifying the regulatory proposals’ impact on the

business processes Identifying regulatory proposals’ impact on the balance

sheet and on the profit/loss account Identifying the data needed for assessing the quantitative

impact Questionnaire for getting the necessary data and

estimates Collection and aggregation of the individual answers Analysis of the questionnaire findings Extrapolating results to the banking system level

SPI Methodology (5)

SPI Methodology (6)Documents to be prepared for a project under EU

Better Regulation approachScoping of the Problem+ Qualitative & quantitative CB Analysis (for users,

for regulated firms, for authorities)= Impact Assessment Analysis Document - IAAD

+ Consultations with Stakeholders (Summary consultation feedback)

= Final PWG Policy Recommendations

SPI Methodology (7)

• Recap on project flow

SPI ProjectProposal

ProjectBackgroundnote

Project ToR

ImpactAssessmentAnalysisDocument1 - 4

Cost BenefitAnalysisdata

IAAD5 - 6

Policy options consultation

Policyrecommendations

SPI Comm.paper

Summary ofConsultations feedback

2 PWG meetings

Draft ….

attached

Direct …..

consultation

Option A….

Option B & Cdiscussion

SPI Secretariat Performance

• SPI Secretariat’s performance is evaluated

by the end of each of the projects by the SPI PWGs

• Evaluation questionnaire in SPI Committee Operating Guidelines

Team exercise 1SPI Secretariat responsibilities

sharing


Page 163 of 335

8

SPI Secretariat Responsibilities Sharing (1) (General responsibilities)

Responsibilities Responsible

(s)

Manage relationships with the banking community, international banks, local experts (e.g., Deloitte) and

other TA providers (e.g., IFC PEP, EBRD,…).

Manage relationships with potential funding sources for expertise (e.g., public and private donors)

Manage technical relationships with foreign experts and consult with technical staff of the authorities during

projects

Prepare analytical studies supporting proposed regulatory changes (with full RIA)

Prepare final SPI Committee proposal (backed by analytical study)

Build up and maintain necessary databases and evidence

Prepare SPI Committee meetings agenda, keep meetings record and distribute minutes to SC members

Submit periodical activity reports [frequency to be determined] to Senior Country Advisor, Convergence

Rome, RBA, Steering Committee and WB

Present SPI Annual Business Plan quarter/annual working plans and budgets for approval to the Steering

Committee

Maintain Convergence web site and disseminate relevant materials

Contribute to Convergence papers, presentation, and reports (i.e., annual reports)

SPI Secretariat Responsibilities Sharing (2) (by project phases)

Responsibilities Responsible

(s)

Issue identification and selectionConsult with authorities on their plans for regulatory changes

Conduct interviews with selected banks to identify the most critical issues that need resolution in

collaboration with authorities

Use preliminary RIA to prioritize issues

Perform research in the international experience and in country’s priorities in accessing to EU

Prepare proposals for SPI Committee approval

PWG activities -IPrepare project ToRs

Identify possible PWG members

Prepare and send invitation letters

Contact PWGs

Organize PWGs meetings

Prepare background studies

SPI Secretariat Responsibilities Sharing (3) (by project phases)

Responsibilities Responsible (s)

PWG activities -IIAttend PWGs meetings

Prepare minutes of PWGs meetings

Centralize individual contributions and prepare documents for PWGs discussions

Look into international experience

Prepare draft RIA questionnaire

Collect data and perform calculations

Consensus building

Prepare policy consultations/recommendation/SPI Comm. documents

Organize seminars and other project-related events

Enactment monitoring

SPI Projects - Case studies

1. SPI Romania – Revamping Rural Lending based on CDW

2. SPI Albania – Project on Auction Procedures for Immovable Collateral under Foreclosure

SPI Romania – Revamping Rural Lending based on CDW (1)

• Objective

• To prepare a set of specific recommen-dations (“secondary” rules and regulations and

technical and organizational implementation steps) on the measures that relevant authorities, market participants and other institutions could take to remove the existing roadblocks to the development of the agricultural warrants-backed lending within acceptable risk parameters.


• Project Management Team

– Project Owner: Radu Negrea, RBA Secretary General– Project Manager: Claudiu Nicula, Director, Raiffeisen

Bank– Deputy Project Manager: Aurica Stoica, Minister’s

Advisor, MoA

• PWG members: banks, NBR, National Grading Commission, Rural Credit Guarantee Fund, Romanian Commodities Exchange, depositors, Agricultural Producers Association, Guarantee Fund for SMEs

• Technical anchor: Les Clarke


Page 164 of 335

9


• Strategy meeting – January 25, 2007– Input: draft ToRs– Output: approved ToRs and individual responsibilities– Follow up: complete list of the regulatory framework;

analysis of the regulatory framework

• Research in the international experience and analysis of the current situation (research and interviews with stakeholders) – February – March 2007

• Regulatory Impact Assessment – February – March 2007: 116 million EUR over 5-year time as net present value of incremental cash flow for farmers; additional lending EUR 559 million in a 4 years aggregated amount, with EUR 104 million in the first year.


• First PWG meeting – March 29, 2007– Presentation of the Technical Anchor Report on the

international experience, Romanian situation and necessary measures and possible solutions for re-launching CDW system

• Second PWG meeting – discussions on the proposed PWG solution (the public – private solution)

• Third PWG meeting – discussions on the proposed regulatory amendments in order to implement the recommended solution


Licensing system Prepared an amendment proposal in order to give the

responsibilities for verifying the eligibility for licensing to

Guarantee Fund and Grading Commission (instead of MoA)

Inspection system Amendment proposals for entrusting the inspection activities

to Guarantee Fund and Grading Commission (instead of

MoA)

CDW negotiability Amendment proposal on minimum content for CDWs and on

the CDWs register (to be organized by Guarantee Fund

instead of MoA)

Guarantee Fund Amendment proposal on Guarantee Fund financing (public

financing for establishment and 4 first years).

Proposed Gov Decision for Guarantee Fund establishment.

SPI Romania – Revamping Rural Lending based on CDW (6) – public – private responsibilities sharing

Private sector

preparatory actions

Private sector

residual actions

MoA Actions Joint actions

Licensing procedure Banks, NGC, RCE, RCGF and

depositories prepared the law amendment

proposal according to which the

verification of the compliance be placed

with NGC and Indemnity Fund

Banks provide input on the

licensing criteria

MoA promotes the legislative

initiatives to delegate

implementing responsibilities to

agencies in the Government and

prepares the minister’s orders

Raising

awareness on WDC

benefits

•MoA designs and

runs, with private

sector active support,

a national campaign

•Banks, NGC, RCE

and depositories to

take active part in the

MoA led campaign

Inspection system Banks, NGC, RCE, RCGF and

depositories formulated the amendment

proposals for entrusting the inspection and

controlling activities with NGC and

Indemnity Fund

MoA promotes the legislative

initiatives to delegate implementing

responsibilities to agencies in the

Government and prepares the

minister’s orders

WDCs negotiability •Banks, NGC, RCE, RCGF and

depositories agreed on the minimum

WDC informational content and prepared

respective amendment proposals.

•Banks, NGC, RCE, RCGF and

depositories formulated the proposal to

amend the law so as to provide that the

Indemnity Fund be entrusted with the

register

•NGC formulates the regulatory

amendment for changing the

monthly reporting in order to

obtain realistic market price

indications

•RCE provides information on

the term contracts

•NGC and Indemnity Fund

support the inventory action

•MoA promotes the legislative




prepares the minister’s orders

•MoA approves the action plan and

ask depositories to report

Cereals market RCE participates in formulating the

proposals for WDCs, Indemnity Fund ,

Licensing and Inspection Systems

•RCE , banks and brokers

discuss how to design trading

facilities

Indemnity Fund •Banks, NGC, RCE, RCGF and

depositories prepared the law amendment

proposal regarding the Indemnity Fund

financing

•RCGF formulated a proposal for the

Government Decision establishing the

Fund

•NGC provides the study on the

necessary financing for the

Indemnity Fund; banks, RCGF,

RCE revises the assumptions

and calculations

•Banks, RCGR, RCE delineate

IF institutional, financial and

organizational arrangements

•MoA asks MEF to include the

necessary amount for the

Indemnity Fund in the state budget

for 2008

•MoA promotes the legislative




prepares the minister’s orders.

SPI Romania – Revamping Rural Lending based on CDW (7) – action plan

October

2007

November

2007

Dec.

2007

Early 2008 March

2008

June

2008

MoA Preparation

of the

regulatory

package

MoF and

MoJ to

support the

enactment

Including

the

necessary

amounts in

state

budget for

Indemnity

Fund

Enactment

of

regulatory

changes

Secondary

regulations

enacted

Issuance of

first CDW

licenses;

stocks

inventory

PWG Contributio

n to the

enactment

package

Supports the

institutional, financial

and organizational

arrangements.

Contribution to

licensing criteria

Amendment of

the monthly

reporting

requirements

Discussions

for creating

transaction

facilities

SPI Romania – Revamping Rural Lending based on CDW (8) – implementation efforts

and finality• SPI Committee Letter to MoA – August 3, 2007• SPI Romania presentation in an event organized by PM -

November 2007• SPI Romania presentation in an event organized by RBA

- March 2008SPI Committee member’s intervention in a Government meeting – June 2008

• Discussions between SPI Romania and MoA representatives – June 2008

• Enactment of the Government Decision no. 520/14.07.2008 on establishing the Indemnity Fund, according to PWG recommendations, with initial state budget financing, through expansion of the existing Rural Credit Guarantee Fund

• New pioneer for promoting the other necessary regulatory amendments (Indemnity Fund)


Page 165 of 335

Analysis of the current regulatory framework.ppt

Necessary measures.ppt

Possible solutions.ppt

Why PWG recommended a public - private solution.ppt





10

SPI Albania – Project on Auction Procedures for Immovable Collateral under

Foreclosure (1)

• Objectives

– To undertake analytical activities that would support the enactment of law amendment proposals to Civil Procedure Code

– To support the improvement of the Bailiff Office activity

– To improve the quality of the buildings evaluation


Foreclosure (2)Project Working Group

Project Management Team

• Seyhan Pencapligil, Project Owner (PO), CEO, Banka Kombetare Tregetare

• Veronika Prifti, Project Manager (PM), General Counsel, Banka Kombetare Tregetare

• Rudina Gorishti, Deputy Project Manager (DPM), Deputy Legal Director Bank of Albania

Project Working Group Members

• Andin Jakova, Eduart Reci, International Commercial Bank

• Erion Lena, Alpha Bank

• Ermal Dobi, Tirana Bank

• Andon Daka, Credins Bank

• Arta Taipi, United Bank of Albania

• Alban Mehmeti, Altin Hysi, Emporiki Bank

• Rudina Ziu, Raiffeisen Bank

• Dorina Mehmeti, International Finance Corporation

• Rezarta Bitri, Ministry of Justice

• Mirela Behluli, Appraisers’ Association

Peer-reviewer

• Kimmo Vikman, EURALIUS


Foreclosure (3)Amending Civil Procedure Code

Improving Bailiff Service

Current Status

- The PWG has approved the final PWG position document on the bailiff service and on CPC amendments.- SPI Committee approved the PWG Recommendations as presented during the SPI Committee meeting, November 2008 and forwarded them to the respective institutions.- On December 11,and 29, the Draft Law on the liberalization of the Bailiff services and the Civil Procedure Changes were respectively approved by the Parliament and published on the Official Gazette.

Follow - up

-Participation of a PWG representative to the IFC Project Working Group for Appraising Standards

-PWG availability for future consultations on the Improvement of the Public Bailiff


Foreclosure (4)

Outputs• Project Terms of Reference

• Note on Enforcement of Collateral

• Note on International Bailiff Experience

• Questionnaire on Bank’s Difficulties in Dealing with the Bailiff Office• Aggregated individual contributions on the CPC and PWG Proposals• EBRD Albanian Mortgage Enforcement External Memo

• Regulatory Impact Assessment Questionnaire Main findings• PWG Recommendations on Improving Bailiff Service• PWG Recommendations on CPC Amendments

SPI Albania – Project on Auction Procedures for Immovable Collateral under Foreclosure

(5)Contributions

•The Project Manager has provided study cases from real life experience that illustrate the impact of the current regulatory framework on the bank’s businesses.

•PMT formulated the draft PWG proposals for CPC amendment.• PMT and SPI Secretariat attended 2 meetings with MoJ representatives from the Enforcement Department.• SPI Secretariat has drafted: Project ToRs, a Note on International Experience, Scoping the Problem Document, a Questionnaire on Banks’ difficulties in dealing with the Bailiff Office; Regulatory Impact Assessment Questionnaire Main findings; PWG Recommendations on Improving Bailiff Service, PWG Recommendations on CPC Amendments•SPI Secretariat ran with AAB support the banking survey and based on the collected feedback drafted a document on its main findings.


(6)


Page 166 of 335

11

Achievements

• Participation in the hearing session of the Parliamentary Commission of Legal Affairs, Public Administration and Human Rights

–Presentation of the PWG amendment proposals and their respective arguments.

• Discussions with MoJ (Foreclosure Department and Minister’s office)

• The PWG sent to the MoJ their comments on Bailiff Liberalization Draft Law, together with the main findings of the banking survey on the difficulties in interacting with the bailiff offices.

•ENACTMENT OF THE 2 LAWS!!!


(7)


Foreclosure (8)Economic Impact of amending the Civil Procedure Code:

Reduction in the time for foreclosure of immovable collateral by 120 working days, increasing thus efficiency of the enforcement process

Improvement of the Albania’s rank in the World Bank Doing Business Contract Enforcement section by 7 (seven) places.

Benefits or cost savings for the creditor would be achieved through the increased debt recovery ratio and the earlier usage of “frozen” funds i.e. bad loans under foreclosure. The benefits for the banking community would vary from 15.5 million to 18.5 million euro. In an annual basis these benefits amount to 5 - 7% of banks’ operational expenses depending on the recovery moment (in the first or in the second auction).

Team exercise 2SWOT analysis of SPI Platform


• Strengths - attributes that are helpful to achieving the objective – ……

– ……

– …..

– …..

• Weaknesses - attributes that are harmful to achieving the objective– …..

– …..

– …..

– …..


• Opportunities - external conditions that are helpful to achieving the objective– …..

– …..

– …..

– …..



Page 167 of 335

12

• Threats - external conditions which could do damage to the objective – …..

– …..

– …..

– …..

SWOT Analysis of SPI Platform (4)SWOT Analysis - Summary

Strengths Weaknesses

Opportunities Threats

Team exercise 3Building the SPI Project Pipeline

(SPI Secretariat proposals)

Potential SPI Projects

FINANCIAL SECTOR

MODERNIZATION

CRITERIA


Asymmetric

information

Completeness of

the market

Increased

opportunities to

engage in financial

transactions

Reduced

transaction costs

Increased

competition



Industry reputation

Debates on the SPI Secretariat project proposals


Page 168 of 335

1

SPI ALBANIA 2009 PROGRAM

QUESTIONNAIRE ON ISSUES PROPOSED TO BE UNDERTAKEN UNDER SPI COMMITTEE AEGIS

Dear stakeholder, SPI Secretariat is planning the projects to be undertaken under the SPI Committee public – private partnership in 2009. We would like to invite you to formulate proposals on the issues that you consider as priorities for you and that meet some eligibility criteria, as described in the attached selection procedure. Please indicate the persons to be contacted by SPI Secretariat for clarifications and details. In order to forward your proposals to the SPI Committee, please provide us with the necessary details by filling in the questionnaire for each proposed issue. Should you have any questions, please do not hesitate to contact the SPI Secretariat. In order to facilitate the project proposal process, you may find some references on the areas to be looked in for issues to be solved. All the projects proposed will be gathered on a common list and you will be asked to prioritize a number of projects to be handled in 2009, according to SPI Albania capacity. After the project proposals will be approved by the SPI Committee, SPI Secretariat will invite you undertake ownership on them and to contribute with your expertise and with data to the achievement of the projects’ objectives. With best regards, SPI Secretariat


Page 169 of 335

wb323932

Text Box

Annex VII-7

2

I. REFERENCES FOR PROJECT PROPOSALS

1. Issues raised by the Governor of Bank of Albania within the Banking Forum Within the Banking Forum meetings, the Governor of Bank of Albania outlined the following issues as being of strategic importance for Albania banking system. SPI Secretariat has mapped them according to ECB modernization criteria and listed some possible actions in order to address them, showing also how 2008 SPI Albania projects integrate themselves under these priority directions. In order to create the necessary synergies and an efficient use of the resources, please use these issues as guidelines in formulating project proposals for 2009.

ECB Modernization

Criteria

BANKING FORUM

ISSUE

Possible actions

Related 2008 SPI Albania projects

IFRS Implementation IFRS Implementation

Consumer financial education Consumer financial education

Minimum standard information on basic bank products

Annual effective interest rate Define a code of conduct for housing loans

Discipline the criteria for transparency of banking products and services (Patti Chiari)

Modernize moveable collateral registries

Asymmetric Information

The publication of the results of banks’ activity/transparency in bank-customer relationship

Make financial statements’ certification mandatory for SME-s

Building up an institution for banking staff training

Adjustment of the university curricula to the needs of the banking system

Help public authorities to build skills on advanced products

Completeness of

Markets

The publication of the results of banks’ activity/transparency in bank-customer relationship

Setup and regulate banking OMBUDSMAN


Page 170 of 335

3

ECB Modernization

Criteria

BANKING FORUM

ISSUE

Possible actions


Improving capital adequacy regulation

Improving capital adequacy regulation

Developing a rapid detection of non-performing loans

Improving liquidity management

Improving FX risk management Reviewing the regulation on foreign currency open positions

Setup public guarantees for SME-s

Provide guarantees in farming and fishing credit operations

Setup public guarantees for unemployed people

The recognition of and protection from the various risks

Link deposit insurance premiums to risk profiles

Developing principles for internal control

The strengthening of internal control Establishing a database on

business data

Improving leasing transactions

Promote project financing

Clarify regulation of preliminary contracts for real estate transactions


Define agreements with disabled people associations to facilitate home banking

Transactions with T-bills

Law on repurchase agreements

Increasing Opportunities to engage in

Financial Transactions


Developing securities trading market

The increase of funds circulation through the system

Reducing cash transactions Reducing cash transactions

Reduction in Transaction

Costs


Developing scoring cards for individuals

Developing scoring cards for individuals


Page 171 of 335

4

ECB Modernization

Criteria

BANKING FORUM

ISSUE

Possible actions


Setup tailored scoring systems for SME-s

Increase the use of new payment systems

Provide training to judges about advanced financial products

Increase the number of specialized courts

The increase of ALL denominated lending

Improving auction procedures for immovable collateral under foreclosure

Improving auction procedures for immovable collateral under foreclosure

Increased Competition


Developing sound banking governance principles and practices

2. SPI Albania projects status No. Approved projects Finalized

in 2008 On

going Not

started 1. Improving auction procedure for immovable

collateral under foreclosure

1.a. Civil Procedure Code amendment X 1.b. Improving Bailiff service X 1.c. Appraisal Standards X 2. Impact on the banking regulations of the IFRS

implementation X

3. Reducing cash transactions X 4. Reviewing capital adequacy regulation X 5. Consumer Financial Education X 6. Facilitating leasing transactions X 7. Developing credit scoring cards for

individuals X

Total 3 4 2 Do you think that the projects 6 and 7 should be maintained on SPI Albania 2009 agenda? No. Approved projects Yes No 1. Facilitating leasing transactions 2. Developing credit scoring cards for individuals


Page 172 of 335

5

If no, please state the reasons for which you don’t consider the above issues as opportune to be handled in 2009. ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….. 3. Strategic Directions for Albanian Financial Sector outlined in the National Strategy for Integration and Development 2007-2013 SPI Secretariat has extracted the following strategic directions for the Albanian financial sector mentioned in the Government Strategy and that might guide you in formulation project proposals:

• improvement and development of the information technology infrastructure to establish a platform of reporting and supervising the insurance and private pension markets;

• improvement of the financial support to SMEs by supporting micro-credit institutions, by establishing a credit guarantee fund, and by using of other financial instruments such as factoring and leasing;

• improvement of the financial support for agriculture through credit schemes with light terms based on credit guarantees, through the expansion of the banking system to rural areas based on fiscal incentives and savings mobilization through support to effective savings-credit schemes.

4. Project proposals made by Project Working Groups Do you think that the below proposals for projects made by PWGs should be included in the project pipeline for 2009? No. Approved projects Yes No 1. Loan loss provisioning under IFRS 2. Establishment of a national settlement system for


5. Regulations issued in 2008 AAB has provided the following list of regulations issued by Bank of Albania and SPI Secretariat extracted the following list of laws on financial sector approved by the Parliament in 2008. Please use these lists in formulating your project proposals, in case of secondary regulations are needed or in case of difficulties in implementing the regulatory provisions.


Page 173 of 335

6

List of regulations issued by Bank of Albania in 2008

Nr. Date Title 11 06/02/2008 “For the implementation of the e-payment”

24 26/03/2008 “For the internal control system of the foreign banks and their branches”

31 30/04/2008 “For the risk administration from the exposure of the banks.

42 16/07/2008 “For the structure and usage of the International Bank Account number. (IBAN)

43 16/07/2008 “ Over the minimum obligatory reserves held in Bank of Albania from banks”

44 16/07/2008 “On the approval of the usage from the banks of the obligatory reserves in Lek.”

59 29/08/2008 On the approval of the regulation on the banking and financial products and services

60 29/08/2008

On the approval of the regulation on the minimum requirements for information publication of the foreign banks and their branches”

61 29/08/2008 For some changes of the “ Credit risk administration “ regulation

62 29/08/2008 For some changes of the “ Activity of the foreign branches administration” regulation

63 29/08/2008 For some changes of the “report of the capital adequacy “ regulation

72 07/10/2008 “For the risk administration from the exposure of the banks 76 29/10/2008 On the agreement of repurchase and the reverse purchase.

84 12/11/2008 “For the approval on the banks usage of the obligatory reserve in Lek.”

91 24/12/2008 On the minimum security conditions and technical specifications for the banking activity environment.

97 24/12/2008 “On the intraday loan”

List of laws on financial sector approved by the Parliament in 2008 No. Law’s name Law no. and

approval date by the Parliament

Published in 2008 Official

Gazette1 1. Repurchase Agreement

9974 dated 28.07.2008

No. 128

2. Money laundering and terrorism financing

9917 dated 19.5.2008

No. 83

3. Securities 9879 dated 21.02.2008

No. 36

4. Local government borrowing 9869 dated 4.02.2008

No. 18

1 Publication in the Official Gazette indicates that law becomes effective. Full text of the law is found in the relevant Official Gazette


Page 174 of 335

7

No. Law’s name Law no. and approval date by the Parliament

Published in 2008 Official

Gazette1 5.

An amendment to the law no. 8360 dated 10.06.1998 on criteria and modality of property distribution of legal non banking persons that have borrowed from the large public

9935 dated 26.6.2008

112

6.

Electronic signature 9880 dated 25.02.2008

No. 40

7.

Some amendments to the law no. 9369 dated 12.05.2005 on financial leasing, modified

9966 dated 24.7.2008

128

8.

Some amendments to the law no. 9630 dated 30.10.2006 on Factoring

10029 dated 11.12.2008

193

6. Other issues raised in SPI Albania 2008 survey and not short listed in 2008 The survey ran in 2008 resulted in the following list of issues that hamper banks’ activities and efficiency and that were not undertaken as SPI Albania projects due to the limited capacity and/or because they were not voted as priorities. The remaining issues could be a reference for your project proposals. In formulating the project proposals, please take into consideration also the short term feasibility and the validity criteria. No. Potential SPI Project Background information 1. Facilitating agricultural lending Farmers have difficulties in

borrowing from banks due to lack of collateral (titles on the land being not clear, farmers cannot mortgage it). Micro-financing institutions are lending small amounts to farmers, but at very high costs. The collateral issue could be solved by establishing a guarantee fund for agriculture.

2. Facilitating lending to tourism The lack of a regulatory framework hinders the development of a bankable environment

3. Facilitating lending to PPPs Many of high value infrastructure projects are undertaken by PPPs. In Albania, there is no specific PPPs regulatory framework

4. Strengthening the stock exchange Although in Albania there is a stock exchange, it has no proper regulations for transacting.

5. Lending to municipalities There is no legislation on municipal


Page 175 of 335

8

bonds issuance. 6. Increasing mortgage loans The mortgage registration procedure

is very long. An electronic register would facilitate this process. Banks also would like to have registered mortgage on unfinished buildings (it seems there is a WB project – to be checked). The lack of a city address system impedes property registration and prevents potential borrowers from using their property as collateral for bank loans

7. Improving credit risk in consumer lending

The credit risk in consumer loans is appreciated as very high due to the lack of proper identification system (ID cards and addresses). The issue regards, in fact, all banks’ relationship with clients because of the impossibility to properly identify and know the customers. Lack of a properly functioning registry for vehicles is a serious disincentive for car loans. Electronic Register of Commerce 8. Improving KYC policies On-line system for customs, tax offices, courts, etc.

9. Better credit risk management Access on statistics on industries and sectors. There is an institutions that collects and manages the information - INSTAT – and it should be developed.

10. Facilitating expansion of banks activities

In Albania, tax on profit is paid in advance, based on the budget projections. This prevents banks of gaining income from placing the respective amounts. At the same time, the netting procedures are very long.

11. Improving the lending environment Due to taxation level, Albanian companies don’t keep an accurate evidence of their transactions. Accounting standards are very poor. Considering the official balance sheets, most companies are not creditworthy, although there are some other indications on the real situation. Banks have to rely on unofficial statements and various proxies for appraising the credit risk.


Page 176 of 335

9

12. Facilitating structural lending This is considered necessary to finance infrastructure in rural areas

13. Optimizing Anti-Money Laundering Reporting

Requirements for (e.g., on reporting) banks should be better defined, and practices should be harmonized

14. Improving write-off of bad debts International best practice should be introduced

15. Regulating bank communications of “effective” interest rate (EIR) offered to customers

Precise and uniform methodologies to calculate the EIR should be introduced to facilitate interbank comparisons from customers

16. Account stopping/blocking An appropriate regulatory framework is lacking

17. Strengthening bank staff Training programs felt necessary at the industry level. Possible cooperation with Academia

18. Securitization Lack of regulatory framework felt 19. Financial ombudsman Banks need out-of-court systems 20. Strengthening the AAB The association is “dysfunctional,

ineffective, and non credible” 21. Developing pension funds There is no regulatory framework for

pension funds 22. Secondary regulations for

implementing Banking Law provisions

Some of the Banking Law provisions should be detailed in secondary regulations with input from banks

23. Rationalizing security/safety requirements

The regulation on banks’ safety should take into account the insurance contracts covering the same risks.

24. Rationalizing reporting to BoA Banks spend a lot of resources in preparing and sending reports to the BoA, Banks and BoA should look for a solution to ease the reporting burden while addressing also BoA concerns on prudential and stability issues.

25. Avoiding reverse effects of regulations

For example, the way of calculating FX position creates a real exposure to risk for banks.

26. Improving stability in the regulating environment

BoA to improve transparency in planning regulations and to harmonize the implementation as much as possible with the business cycle

27. Harmonizing accounting policies Fiscal and BoA accounting regulations should be harmonized (for example, discrepancies in treating the fixed assets depreciation).

28. Improving Government transparency Banks do not have updated information on regulatory changes


Page 177 of 335

10

29. Improving transparency and equal access to guarantee funds

There are some guarantee funds established but only some of the banks have information on them or access to them (for example, the guarantee fund for electricity suppliers)

30. Reducing paper-based documents Any measure decreasing the amount of paper used would be welcome and would reduce banks’ costs.

31. Improving access to basic banking products

Banks should provide some basic products and services to affordable prices in order to stimulate people to use bank accounts.

32. Improving FX market There are no forward transactions on the market. There are no regulatory provisions or industry standards for this market


Page 178 of 335

11

II. Project proposals

[please fill in the below section for each project proposal]

1. Project proposal

Title of the issue

2. Description of the proposed issue

Short description of the issue /situation to be solved (regulatory context, difficulties, prior attempts to solve the issue)

How it should be solved (issuance of a regulation/amendments to an existing regulation, self regulation)

3. Is the issue of public and private interest?

Short Description Public interest in the issue

Private interest in the issue

4. Estimated impact (please tick in the appropriate box)

High Medium Low Estimated impact Some economics (if available) on the size of the issue

5. Action line of the project (please tick in the appropriate box) New Business Opportunities

Cost Efficiency

Better industry-consumer relationships


Page 179 of 335

12

6. International reference (if any)

EU level Deadline

(if any) National level

International reference

7. Expected value added from SPI Secretariat:

8. Estimated international assistance needed:

9. Contact details:


Page 180 of 335

1

Annex VII-8

Template of SPI proposed multi-annual activity program

1. Summary of the consultation process for building up SPI Albania activity program The consultation process for building up SPI multi-annual activity program was based on a questionnaire (Annex 2) that was centered on [to be filled in as appropriate]. Consultation period: No. of participants in the consultations, out of which banks, public authorities, international donors. Broad description of the proposals by institution type: Description of project selection process: 2. Summary presentation of proposed annual activity program Analysis of the proposed annual activity program by impact on key areas:

Completeness of the market: Increased opportunities to engage in financial transactions: Cost efficiencies: Core prudential issues:

The emerging overall theme Brief presentation of the multi-annual activity program


Page 181 of 335

PROPOSED SPI ALBANIA 2009 PROGRAMBOLD BLUE: Public Stakeholders’ Proposals; BOLD RED: Banks’ proposals; BOLD GREEN: Private – Public Proposals





Increased opportunities to engage in financial

transactions

Reduced transaction

costs


Transparency in bank-customer relationship 0/1

Strengthening judicial system on banking issues 1/8


The recognition of and protection from the various risks 5/8



Revising Foreign Currency Open Position Loan loss provisioning under IFRS

The strengthening of internal control 0/1Introduction of new products 1/7





Establishment of a national settlement scheme for payments in foreign currency

The building of full technological capacities 1/2


Facilitate lending to excluded groups 0/3 The increase of ALL denominated lending 0/3Improvement of bank’s governance

Total:10 2 4 2 2

1


Page 182 of 335

SUMMARY FEATURES OF PROPOSED PROJECTS (1)

MAIN THEME

Banking Forum Issue: Recognition of and Protection from various risks

Projects Enhancing banks’ liquidity risk management




Estimated starting time February 2009 June 2009 June 2009 September 2009

Actionable SPI Committee Proposal

A proposed regulatory amendment providing limits to banks’ exposures to liquidity risk

A regulatory proposal for amending the calculation of the banks’ foreign currency open position

PWG recommendation for a regulation on loan loss provisioning under IFRS

1.A comprehensive and structured proposal on expanding the credit bureau services in cooperation with other data providers2. An action plan for developing a credit scoring card system

SPI Albania Involvement Rationale

SPI Committee’s endorsement would ensure a balanced solution and a smooth implementation.

SPI Committee would facilitate the consensus building on a feasible conversion of prudential standards to reflect new accounting standards that would meet both business reality and supervisory objectives.

SPI Committee would support the identification of a solution addressing banks’ concern and also prudential principles

1. SPI Committee would be the proper framework to ensure the cooperation among different institutions for collecting data.2. The public-private framework would facilitate the build-up process and ensure the capacities for implementation

2


Page 183 of 335





Description- Background

Currently the regulation on the banks’ liquidity risk management provides only principles. BoA would like to enhance the liquidity risk management by providing some limits to banks’ exposures. The necessity in improving liquidity management is again related to tight conditions on liquidity in international markets, a factor that might influence the activity of the banking system in Albania as well. It is a regulatory issue, at a bank prospective, but a plan of contingency as it was applied on many countries on the liquidity level of the banking system might be of good help for the banking system.

The calculation of the FX position as per the current regulation does not reflect the profit/loss resulting from the treasury activity since it revaluates all assets/liabilities and not only the ones subject to the treasury activity. An additional calculation method concerning only the profit/loss related to the treasury activity could be introduced or a modification of the current method could take place in order to adjust the above mentioned issue.The way of calculating FX positions should be revised in accordance with IFRS in order to have a better dimension of the banks’ exposure to FX risk.

Currently, Albanian banks calculate provisions both according to BoA regulations (for prudential and fiscal purposes) and to IFRS (for reporting to their mother entities). This duplication will continue after Basel II implementation, unless the related regulations change.

Statistics data are incomplete, uncertain and come from many sources. Easier and quicker access to statistics on industries and sectors is needed for Credit Risk Management purposes. There is an institution that collects and manages the information – INSTAT and centre of business registration (QKR) which keeps dataset on businesses. Development of interactions with INSTAT should take place and exploring additional information sources for this purpose are welcomed such as reaching agreement with QKR or involving of a non public entity such as research institute or university in collecting data.At the same time, buiding up a credit scoring system for individuals would be very helpful in managing the credit risk attached to them and in having credit terms and conditions relating to the risk profile.

Impact drivers

Ind

ust

ry

econ

omic

dri

ver By changing the regulation on

liquidity, banks could lower liquidity risk and improve liquidity risk management.

By improving the regulation, banks benefit from having a real dimension of their exposure to FX risks and to control foreign currency risk.

1. Through institutionalized access to information, banks will have better information regarding different industries and businesses. This reduces credit risk, operational risk and leads to efficiency of the banking system

3


Page 184 of 335





2. Benchmarks for risk rating for individuals create the premises for having a higher standards loan portfolio for the individuals and this in turn might be reflected in lower probability of default and even reduced losses generated by the lending activity or it might as well have an impact in lowering the costs associated with recovering bad debts.

Pu

bli

c go

od d

rive

r Netter regulated liquidity ensures sound banking system and financial stability. Customers will be protected against the consequences of possible liquidity crisis.

It promotes banking system stability by a better coverage of risks with regulatory capital. A better risk management gives an enhanced coverage for the customers.

1. It serves to the stability and sustainable development by taking more informed lending decisions. 2. Lower cost and reduced uncertainty might lead to lower prices in bank products-loans to individuals. The higher quality loan portfolios addresses the concerns on the financial stability as well.

Expected AAB Contribution

-To undertake ownership of the project-To provide experts for the working group -To validate the solutions-To implement recommendations

-To undertake ownership of the project-To provide experts for the working group-To provide data for impact calculations-To validate the solutions

-To undertake ownership of the project -To provide experts for the working group-To provide data for impact calculations-To validate the solutions

-To undertake ownership of the project-To provide experts for the working group-To offer data for surveys-To validate the solutions

4


Page 185 of 335





Expected BoA Contribution

-To undertake ownership of the project-To provide experts for the working group-To validate the proposal-To follow implement the solution

-To undertake ownership of the project-To provide experts for the working group-To validate the proposal -To follow up implementation

-To provide experts for the working group-To validate and implement solution

To provide experts for the working group -To validate solutions-To implement recommendations

Other Expected Contributions

Audit Companies Ministry of Finance

INSTAT, QKR, other public or private institutions

5


Page 186 of 335

SUMMARY FEATURES OF PROPOSED PROJECTS (2)

OTHER THEMES

Banking Forum Issue






Project Revising regulatory act on Execution of




Preparing a feasibility study for a central

depositary

Establishment of a national settlement

scheme for payments in foreign currency

Estimated starting time

April 2009 April 2009 April 2009 June 2009 September 2009

Actionable SPI Committee Proposal

PWG regulatory amendment proposal backed by an impact assessment

PWG proposals for a legislative package with the necessary changes to the regulatory framework (draft law and/or secondary regulations)

A comprehensive regulatory proposal on the new system of banks’ reporting to the central bank

PWG recommendation to the financial sector on establishing a central depositary

PWG recommendation on establishing a national settlement system for payments in foreign currency

SPI Albania Involvement Rationale

SPI Committee would ensure a public-private collaboration and foster dialogue

SPI Committee would ensure that the solution meets public interests while being feasible

SPI Committee is the appropriate structure to bring together the interested parties to agree on the standardized reporting

All main stakeholders being represented in the SPI Committee, this would facilitate reaching a solution addressing all interests and concerns

SPI Committee would bring a balanced view on the feasibility, advantages versus costs and risk mitigation

Description- Background

Bank of Albania current regulation on the implementation of execution on bank accounts is lacking provisions regarding public institution accounts or consolidated accounts. Notwithstanding financial

Article 7 of the Public Procurement Law (no.9643 dated 20.11.2006) excludes from the jurisdiction of the law financial services related to purchase, sale, or title transfer or other financial instruments. This

Until now banks have reported according to the national accounting standards. With the introduction of IFRS, its implementation will also impact the reporting system, which now should be

In Albania, there are individual banks acting as custodians, but there is not a central depository. This institutional lack prevents the development of the securities market and of the treasury bills market in

Albania has a high level of domestic EUR transactions. Thecurrent system of settlement exclusively via foreign correspondent banks is expensive, especially for low value transactions, therefore clients prefer to

6


Page 187 of 335

Banking Forum Issue











depositary



intermediary role, banks are faced with the difficulty to execute bailiff orders. There is a need for a new regulation to be issued by the Bank of Albania.

provision restrains the Ministry of Finance when contracting complex loans because financial and supporting services (eg. legal services) associated to the loan contracting process lack coverage in the law. This hampers banks as they are in many cases offering financial services. In this context, there is a need to revise the public procurement law to include clear provisions on financial services.

unified. particular (as the most advanced securities market). The feasibility study should assess the opportunity of building up this institution, the possible options to establish it and a recommendation to the financial sector based on a cost/benefit analysis.

perform their domestic EUR transactions in cash. A domestic payment system/a correspondent banking arrangement for EUR domestic transactions is likely to reduce settlement commissions and to decrease EUR cash transactions.

Impact drivers

Ind

ust

ry e

con

omic

dri

ver By determining proper

procedures regarding execution on public institution accounts, Banks operate in a safer institutional environment which protects them from abusive or unclear actions of bailiff offices, tax offices etc. Reduced uncertainty might be reflected in lower costs, improved bank-client

Banks will be offering financial services associated to the loan contracting process, leading to their business development.

Establishing one central depository would support an active Stock Exchange, securities’ tradability and, as a result, an increase in their liquidity. Overall, this leads to fund raising opportunities for different actors in the market (foreign banks also) and to an increase in the income coming from transactions on the financial

By establishing this national system for payments banks could operate domestic EUR non-cash transactions faster and with lower costs and could reduce EUR cash transactions, with all attached costs.

7


Page 188 of 335

Banking Forum Issue











depositary



relationships and in more transparency with account operations.

market.

Pu

bli

c go

od d

rive

r Clear procedures could improve collection of receivables by state budget or by public companies.

By regulating environment for procuring financial services, the access to foreign borrowing improves and investments increase, facilitating economic development.

By having a central depositary, public could be more interested in investing in Government bonds, facilitating thus public borrowing. This leads further to more governmental actions for economic development.

Customers could benefit of payment services in a shorter time and with cost efficiency. Use of cash in economy is reduced and informality decreases.

Expected AAB Contribution

-To undertake ownership of the project-To provide experts for the working group and data for impact assessment-To validate the solutions

-To provide experts for the working group -To validate the solutions

-To undertake ownership of the project-To provide experts for the working group-To provide information on reporting requirements and on the reporting costs-To validate the solutions

-To provide experts for the working group-To provide data for impact assessment-To validate the solutions

-To undertake ownership of the project-To provide experts for the working group-To validate the solutions

Expected BoA Contribution

-To provide experts for the working group-To validate the proposal

-To provide experts for the working group

-To undertake ownership of the project-To provide experts for the working group-To validate and implement solution



8


Page 189 of 335

Banking Forum Issue











depositary



Other Expected Contributions

Ministry of Finance (Budget Department), Ministry of Justice (General Directory of Bailiff Office), General Tax Directorate, General Customs Directorate

Ministry of Finance (General Debt Department) – to undertake ownership, Public Procurement Agency, Council of Ministers

Audit companies Securities market operators, Ministry of Finance Financial Supervisory Authority (to undertake ownership)

Other public and private institutions

9


Page 190 of 335


Page 191 of 335


Page 192 of 335

1

Annex VIII-1

SPI Project Working Groups responsibilities a. SPI projects preparatory activities SPI partners undertake the projects’ ownership and ensure participation in the

Project Working Groups. Project Management Team and Project Working Group general responsibilities:

o Project Management Team (PMT): Project Owner - represents the main stakeholder at top management level and ensures the project oversight; Project Manager – is appointed by the Project Owner (out of the PO’s institution management staff) and ensures the management of the day-to day activities; Deputy Project Manager(s) – represent(s) the other main stakeholder(s) and second(s) the Project Manager in coordinating the day-to-day activities;

o Project Working Group members: they represent all stakeholders, with specific expertise profiles.

PMT agrees on the project strategy, ToRs and on the optimal composition of the

PWG in order to ensure timely achievement of the project objective before first PWG meeting.

PO/PM signs the invitation letters for the other PWG members. PMTs gather/have individual meetings with SPI Secretariat in order to agree on

the project ToRs, on the adequacy of the PWG composition and on the first documents prepared by SPI Secretariat.

In order to ensure the same level of knowledge for the PWG members, PMT and

SPI Secretariat share the responsibility of preparing: o a compilation of the regulatory framework, or o a background study, or o a note on international experience, or o the scoping the problem documents, as the case may be.

b. SPI project activities PMT conducts discussions within PWG meetings, outlining the conclusions

reached or main ideas exposed.. PMT facilitates consensus reaching among PWG members during their meetings

and/or by drafting possible PWG proposals. PMT establishes individual tasks. PMT relates with all possibly involved institutions in reaching the projects’

objectives, based on the letters drafted by SPI Secretariat. PWG members participate actively in the discussions.


Page 193 of 335

2

PWG members send their individual contributions on time, meaning notes on international experience, on internal experience, information sources, answers to questionnaires, draft regulatory/self-regulatory proposals.

PMT attends meetings and discussions with the partner institutions. PWG members send feedback on the draft documents sent by SPI Secretariat or

by PMT. PWG members identify the knowledge gap to be filled in by international experts,

indicating also possible expertise providers. PMT endorses the ToRs for the Technical Anchor. PMT formulates the specific requirements to TAN and approves TAN’s

contribution/report/study. c. SPI PWG recommendations PWG members or PMT formulates draft PWG Recommendations, based on the

draft prepared by SPI Secretariat. PWG members approve the proposed recommendations. PMT/PO sends PWG recommendations to SPI Committee for endorsement. PMT supports the enactment of the PWG Recommendations, through direct or

indirect interactions with the implementing authorities. PWG supports awareness building on the outcomes of the projects.


Page 194 of 335

1

SPI Project Management

Presentation to the PWG by SPI Secretariat during first PWG meeting

Annex VIII-2

2

SPI Committee

SPI Working Group 1

(Experts from public and

private institutions)

SPI Working Group 2



SPI Working Group N



…

Project Manager 1 Project Manager 2 Project Manager N…

Project Owner 1 Project Owner 2 Project Owner N…

SPI Secretariat

SOLUTION FINDING (Based on public-private consultations through RIA)


SPI Platform

PLATFORM ENGINE – TECHNICAL CONSENSUS-BUILDING


Page 195 of 335

2

Project Working Groups (PWGs)

Project Management Team• Composition & responsibilities:

– Project Owner - represents the main stakeholder at top management level and ensures the project oversight;

– Project Manager – is appointed by the Project Owner (usually out of the PO’s institution management staff) and ensures the management of the day-to day activities;

– Deputy Project Manager(s) – represent(s) the other main stakeholder(s) and second(s) the Project Manager in coordinating the day-to-day activities.

Project Working Group

• Composition: representatives of all stakeholders, with specific expertise profiles.• Responsibilities:

» Attending the meetings;» Actively participating in the meetings;» Providing individual contributions (their institutions’ experience, parts of

documents);» Validation of RIA questionnaire;» Providing data/filling in questionnaires;» Validation of RIA findings;» Approval of position/policy documents;» Supporting enactment activities.

SPI Project Planning and PWG Gathering

• ToRs drafting:

– background information – interviews with stakeholders and research;

– project objective;– strategy;– methodology (steps, output, contributions)

• Drafting list of stakeholders

• In PWG composition in cooperation with AAB – a fair

representation of big, medium and small banks

• Drafting, getting signatures and sending invitation

letters


Page 196 of 335

3

Banking Association

Central Bank

Other SPI

Partners SPI

Secretariat

SPI pipeline

SPI Projects

SPI Committee




research

Banks





-Identifies the needed expertise-Searches for solutions in international experience/EU legislation - Identifies the needs for international/local consultants- Arranges for the consultants’ support- Prepares documents for discussions- Drafts RIA questionnaire (as part of the RIA)- Collects data and performs RIA calculations- Organizes seminars and other supporting events - Collects feedback from SPI stakeholders- Collects and aggregates individual contributions- Prepares documents presenting the solutions


SPI partners

SPI Secretariat



Page 197 of 335

4


Central Bank- Revizes proposed solutions

- Provides input on disputed issues- NBR Board endorsement for


Banking Association

- Banks review solutions- Provide input on disputed issues-BA Board endorsement for






choice

SPI Secretariat


4. Solution

enactment

NBR, RBA and SPI Secretariat coordinate

actions in respect of full range of SPI

projects

SPI Secretariat



or to the Central Bank for its specific regulations






- Sends SPI Secretariat’s submission under the public





initiator



Page 198 of 335

5

SPI Methodology (1)• EU Better Regulation Approach,

developed by the European Commission, aiming at: – simplifying and improving existing regulation;– better design new regulation; and – reinforcing the respect and the effectiveness

of the rules, in line with the EU proportionality principle

SPI Methodology (2)

• EC comprises a very wide range of issues but… • For Financial Services it has adapted the EU-Better

Regulation approach to reflect the more specialized nature of financial services policies and the specific development circumstances.

• “Better laws” - having a full picture of their economic, social and environmental impacts

• Impacts assessed through the structured Impact Assessment tool.


Page 199 of 335

6

Impact assessment – IA - a set of logical steps which structure the preparation of policy proposals. IA enhances the policy making process through:

- providing a coherent framework to conduct evidence-based policy making, that spans the regulatory policy making process from beginning to end;

- the use of market and regulatory failure analysis ensures accurate identification of problems and the threats they pose to regulatory objectives, which are reflected in effective and efficient policy solutions amongst a wider range of possible policies;

- saving time in the long run by reducing the risk of regulatory failure;

- formal and informal consultation with stakeholders and by enhancing the transparency of the policy making process and keeping all affected parties informed that results in enhanced credibility and accountability of the policy making process.

Impact assessment is an aid to political decision-making, not a substitute for it.

SPI Methodology (3)


Scoping of problem


intervention.


objectives.



solution”).

Analysis of impact





Consultations



Conclusion



SPI Methodology (4)


Page 200 of 335

7


Prob

lem

Iden

tific

ation

Regula

tory

context

Poli

cy

obje

ctive

s

Prop

osed

regu

lator

y

actio

n

Cost

and

Ben

efit

anal

ysis

Cost

and

Ben

efit

ques

tion

naire

IAA

D

PW

G

Poli

cy

reco

mme

ndati

on




SPI Methodology (6)

• Scoping of the Problem Document (steps 1–4)1.Problem identification

- What is the problem? Is it due to Market or Regulatory Failures?2. Definition of policy objectives-General objectives (objectives of the authorities)-Specific objectives (objectives of the project)-Operational objectives (deliverables, actions of the project)

3. Development of “do nothing option” 4. Alternative policy options


Page 201 of 335

8

SPI Methodology (7)• IAAD Document (steps 1 – 9)

5. Costs to users 6. Benefits to users 7. Costs to regulated firms and regulator 8. Benefits to regulated firms and regulator 9. Data Questionnaire

5-9 Analysis on the incremental costs & benefits of the identified policy options

SPI Methodology (8)

• Consultations with stakeholders (step 10)10.1. Consultation questionnaire10.2. Consultations feed-back

• Final document – PWG Recommendation (step 11)


Page 202 of 335

9

Market Failures

• MF are reflected by market inefficiencies and welfare losses, due to:– Information asymmetry – one part of a transaction

lack important information. Information is costly to obtain or too complex.

– Externalities – Production of a good affects parties other than the original producers and consumers. These effects are not reflected in the price.

– Market power – Companies can persistently raise prices above the “competitive level”

SPI Methodology (9)

Regulatory / Supervisory Failures

• regulation has unforeseen and unintended effects arising from interaction with a specific characteristic of the market affected,

• or when a supervisory practice is no longer adapted to the realities of a rapidly evolving market

SPI Methodology (10)


Page 203 of 335

10

What is the problem & MRF (SPI Albania

Bailiff Project)

International institutions assessed that the secured transactions legal framework in Albania is appropriate & sound but its effectiveness is hampered by the slow enforcement system and flaws in the administrative system. Banks – the largest users of the enforcement system in Albania - complain on the effectiveness of the enforcement system and institutions. EURALIUS has identified insufficient professional expertise, scarce infrastructure and working conditions, lack of professional and financial incentives in the Bailiff offices. The problems in the Bailiff Service combined with the deficiencies in the legal framework produce an inefficient enforcement system.The low efficiency in the current enforcement system is result of a regulatory

and administrative / management failure. The current regulation is not appropriately prescribed for the market. This regulatory failure generates additional uncertainty and costs to all the users of the enforcement system.


Objectives (CPC)

General Objectives:To improve the economy competitiveness;To increase the opportunities to engage in transactions.

Specific objectives:To improve the efficiency of the enforcement system;To stimulate the development of lending activity;To decrease in the cost of bank products and services.

Operational objectives:

To steady increase the execution rate of court orders;To secure the timely execution of the court orders; To ensure rapid recovery of bad debts.



Page 204 of 335

11

“Do nothing” Option (SPI Albania IFRS

Project)

The non-revision of all banking regulations with the international accounting principles would make banks to maintain two evidences of their activity: one based on national accounting standards, in order to comply with banking regulatory provisions, and one based on international standards, in order to comply with the general legal requirements. This situation would involve additional costs for banks and confusion among the market participants.

Impact of the “Do Nothing” option to the various stakeholders

Regulated firms / Banks: Additional costs on human capital generated by double reporting (BoA & IFRS).Consumers:Non informed consumers might be confused.Authorities:There are no additional costs.


Alternative Options ( SPI Albania Reducing

Cash Transactions Project)The volumes of cash transactions within the banking

system might be further reduced by:

Option 1: Self regulatory measuresEstablish a common policy among banks that will aim: a) the reduction of cash transaction by creating disincentives for

cash use; combined withb) the increase of non-cash transactions by creating incentives

for the costumers to use alternatives to cash.

Option 2: Regulatory measures

Option 3: The combination between the regulatory and self regulatory measures



Page 205 of 335

12

Qualitative Cost & Benefit Analysis (CPC) Impact Comments

Costs Lower

One-off Slightly

higher

Human resources

New staff = No additional staff needed to comply with the new legal provisions

Trainings for existing staff =+ Due to the amendments in CPC, there might be the need to spend time to acknowledge them.

On going Lower

Human resources =

Expenses

Procedural

- Under the art. 525 the creditor should pay for each procedure (when required by the law) and will

be reimbursed at the end of the process by the proceedings of the sale.

Given the low rate of successful auctions and the low price that the bank is very often forced to

liquidate the property, in the end of the process if might happen that the bank is not able to

recover all the payables.

The amendment of art.525 on expenses by adding– the creditor will pay only for the initial fee, is

expected to reduce the number of appeals by the debtors and reduce the expenses paid.

“Purchase” costs - More transparent and objective selecting rules and procedures for the appraisers would end in

more realistic market value for the foreclosed immovable, diminishing thus banks’ losses from

exchanging the good for the loan within auction procedures and re-selling them for a lower price.

Benefits higher

Additional loans –

immovable property backed

+ The more rapid recovery of bad debts would give the possibility to re-place those sources in

additional loans. Furthermore, banks would be more willing to enter into mortgage-backed

transactions.

Cost saving / + revenues + By increasing effectiveness and fairness in the procedures more third parties will be willing to

enter in the auction and bid to purchase the immovable property, accordingly banks will not be

obliged to take the property in exchange of the loan

Equity relief =

Total impact Less costs

more

benefits

A more effective foreclosure process will generate direct and indirect benefits.



Page 206 of 335

1

Annex VIII-3 Responsibilities sharing between PWG, SPI Secretariat and Technical Anchor

1. Project Management Responsibilities –

Project Working Group and SPI Secretariat (Without Technical Anchor)

Better Regulation

Steps Responsibilities


2. Provide comments on current regulatory context prepared by SPI Secretariat 4. Validates note on the current regulatory context and background section of the Scoping the Problem

2. Provides views on the identified problems to TAN 4. Validates problem identification section of the Scoping the Problem document

1.PM provides policy objectives 3.Validates policy objectives section of the Scoping the problem document

2.Formulates individual regulatory proposals 3. Discuss and agrees on PWG

2. Validates the questionnaire 6. Validates the results of the quantitative impact assessment

2.Validates document for consultations

1. Analyzes the findings of the consultations 2. Approves PWG Policy Recommendations

SPI Secretariat as Step 0: prepares Project and TAN ToRs) 1. Drafts note on the current regulatory context 3. Drafts background section of the Scoping the Problem document

1. Seeks PWG views on the identified problem 3. Drafts problem identification section of the Scoping the Problem document

2. Drafts policy objectives section of the Scoping the Problem document

1.Provides international experience 4. Facilitates PWG consensus building (under 3.)

1. Drafts the cost-benefit questionnaire, including qualitative and quantitative assessment 4.Distributes questionnaire and collects and aggregates data 5. Performs calculations 7. Drafts IAAD document, including results of quantitative impact assessment

1.Drafts policy document for consultations

1.Runs consultations 2. Collects and aggregates feedback received 3. Drafts document on summary findings of the consultations 4. Drafts PWG Policy Recommendation document

3. Presents document to SPI Committee for endorsement

Problem Identification

1*

Regulatory context

Policy objectives

2

Proposed regulatory

action 3-4

Cost and Benefit analysis

5-9

Policy document for consultations

10

PWG Policy recommendation

11

Consultation feedback

10


Page 207 of 335

2

2. Project Management Responsibilities – Project Working Group, SPI Secretariat and Technical Anchor

Better Regulation



2. Provide comments on current regulatory context prepared by SPI Secretariat 4. Validates note on the current regulatory context and background section of the Scoping the Problem


1.PM provides policy objectives 3.Validates policy objectives section of the Scoping the problem document





Technical Anchor

1.Provides international experience 3. Prepares suggestions on regulatory proposals

3. Provides views on the questionnaire

SPI Secretariat as Step 0: prepares Project and TAN ToRs) 1. Drafts note on the current regulatory context 3. Drafts background section of the Scoping the Problem document

1. Seeks PWG views on the identified problem 3. Drafts problem identification section of the Scoping the Problem document


5. Facilitates PWG consensus building (under 4.)

1. Drafts the cost-benefit questionnaire, including qualitative and quantitative assessment 4.Distributes questionnaire and collects and aggregates data 5. Performs calculations 7. Drafts IAAD document, including results of quantitative impact assessment


1.Runs consultations 2. Collects and aggregates feedback received 3. Drafts document on summary findings of the consultations 4. Drafts PWG Policy Recommendation document



1*

Regulatory context

Policy objectives

2

Proposed regulatory

action 3-4


5-9


10


11


10


Page 208 of 335

3

3. Project Management Responsibilities – Project Working Group, Technical Anchor and SPI Secretariat (supporting)

Better Regulation



3. Provide comments on current regulatory context prepared by TAN 5. Validates TAN note on the current regulatory context and background section of the Scoping the Problem


1.PM provides policy objectives to TAN 3.Validates policy objectives section of the Scoping the problem document





Technical Anchor

2. Drafts note on the current regulatory context 4. Drafts background section of the Scoping the Problem document

3. Drafts problem identification section of the Scoping the Problem document


1.Provides international experience 2. Seeks PWG views on regulatory proposals 4. Prepares suggestions on regulatory proposals

1. Drafts the cost-benefit questionnaire, including qualitative and quantitative assessment 4. Performs calculations 6. Drafts IAAD document, including results of quantitative impact assessment


3. Drafts document on summary findings of the consultations 4. Drafts PWG Policy Recommendation document

SPI Secretariat as Step 0: prepares Project and TAN ToRs) 1. Provide domestic regulations to TAN

1. Seeks PWG views on the identified problem

6. Facilitates PWG consensus building (under 5.)

3.Distributes questionnaire and collects and aggregates data

1. Runs consultations 2. Collects and aggregates feedback received



1*

Regulatory context

Policy objectives

2

Proposed regulatory

action 3-4


5-9


10


11


10


Page 209 of 335


Page 210 of 335

SPI Albania Secretariat Mrs. Anuela Ristani, Director of Operations, [email protected]

Ms. Elona Bollano, Director of Analytics and Policy, [email protected] Address: Twin Tower I, Kati 6, Apt. A3. Tirana, Albania. Tel. +355 42 280 359; Fax. + 355 42 280 371

SPI Project on the impact of IFRS implementation on the Banking regulatory framework

Minutes Attendees: Miranda Ramaj, BoA (PM)

Armand Muharremi, Banka Popullore (DPM) Ilir Pustina, BoA (member) Julia Manushi, Raiffeisen Bank (member) Lirola Keri, National Accounting Council (member)

Project Objectives • To interpret the Decision of the Ministry of Finance for the timing of the

application of IFRS standards. • To assess the impact of IFRS implementation in banking regulatory framework

by preparing a list / identifying the affected laws, bylaws, regulations and guidelines.

• To assess the main areas of impact and the general sense of the changes to be brought to the regulations.

Project Management Team

Project Owner (PO): Indrit Banka, Supervision Director, BoA Project Manager (PM): Miranda Ramaj, Supervision Deputy Director, BoA Deputy Project Manger (DPM): Armand Muharremi, Head of Finance Department,

Banka Popullore

Third meeting September 22, 2008—AAB premises


Page 211 of 335

wb323932

Text Box

Annex VIII-4

2

Lyela Rama, AMF (member) Romira Hoxha, KPMG (member) Florian Dervishi, FIB (member) Skender Emini, BKT (member) Zinaida Cako, BNT (member) Lindita Kopica, BNT (alternate member) Adela Xhemali, ABA (member) Silvana Osmani, ABA (alternate member) Adela Leka, ProCredit (member) Rezarta Kocollari, NBG (alternate member) Elona Bollano, SPI Albania, Director of Analysis and Policy Anuela Ristani, SPI Albania, Director of Operations

I. Project Activity Brief

• SPI Secretariat has forwarded to the banking community the findings of the survey on banks’ readiness to implement IFRS together with NAC interpretation.

• The SPI Secretariat presented an overview of the contributions received on the accuracy of classification (if the regulations are properly grouped accordingly to the grouping criteria) and the suggestions on specific items of each regulation affected by the IFRS implementation and the sense of the changes.

II. Discussion on:

o The grouping of the regulations accordingly to their priority

The SPI Secretariat introduced the list of regulations whose classification was subject of change due to PWG members’ suggestions. These non-classified regulations together with the respective comments were considered one by one. The interpretation of IFRS 7 and its peculiar disclaimers was subject of discussion for several regulations classified in the third group in the initial proposal. After all the comments and arguments for the re-classification of regulations were exhausted, the final classification of the regulations was consensual and satisfactory for all the present PWG members.

o Specific issues of each regulation affected by the IFRS implementation and the sense of the changes.

The PWG managed to cover all the issues for the regulations included in the first group: Regulations that will be highly affected by the implementation of IFRS. (Please refer to


Page 212 of 335

3

the APPENDIX: SPI Albania IFRS Project Group I Regulations Statutory vs IFRS changes Draft) The PWG members representing the banks and their external auditors expressed their concern in the differences that will appear between IFRS reporting and SRU reporting for Bank of Albania. When banks were reporting in local and IFRS, this was acceptable but since the law provides for IFRS only, this discrepancy should not be ignored. Some of the suggestions to Bank of Albania were instead of loan loss provisioning to use the capital adequacy as a prudential instrument to control lending risk. Another suggestion coming from the PWG members representing the banks was for BoA to introduce a set of instructions that would lead the banks through the transitory period and guide them through a standard path of IFRS application. However the PWG members representing BoA stressed once more the fact that they acknowledge the distortions that will be introduced in the beginning, and that the differences in the level of provisions compared to the current reporting are too significant to be ignored. In addition, there are no assurances that the banks would have the capabilities of reporting correctly through IFRS even for the banks that have experience in this kind of reports. The difference between reporting to the mother bank and reporting by law will be significant, therefore BoA insists in having a transitory period of prudence in order to allow banks to consolidate their experience and improve the reliability of their reporting for supervision purposes. Bank of Albania will start adopting one by one all the elements of IFRS reporting that may be implemented within the prudential approach. There is no foreign experience of immediate implementation of IFRS standards from the Central banks. The PWG members representing banks and auditors raised the issue of dividend distribution due to the differences in profit between the IFRS and SRU reporting. The banks and auditors suggested that BoA should consider specifying in the Capital Adequacy regulation the criteria of profit evaluation from the external auditor with a reference on the dividends. BoA is under continuous revision of many regulations and the Capital Adequacy in particular which will be the focus of the next SPI project proposed by Bank of Albania. BoA is currently working on transforming the Bank Accounting Manual into a document outlining the methodologies of regulation applications for the banks. The references to the IFRS instead of the local standards will be the main focus of the changes. BoA requested from the banks to share their database of discrepancies in the current manual in order for the revisions to be efficient and accurate. SPI Secretariat will assist in the collection of these contributions from the Banks. While many issues are also related to tax-authorities, the PWG members and the PM suggested establishing contacts with the Tax Office and consulting with them on the issues raised by the banks. SPI secretariat and PMT will follow up on establishing these contacts.


Page 213 of 335

4

III. Scoping of the problem (Discussion and Agreement) The SPI Secretariat presented the Scoping of the Problem Document, part of the Regulatory Impact Assessment methodology of the EU Better Regulation approach. In May 2008, the Ministry of Finances issued a decree that made obligatory the application of International Accounting Standards and International Financial Reporting Standards since January 1st 2008. Banks, as business entities, have to start with the application and implementation of the new standards. In order to facilitate the transition process, Bank of Albania, as the banking system supervisory authority, has to adjust the banking legislative framework and align it with the new accounting and reporting standards. The PWG approved the document without any objections.

VI. Conclusions and distribution of tasks

- The SPI secretariat together with the PMT will follow up on establishing contacts with the Tax Authorities in order to clarify the tax reporting changes after IFRS implementation.

- The SPI Secretariat will send the revised classification of the regulations and the summary of the suggestions made during the meeting for the First Group.

- The PWG Members will consult the regulations of the Second Group (medium level changes) and will make their suggestions/ comments with regards to the specific changes needed as a consequence of IFRS implementation.

- The SPI Secretariat will send a request to the PWG members representing the banks for contributing through their reconciliation tables that identify the differences between the entries as per IFRS versus Bank Accounting Manual standards, as well as the specific references to these differences.

VII. Closing Remarks Next PWG meeting is preliminary scheduled to take place mid October 2008.


Page 214 of 335

AttachmentTemplate of the SPI PWG meeting minutes

SPI Project on …..

Minutes Attendees:

AGENDA

I. Welcome remarks II. Progress report

III. Documents to be discussed

IV. Conclusions and Distribution of Tasks

V. Closing Remarks

Project Objective

Project Management Team Project Owner (PO): Project Manager (PM): Deputy Project Manger (DPM):

[No. of] meeting [date, premises]


Page 215 of 335

2

I. Welcome remarks – by PM

[Objective of the meeting and expected outputs]

II. Progress report – by SPI Secretariat [Activities performed from the previous PWG meeting and results]

III. Project Documents (Discussions and approval) [Presentation of the documents] – by SPI Secretariat [Summary discussions and conclusions] – by PWG [Approval details]

IV. Conclusions and distribution of tasks – by PMT V. Closing Remarks – by PMT

[estimated date of the next PWG]


Page 216 of 335


Page 217 of 335

wb323932

Text Box

Annex VIII-5


Page 218 of 335


Ms. Elona Bollano, Director of Analytics and Policy, [email protected] Address: Twin Tower I, Kati 6, Apt. A3. Tirana, Albania. Tel. +355 42 280 359; Fax. + 355 42 280 371

www.spi-albania.eu

TERMS OF REFERENCE

Project: Reviewing the Capital Adequacy Regulation

Project Owner: Mr. Indrit Bank, Bank of Albania, Supervision Department.

Project Manager: Mrs. Miranda Ramaj, Bank of

Albania, Supervision Department.

Deputy Project Managers: Mrs. Adela Xhemali, Intesa SanPaolo Bank

Technical Anchor (TAN): One or two peer reviewers from Central Banks in the region.

Project Working Group: BoA – Supervision Department, Legal Department, Banks, AMF.

I - Background - Identification of the problem BoA is seeking to improve and to expand the coverage of the regulation on capital adequacy in order to capture a wider range of risks faced by the banks. The current regulation on Capital Adequacy establishes the regulatory capital to risk weighted assets and off-balance sheet items ratio, and sets the minimum required limit for this ratio. More specifically: the numerator of the adequacy ratio, bank’s regulatory capital, is composed of core capital and supplementary capital 1; the denominator of this ratio consist of the risk-weighted amounts of the balance sheet assets, off balance sheet items representing term financial instruments contracts related to interest and exchange rates and other balance sheet items. 1 More on the definition and calculation method of the regulatory bank capital is provided on the “Guideline on Regulatory Bank Capital” issued by Bank of Albania. Regulatory bank capital is composed of core capital and supplementary capital.


Page 219 of 335

wb323932

Text Box

Annex VIII-6

2

The methodology used in the current framework calculates the (minimum) regulatory capital to cover only for credit risk. Other risk typologies, such as operational risk, have not been addressed yet. Therefore BoA intends to improve risk management in line with Basel II, first pillar of the capital adequacy framework, by enhancing the methodology for calculating risk weighted assets to credit risk and by including the operational risk in calculating the capital requirement. Basel Committee defines operational risk as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes legal risk, the risk related, but is not limited to, exposure to fines, penalties, or punitive damages resulting from supervisory actions, as well as private settlements, but excludes strategic and reputational risk. Basel Committee permits banks to choose among broad methodologies for calculating their capital requirements to cover credit and operational risks. For calculating credit risk charges banks can choose between two broad methodologies. One alternative is to measure credit risk in a standardized manner using the Standardized Approach. The other alternative, the Internal Ratings-based Approach, allows banks to use their internal rating systems for credit risk management. This approach is subject to the explicit approval of the bank’s supervisor. For calculating operational risk charges the Committee provides three methods: (i) the Basic Indicator Approach; (ii) the Standardized Approach; and (iii) Advanced Measurement Approaches (AMA). Given the current status of developments of the banking industry and the internal capacities, BoA has considered that the Simplified Standardized Approach2 or the Standardized Approach as the most appropriate method for calculating credit risk charges. In line with the simplified standardized approach Basel Committee suggests the Basic Indicator Approach for operational risk. I.2 Legal Framework. The legal framework built up by BoA on capital requirements for banks consists of laws, regulations and guidelines. In order to implement the new methodologies on credit risk and operational risk a thorough investigation of the current framework is necessary. The preliminary legal framework.

Existing framework Actions to be followed: Review / Amendment / Issue

Law No. 9662 Nr. 9662, dated Review: Chapter V “Risk Management”, art. 58 2 This approach is not considered as another approach per se for determining regulatory capital, it rather collects in one place the simplest options for calculating risk-weighted assets.


Page 220 of 335

3

18.12.2006 “On Banks of the Republic of Albania”.

“Regulations for risk management”.

Regulation on Capital Adequacy approved and amended by BoA’s Supervisory Council.

a) Amend: The methodology for Credit risk charges calculation. Proposed methodology: Simplified Standardized Approach. b) Issue: The methodology for Operational risk calculation. Proposed methodology: Basic Indicator Approach.

Guideline on Regulatory Bank Capital approved and amended by BoA’s Supervisory Council.

Amend: Chapter I “General”, art. 3, “Purpose”

Issue a guideline on Credit Risk Management Issue a guideline on Operational Risk

Management Comply with Basel Committee guidance on

Sound Practices for the Management and Supervision of Operational Risk

Other II - Project Objective – Definition of policy goals Within the policy goal of improving the capital adequacy to the credit risk and to the operational risk according to Basel II, First pillar, the project objective is to prepare the necessary regulatory amendments and to define an implementation timeframe. III – Intended Strategy – Description of the BR 9 steps =========Scoping of Problem========║======Analysis ====║= Policy =║=Conclusion= Of Impact Consultation * See attachment The project management group (Project Owner, Project Manager, Deputy Project Manager, supported by the SPI Secretariat) will act based on the mandate received from the SPI Committee to review the Capital Adequacy regulation, to modify the methodology on credit risk and to introduce operational risk in calculating capital requirements.


1*

Regulatory context

Policy objectives

2

Proposed regulatory

action 3-4


5-8

Cost and Benefit

questionnaire 9


10

PWG Policy recommendatio

n 11


Page 221 of 335

4

The project working group (PWG), with the support of SPI Albania Secretariat, will work to revise the existing Capital Adequacy and bring it in line with the developments in banking system and with Basel II requirement on capital adequacy. Planned steps to achieve project’s objective:

1. To identify the legal framework that regulates the capital requirements for banks 2. To acquire a clear understanding on the provisions of Basel II and EU respective

directives and international experience on capital adequacy framework, focused on credit and operational risk;

3. Based on the gained expertise, to formulate the proposal for amendments in the existing legal framework and/or for issuing new regulations and guidelines in order to have a comprehensive regulatory framework;

4. To assess the possible impact of the new methodologies on credit and operational risk and run consultations on the regulatory design and impact;

5. To propose an implementation plan. IV- Methodology: from kick off to the accomplishment of the project

A. First PWG Meeting

Preparation of PWG 1st meeting (PM/DPM and SPI Secretariat)

The Project Owner will appoint PM and AAB will appoint the DPM. SPI Secretariat will draft the invitation letter. PMG and SPI Secretariat to prepare: a. a background note on current situation, including regulatory context; b. a note on international experience (Basel II provisions and experience in European countries). Output: First Draft of “Scoping of Problem” for PWG discussion After PMG clearance and before the 1st meeting, SPI Secretariat will send to PWG members the following documents: 1. Draft present TORs. 2. Draft of “Scoping of Problem” document. PWG 1st meeting


1

Regulatory context

Policy objectives

2

Proposed regulatory

action 3-4


5-8

Cost and Benefit

questionnaire 9


10


n 11


1

Regulatory context

Policy objectives

2

Proposed regulatory

action 3-4


5-8

Cost and Benefit

questionnaire 9


10


n 11


Page 222 of 335

5

Objectives: a. To understand the current context and the policy goals; b. To formulate recommendations on policy implementation;

c. To analyze the impact for users, regulated firms and regulators of changing the capital requirements.

Output: Information to complete a document comprising the Scoping of the Problem and the Impact Assessment (Impact Assessment Analysis Document - IAAD) to be endorsed in PWG 2nd meeting. The IAAD covers steps 1-8 of the Better Regulation Template. PM/DPM establishes homework: SPI Secretariat will prepare the minutes of the meeting

B. Second PWG Meeting Preparation of PWG 2nd meeting (PM/DPM and SPI Secretariat) PMG and SPI Secretariat to draft the questionnaire for data collection. PWG 2nd meeting Objective: To discuss and agree on the cost and benefit questionnaire; Output: (a) Endorsement of IAAD (1-8) and (b) Final questionnaire. PM/DPM establishes homework:

• SPI Secretariat: will prepare the minutes of the meeting will integrate the individual contributions on the cost and benefit questionnaire.

C. Third PWG Meeting Preparation of PWG 3rd meeting (PM/DPM and SPI Secretariat) SPI Secretariat to: collect data from PWG participating banks; and summarize questionnaire results and prepare draft “summary impact assessment” for PWG discussion and endorsement. PMG and SPI Secretariat: to draft policy option consultation paper, including regulatory amendment proposals. PWG 3rd meeting


1

Regulatory context

Policy objectives

2

Proposed regulatory

action 3-4


5-8

Cost and Benefit

questionnaire 9


10


n 11


1

Regulatory context

Policy objectives

2

Proposed regulatory

action 3-4


5-8

Cost and Benefit

questionnaire 9


10


n 11


Page 223 of 335

6

Objectives: (a) To endorse Impact Assessment Analysis Document including “Summary Impact Assessment”; b) To finalize policy option consultation paper. Output: a) IAAD; b) final policy option consultation paper.

D. Forth PWG Meeting Preparation of PWG 4th meeting (PM/DPM and SPI Secretariat : PM/DPM and SPI Secretariat to: a. Run consultations with stakeholders based on the policy option consultation paper; b. Draft feedback document. PWG 4th meeting

Objective: a) To discuss the consultation feedback document and the policy document; and b) To agree on the policy recommendations. Output: Policy recommendations. Following PWG 4th meeting: Preparation of the SPI Committee paper.

VI - Project Team The team is composed of:

• Bank of Albania • Banks

VII – Tentative PWG meeting schedule

• First meeting October 2008

Second meeting November 2008

Third meeting November 2008

Fourth meeting December 2008


1

Regulatory context

Policy objectives

2

Proposed regulatory

action 3-4


5-8

Cost and Benefit

questionnaire 9


10


n 11


Page 224 of 335

7

VIII – Consulted documents - Basel Committee on Banking Supervision, 2006, International Convergence of Capital Measurement and Capital Standards, A Revised Framework, June 2006. - Basel Committee, 2003, Guidance on Sound Practices for the Management and Supervision of Operational Risk, February 2003. - Law N0. 9662, dated 18.12.2006 “On Banks on the Republic of Albania”. - Regulation on Capital Adequacy. - Guideline on Regulatory Bank Capital. Attachment


Page 225 of 335

8

The EU Better Regulation Approach Steps Purpose

Scoping of problem 1. Problem identification To understand if a market/regulatory failure creates the

case for regulatory intervention. 2. Definition of policy objectives To identify the effects of the market /regulatory failure to

the regulatory objectives. 3. Development of “do nothing option”

To identify and state the status quo.

4. Alternative policy options To identify and state alternative policies (among them the “market solution”).

Analysis of impact 5. Costs to users To identify and state the costs borne by consumers 6. Benefits to users To identify and state the benefits yielded by consumers 7. Costs to regulated firms and regulator

To identify and state the costs borne by regulator and regulated firms

8. Benefits to regulated firms and regulator

To identify and state the benefits yielded by regulator and regulated firms

9. Data Questionnaire To collect market structure data to perform a quantitative cost and benefit analysis

Consultations 10. Policy Document To learn market participant opinions on various policy

options Conclusion

11. Final Recommendations Final report to decision-makers, based on Cost Benefit Analysis and market feedback

Source: CESR-CEBS-CEIOPS 3L3 Guidelines, adjusted by the Convergence Program based on experience.


Page 226 of 335

Document prepared by Elona Bollano, SPI Director for Analytics and Policy

“Scoping of Problem” Document

Project: Reducing cash transactions

Section 1 Project information

PUBLIC-PRIVATE FINANCIAL SECTOR MODERNIZATION MATRIX

European Central Bank CRITERIA

Italian Banking Association CRITERIA

Asymmetric information reduction


Increased opportunities to engage in

financial transactions

Reduced transaction

costs


Business development Industry competitiveness

X

Industry reputation Short description of the context [from project matrix]: Albanian authorities have taken several legal and administrative initiatives to reduce the use of cash. Despite these initiatives undertaken it seems that the intended effects are not completely materialized and the volume of cash transactions continues to be high. The high level of cash transaction raises concerns to the banks. These concerns are related to the costs associated with processing the cash and with the inefficiency produced by the high level of the unused liquidities. Stakeholder proposing the project: Banks

Other Stakeholders involved (sponsors): BoA, utilities and card companies Project objectives:

1. To prepare a protocol on a common policy in respect of the actions and measures to by be undertaken by the banks for reducing the volume of cash transactions.

2. To build consensus among banks in order to sign and implement the protocol.


Page 227 of 335

wb323932

Text Box

Annex VIII-7

2

Description of the project contribution toward financial modernization:

By reaching the project’s objectives, the level of expensive and inefficient cash transaction will decrease and the level of more efficient payments will increase. The improvement of the payment system will enhance the efficiency of the intermediation function of the banking system.


Raiffeisen Bank (Project Owner & Project Manager) Bank of Albania (Deputy Project Manager) Union Bank (member) Credins Bank (member) American Bank of Albania (member) Italian Development Bank (member) Tirana Banka (member) ProCredit Bank (member)


Page 228 of 335

3

INTRODUCTION

The present Impact Assessment Template is designed to take you through the main steps of the analysis and data requirements. At an early design stage, with little quantitative data available, this template can help prepare a Preliminary Impact Assessment. Later on, the template can help prepare a Full Impact Assessment. The template builds on the EU Better Regulation Impact Assessment process.


Scoping of problem 1. Problem identification To understand if a market/regulatory failure creates the


the regulatory objectives. 3. “Do nothing” option To identify and state the status quo.


Analysis of impact 5. Costs to users To identify and state the costs borne by consumers 6. Benefits to users To identify and state the benefits yielded by consumers 7. Costs to regulated firms and regulator




Consultations 9. Data Questionnaire To collect market structure data to feed into cost and

benefit analysis 10. Policy Document To learn market participant opinions on various policy

options Conclusion

11. Final Recommendations Final report to decision-makers, based on Cost Benefit Analysis and market feedback

Rather than being a step-by-step process, RIA is a highly iterative process. As it

advances, it is likely that previous steps need to be fine tuned accordingly.


Page 229 of 335

4

The template is made up of the following 3 sections: Section 1 aims to scope the underlying problem in order to see whether or not a regulatory/market failure exists and, if so, whether or not a regulatory action to address that problem is necessary. Section 2 is devoted to Cost-Benefit Analysis. In this part the main qualitative and quantitative economics are illustrated under the various perspectives: from the regulator and the government; from consumers and from the regulated firms. Section 3 summarizes the conclusions. This template is based on the following sources:

- CESR-CEBS-CEIOPS, Draft Impact Assessment Guidelines; May 2007; - UK Financial Services Authority; - Oxera; - Lessons learnt by Convergence through the RIA Capacity Building sessions.


Page 230 of 335

5

Section 1:

Scoping the problem

1.1. Problem identification [Background section from ToRs]

The Albanian authorities have undertaken several legal and administrative initiatives to reduce cash transactions in economy with final objective to combat the informal economy.

- In July 2007, the Albanian Government amended some articles in the Law on Taxation Procedures in the Republic of Albania that are in line with cash reduction initiative. The upper limit allowed to use cash for the purchase of goods and services was revised downward from 1,000,000 lek to 300,000 lek, but not more than 10% of the total purchases of that fiscal year / tax period. All the acquisitions above this amount should be paid through the banking system.

- Prior to this law amendment, the Council of Ministers has issued a decree on May 2007 on the minimal reference monthly wage to be used in the computation of the social security, health insurance and tax contributions with the provision that contributions have to be paid to the respective state institutions through the banking system or the post office network.

- In addition to the legal aspect the General Directorate of Taxation is working for modernizing the payment procedures in order to facilitate the non-cash payment of the taxes. The Directorate is working on the implementation of an on-line payment system and on the reduction and the simplification of the procedures to be followed by the taxpayers.

- In 2003 Bank of Albania in collaboration with other institutions initiate a campaign for the reduction of the use of cash in the economy. In addition to this campaign, in order to facilitate the interbank payments BoA has implemented:

(i) The Albanian Interbank Payment System (AIPS) that settles systemically important payments (such as payments between settlement participants, bank-to-bank payments, including payments to and from the BoA; payments on government securities transactions; net transfers of funds requiring designated time settlement; and large-value customer payments. This is a system based on the core RTGS principles; (ii) The Albanian Electronic Clearing House System (AECH), an electronic clearing system owned and operated by BoA, in which files of bulk (high volume) low value payment instructions (both credit transfers) are exchanged among banks after the net positions have been settled through RTGS.

(iii) BoA, as a settlement agent, in collaboration with VISA international association provide to the banks the “Albanian National Net Settlement Service” (ALNNSS), which means the net settlement of Albanian lek payments, executed within the territory of Republic of Albania, via banking cards (debit/credit), issued in Albanian lek. The settlement is carried out for net amounts, in the bank accounts that members (banks) holds in the AIPS system.

AIPS and AECH have automated the clearing service provided by the Bank of Albania to commercial banks for processing payments to their clients. The implementation of these systems improvements in the national payments system in terms of increasing speed, reducing cost and security increasing in their processing. Did banks decrease their charges for payments according to the cost reduction?

Despite these initiatives undertaken it seems that the intended effects are not completely materialized and the volume of cash transactions continues to be high. The high level of cash transaction raises concerns to the banks. These concerns are related to the costs associated with handling the cash and with the inefficiency produced by the high level of unused liquidities.


Page 231 of 335

6

1.2. Market/regulatory failure analysis (nature and evidence)

Cash is considered as an expensive and inefficient mean1 of payment. Cash is a payment instrument that is difficult to trace and this property makes it very attractive in the shadow economy.

The currency in circulation makes up to 20% of the M3 aggregate, almost 3 times higher than the weight that this component has in EU member states (aggregate level). The spread usage of cash in the domestic economy in addition to the cultural factors and stage of economic development is linked to the informal economy and maybe to some extend to the limited financial knowledge and trust in the banking system.

In this context, the high level of cash transactions in the banking system could also be considered as a market failure due to the weak market power to identify the proper incentives for non-cash transactions and disincentives for cash transactions and thus to decrease their operational costs.

Although banks raised the issue of the level of cash transactions and of the involved processing costs, except for establishing an electronic payment system, they did not undertake additional actions to decrease the cash volume: cash withdrawals are usually free of charge, ATM and POS network is not too large, non-cash transactions are (highly) charged. Utilities companies did not take any measures to discourage non-cash payments of their bills and the card companies did not take actions to promote cards’ utilization.

Authorities undertook several regulatory actions in order to reduce cash transactions, but an assessment on the effectiveness of the measures taken until now might be too early. Banks’ complains on the high level of cash transactions show that, for the time being, the regulatory interventions still have not generated the desired effects. It seems that companies succeeded to identify ways of “tricking” the regulatory requirements. Therefore, this situation indicates a regulatory failure as the legal actions cannot be considered as very effective.

1.3. Policy Goal(s) threatened by the failure [e.g. financial stability, market integrity, market confidence, consumer protection, facilitating innovation, enhancing

competition]

The market failure described above threatens the innovation promoting and the financial stability policy objectives.

1 The efficiency of the means of payments can be measured by at least one of the following: - the number of coins and banknotes involved. A cash payment between two persons is efficient when the total number of coins and banknotes used – including the change – is the minimum of all possible combinations of the amount of coins and banknotes needed to realize this cash transaction. - the time needed to settle a payment; - the time needed for an additional check on counterfeits.


Page 232 of 335

7

1.4. “Do nothing” option 1.4.1 Possible medium-term (max 2 years) self – corrective market actions (e.g. mechanisms through which the “Do Nothing” option would address the market/regulatory failure). Various governmental institutions in the country have undertaken initiatives to curb the high level of cash in the economy. The scope of the interventions by these institutions has been related to their respective mandate or legislative obligations i.e. Albanian government’s main objective has been to reduce informal economy, one of Bank of Albania’s objectives is to promote the normal function of the payment system.

Due to the actions undertaken by the authorities the level of involvement of the banking system in the payment system of the economy has increased and the level of currency outside the banking system is gradually falling. Despite these developments still the level of cash and cash transactions remains very high, showing that, on one hand, the regulations are not very effective and maybe they should be completed with other regulatory actions, and on another hand that market solutions are needed.

In this landscape the banking community, through is own resources, can compliment the actions undertaken until now and identify alternative routes that will lead to lower cash transactions and higher efficiency.Banks and utility companies could take actions in order to stimulate use of non-cash payments and to raise customers’ awareness on the advantages of using other means of payments.

1.4.2. Impact of the “Do Nothing” option to the various stakeholders -

1.5. Alternative policy option(s) 1.5.1. Broad description of the regulatory or self-regulatory action(s) needed to remedy the market or regulatory failure and hence achieve the policy goal(s)

- To take additional regulatory; - To promote non-cash payments at industry level.

1.5.2. Possible operational regulatory or self-regulatory actions to achieve the policy goal

- to perform a study on the international experience in fighting against cash through regulatory measures;

- to perform a national survey for collecting information on the level and rationale of usage of cash transactions by the consumers and by the business entities;

- to perform a study on the cost generated to banks, consumers and business entities by the use of cash, utilizing the information collected though the surveys;

- to enforce a protocol for an uniform application of the self-regulatory measures; - to run an awareness raising campaign for the public on the benefits of non-cash

payments.

1.5.3. General description of Alternative Options

The approach that can yield faster positive results in the “war” to cash is to promote the


Page 233 of 335

8

application of self regulatory actions by all banking market participants (option 1). On the other side, there might be additional regulatory measures to be undertaken that in other countries proved more effective (option 2). The most effective approach to reduce the level of cash transaction is to combine the self regulatory measures of the banking industry with regulatory measures that not only tack with the effects - high level of cash transactions, but also the root of the problem - informal economy, financial literacy (option 3).

1.5.3.1 Detailed description of Option 1 The volumes of cash transactions within the banking system might be further reduced by the establishment of a common policy among banks that will aim:

a. the reduction of cash transaction by creating disincentives for cash use; combined with b. the increase of non-cash transactions by creating incentives for the costumers to use

alternatives to cash. 1.5.3.2 Detailed description of Option 2 State authorities could identify, based on the international experience, additional regulatory measures such as to cap cash withdrawals, cash payments to state institutions, cash payments in the stores or to provide incentives for non-cash transactions.

1.5.3.3. Detailed description of Option 3 The combination between the regulatory and self regulatory measures to be implemented in and by the banking market, by the utilities and other state owned companies (such as customs) could ensure very good results on short term.

Summary Problem Scoping Auction procedures under foreclosure for immovable collateral

Market failure Asymmetric information

Market power Positive externalities

Negative externalities

X (Existing) Regulatory failure

Regulation wrongly prescribed for the market

Regulations succeeded in addressing the failure; a different market failure (e.g. side effect)

Regulation made it worse

Regulation so far has failed to work; maybe in due course

X


Page 234 of 335

9

Section 2

Summary of impact analysis

2.1. Regulated firms

Quantitative assessment summary results (mln.

EUR)

Costs & Benefits Qualitative assessment

summary results (High, medium, low) First full

year 5 years horizon

One-off X High On going X Medium

Costs

Other Additional Loans X Medium Cost savings/Additional revenues X

High Benefits

Equity relief

2.2. Consumers

Quantitative assessment summary results (mln. EUR)

Costs & Benefits Qualitative assessment

summary results (High, medium, low)

First full year 5 years horizon

Higher risks Higher prices

Lower quality of service

Costs

Others Better Choice X Higher Price reduction

Improved access X

Higher

Benefits

Others

2.3. Regulator and Government Quantitative assessment summary

results (mln. EUR) Costs & Benefits Qualitative

assessment summary results

(High, medium, low)

First full year 5 years horizon

One-off On going

Costs

Direct


Page 235 of 335

10

Indirect Statutory goals Increase income

to the state budget

Benefits

Others

Section 3 Conclusions

1. Problem identification: 2. Proposed regulatory/self-regulatory action: 3. Impact assessment of the action:


Page 236 of 335

1

Attachment

Template of Scoping the problem document

“Scoping of Problem” Document

Project:









Reduced transaction

costs




Industry reputation (tick in a box) Short description of the context [from project matrix]: Stakeholder proposing the project: Other Stakeholders involved (sponsors): Project objectives [from project ToRs]:

Description of the project contribution toward financial modernization [from impact drivers of the projects matrix]:

Project Working Group [composition]:


Page 237 of 335

2


Scoping of problem1. Problem identification To understand if a market/regulatory failure creates the


the regulatory objectives. 3. “Do nothing” option To identify and state the status quo.


Section 1: Scoping the problem

1.1. Problem identification 1.1.1. Background information [Background section from ToRs] 1.1.2. Market Analysis General market: Specific segment: Sub segment:

1.1.3. Legal framework

1.1.4. Stakeholders - Institutional framework

1.2. Market/regulatory failure analysis (nature and evidence)

1.3. Policy Goal(s) threatened by the failure [e.g. financial stability, market integrity, market confidence, consumer protection, facilitating innovation, enhancing

competition]

General Objective:

Specific objective:

Operational objective:


Page 238 of 335

3

1.4. “Do nothing” option

1.4.1 Possible medium-term (max 2 years) se lf – corrective market actions (e.g. mechanisms through which the “Do Nothing” option would address the market/regulatory failure).

1.4.2. Impact of the “Do Nothing” option to the various stakeholders Impact on regulated firms/ banks: Impact on consumers:

1.5. Alternative policy option(s)

1.5.1. Broad description of the regulatory or self-regulatory action(s) needed to remedy the market or regulatory failure and hence achieve the policy goal(s) Option 1: Option 2: Option 3:

1.5.2. Possible operational regulatory or self-regulatory actions to achieve the policy goal Option 1 Option 2 Option 3

1.5.3. General description of Alternative Options

1.5.3.1 Detailed description of Option 1 a.

1.5.3.2 Detailed description of Option 2 1.5.3.3. Detailed description of Option 3


Page 239 of 335

4

Summary Problem Scoping [project name]

Market failure Asymmetric information

Market power Positive externalities

Negative externalities

(Existing) Regulatory failure

Regulation wrongly prescribed for the market

Regulations succeeded in addressing the failure; a different market failure (e.g. side effect)

Regulation made it worse

Regulation so far has failed to work; maybe in due course

(tick in respective boxes)


Page 240 of 335

SPI Albania Secretariat

Anuela Ristani, Director of Operations, [email protected]

Ms. Endrita Xhaferaj, Director of Financial Modernization Program & Analytics, [email protected]

Address: Twin Tower I, Kati 6, Apt. A3. Tirana, Albania. Tel. +355 42 280 359;Fax. + 355 42 280 371

www.spi-albania.eu

Document prepared by Endrita Xhaferaj,

SPI Director of Financial Modernization Program and Analytics

Annex VIII-8

Note

On

The International Experience with Liquidity Risk Management

Content:

Summary ....................................................................................................................... 2

1. International regulations and best practice in managing liquidity risk ......... 2

1.1. Basel Committee on Banking Supervision (BCBS) on liquidity risk

management principles and best practice.................................................................. 2

1.2. EU regulatory framework on liquidity risk................................................... 3

2. National experiences with liquidity risk management ..................................... 3

2.1. Key findings of the WGL’s report on supervising liquidity risk (national

liquidity regimes) ......................................................................................................... 3

2.2. Main findings of the survey of the liquidity regulatory regimes across

European Economic Area (EEA) countries ............................................................... 5

2.2.1. Approach to quantitative requirements .................................................... 5

2.2.2. Approach to qualitative requirements ....................................................... 6

2.2.3. Stress testing and scenario analysis ............................................................ 6

2.3. Comparative table on the international experience on liquidity risk

management.................................................................................................................. 7


Page 241 of 335

2

Summary

Looking at the liquidity risk management in some countries, and based on the review

and survey performed by Working Group on Liquidity set by the Basel Committee on

Banking Supervision and by the European Commission, it is evident that liquidity

regimes have been developed along national lines to support the preservation of the

safety and soundness of each country’s financial system. These objectives for

liquidity supervision are similar across jurisdictions, although there is much diversity

in how they translate into rules and guidelines.

Almost all regimes expect banks to establish and develop effective systems for risk

management, and to document liquidity policies in order to set out the internal

strategy for managing liquidity risk.

These systems, in most cases, include:

- Normative and organizational framework;

- Internal control for liquidity risk management and internal audit of it;

- Management information system;

- Conduction of liquidity stress tests; and

- Contingency plan for managing liquidity of the banks.

Another approach of supervisors to liquidity risk management has been that of setting

quantitative limits in order to constrain the amount of liquidity risk that a bank takes,

and ensure that banks are adequately prepared for stressed conditions. These can be

solely internal limits or targets, or can be prescribed as part of the regulatory

requirements.

Particular attention has been put by supervisors to the identification, recognition and

classification of any position, activity or product, which has influence on the level of

liquidity and the assessment of the liquidity indicators and ratios.

1. International regulations and best practice in managing liquidity risk

1.1. Basel Committee on Banking Supervision (BCBS) on liquidity risk

management principles and best practice

The Basel Committee on Banking Supervision is well known for its work to establish

a regulatory capital framework (Basel I and II), and its work on liquidity has focused

on developing high-level principles of good practice — an approach that the banking

industry has also favored.

A 1992 Basel Committee paper, ―A Framework for Measuring and Managing

Liquidity,‖ first assembled the practices followed by major international banks in one

framework (BCBS, 1992). This was intended primarily as summary guidance for

banks and was largely silent on supervisory standards. In 2000, this paper was

significantly updated in ―Sound Practices for Managing Liquidity in Banking

Organizations,‖ which laid much greater emphasis on liquidity management as a vital

element of banks’ overall risk management practices. Its key elements were also


Page 242 of 335

3

incorporated through a stand-alone principle in the 2006 revision of the Basel ―Core

Principles for Effective Banking Supervision

In December 2006, the Basel Committee on Banking Supervision (BCBS) established

the Working Group on Liquidity (WGL) to review liquidity supervision practices in

member countries.

The WGL also reviewed the 2000 BCBS publication Sound practices for managing

liquidity risk in banking organizations, and issued in September 2008 Principles for

Sound Liquidity Risk Management and Supervision.

Guidance has been significantly expanded in a number of key areas. In particular,

more detailed guidance is provided on:

the importance of establishing a liquidity risk tolerance;

the maintenance of an adequate level of liquidity, including through a

cushion of liquid assets;

the necessity of allocating liquidity costs, benefits and risks to all significant

business activities;

the identification and measurement of the full range of liquidity risks,

including contingent liquidity risks;

the design and use of severe stress test scenarios;

the need for a robust and operational contingency funding plan;

the management of intraday liquidity risk and collateral; and

public disclosure in promoting market discipline.

1.2. EU regulatory framework on liquidity risk

European banks are subject to The Capital Requirements Directive (CRD), which has

introduced in Annex V, point 10 of Directive 2006/48/EC, an explicit requirement for

institutions to have in place:

- policies and procedures for the management of liquidity risk, and

- contingency plans to deal with liquidity crises.

In addition to these guidelines, almost all EU countries have some additional form of

regulation or monitoring addressing liquidity risk, although the range of national

options varies widely. Most if not all national authorities, however, appear to

recognize the Basel Sound Practices for Liquidity.

2. National experiences with liquidity risk management

2.1. Key findings of the WGL’s report on supervising liquidity risk (national

liquidity regimes)

Liquidity regimes are nationally based according to the principle of ―host‖ country

responsibility (although in some cases, the task, though not responsibility, of

supervision of branches is delegated to the home supervisor).


Page 243 of 335

4

The high level objectives for liquidity supervision are similar across jurisdictions,

although there is much diversity in how these objectives translate into rules and

guidelines. In addition, there is a diversity of approach to liquidity supervision within

some countries.

In some jurisdictions, different rules are implemented for large and small banks. For

example, in some countries the regime embodies a more sophisticated approach for

certain large banks, and a more prescriptive approach principally designed for smaller

banks. In another style of regime, the larger banks are required to hold a large buffer

of liquid assets compared to smaller banks, reflecting their systemic importance.

One important differentiating factor across regimes is the extent to which supervisors

prescribe detailed limits on liquidity risk and insurance that banks should hold.

This is in contrast to an approach that relies more on reviewing and strengthening

banks’ internal risk management systems, methods and reports.

In recent years several regimes have placed greater emphasis on banks’ internal risk

management practices to better capture the risks that arise from financial market

innovations.

In general, high-level approaches to supervising liquidity risk are common across

regimes:

– firms are expected to have specific policies to address liquidity risk;

– the use of stress tests is commonplace;

– all regimes recognize the importance of contingency funding plans; and

– all regimes require firms to report information regularly to supervisors.

Firms’ liquidity policies are expected to set out the internal processes in place to

measure, monitor and control liquidity risk. Various regimes require some

combination of the following elements to be included in their policies:

– the need for adequate information systems;

– required processes to assess future cash flows and net funding requirements;

– the importance of specific approaches for the management of foreign currency

flows;

– stress tests;

– the setting of internal limits;

– the need for independent review of internal policies; and

– the need to communicate the policy through the institution.

Some regimes require banks to set internal limits or targets.

These may include:

target holdings of liquid assets

limits on maturity mismatches

limits on the reliance on a particular funding source.


Page 244 of 335

5

These quantitative limits can help to constrain the amount of liquidity risk that a bank

takes, can help to ensure that banks are adequately prepared for stressed conditions or

can serve as early warning indicators of stress or vulnerability.

Several regimes prescribe explicit limits or target ratios as part of the regulatory

requirements.

Examples of ratios:

- for target holdings of liquid assets, the ratio may be (liquid assets / short-term

liabilities > x %).

- for a maturity mismatch the limit may be (cash inflows / cash outflows including

off-balance sheet items > y %).

- a limit on the proportion of liabilities sourced from securitization markets could be

(Asset-backed Securities (ABS) in issue / total liabilities < z %).

Standardized limits are relatively inflexible and hence are not so easily adapted to

changing financial markets, compared to other tools such as stress tests (e.g. some do

not incorporate off-balance sheet risks). In recent years several regimes have lowered

their emphasis on standardized limits. Several WGL members have reported plans to

update such limits in the light of market developments.

2.2. Main findings of the survey of the liquidity regulatory regimes across

European Economic Area (EEA) countries

On 5 March 2007, the European Commission issued a Call for Advice (CfA) (no. 8)

asking the Committee of European Banking Supervisors (CEBS) to provide technical

advice on liquidity risk management at credit institutions and investment firms. The

Call for Advice was split into two parts:

1. an updated survey of the regulatory regimes across the EEA;

2. an in-depth analysis of the variables that may significantly affect liquidity risk

management, the interaction of funding liquidity risk and market liquidity risk, the use

of internal methodologies by sophisticated firms and by credit rating agencies as well

as the impact of payment and settlements systems design and relevant increased

interdependencies.

CEBS was also asked to identify any other areas and problems that appear not to be

adequately addressed by the current regulatory framework at EU level.

2.2.1. Approach to quantitative requirements

The survey performed showed that of the two thirds of countries that set such

requirements, there are various approaches. They range from the application of

mismatch limits (related to the size of the maturity gaps) (11 countries), stock ratios

(related to static indicators such as the size of balance sheet (4 countries), combined

mismatch/stock (5 countries), and separate mismatch and stock applied according to

type of institution (1 country).


Page 245 of 335

6

The remaining third of countries do not set supervisory limits/apply quantitative

requirements per se but nevertheless expect institutions to use their own approaches to

arrive at their assessment of mismatch positions, including allowing for behavioral

factors, which are then subject to supervisory review.

Regarding the assets eligible as marketable/liquid assets, a majority of respondents

have indicated that eligibility requirements/provisions apply to the recognition of

assets. Most supervisors list eligible types of assets whilst a minority applies

also/instead a set of overriding or minimum liquidity criteria, which assets must

satisfy in order to be deemed liquid. All respondents accept cash in hand and freely

convertible foreign currency as eligible assets. In addition to that, there is a large

variety of assets accepted by one or more of the respondents.

There is a range of practices in relation to the mismatch/stock approach, with a third

of countries requiring reports to cover 1 month onwards, and another third requiring

variously from 1 week onwards, 1 month only, and placing the onus on institutions to

use their own approaches.

2.2.2. Approach to Qualitative Requirements

The majority of supervisors require that institutions have a documented liquidity

policy in place, including currency management, contingency arrangements and

internal limits. The remainder of supervisors, whilst not formally requiring a

documented liquidity policy, expects or encourages institutions to have an appropriate

written policy in place. No supervisor indicated that supervisory approval of the

policy is required, with the exception of one country in the context of accepting the

use of an institution’s own procedures under recently introduced regulations.

Several countries, however, encourage or require entities to redefine their policy

where deemed necessary, and almost all review liquidity policies during the course of

examinations and onsite inspections/visits. It is generally accepted that ultimate

responsibility for policy approval rests with the Boards of institutions.

2.2.3. Stress testing and scenario analysis

All countries require institutions regardless of their regimes (quantitative / qualitative

/ mix) to apply stress tests as part of their process of liquidity management. The

majority of supervisors do not set obligatory/explicit scenarios for institutions but

expect them to apply appropriate scenarios based on their own risk profile. Based on

the responses, there is a general expectation that institutions will apply both bank

specific and market wide scenarios.


Page 246 of 335

7

2.3. Comparative table on the international experience on liquidity risk management

Country Serbia Republic of Belarus Poland Romania Slovenia

Criterion

Regulatory

framework

- Law on the National Bank

of Serbia

- Law on Banks

- Decision on liquidity risk

management +

Guidelines for the

implementation of this

decision.

- The Law on the National

Bank of the

Republic of Belarus

- Banking Code of the

Republic of Belarus (Article

113. Bank Liquidity

Standards)

- Banks’ standards –

Instructions on the

requirements to secure

functioning for banks and

non-bank credit and

financial institutions

- Resolution of the

Commission for Banking

Supervision (2007)

―On detailed principles of

the functioning of risk

management and internal

control systems, and

detailed conditions of banks’

assessment of their internal

capital and review of the

process of assessing and

maintaining internal capital‖

Law on banking activity

NBR Norms no. 1/2001 ―On

banks’ liquidity‖ amended

by NBR Norms no. 7/2003,

modified by Norms no.

2/2008

Banking Act

Bank of Slovenia – Regulation

on the Minimum

Requirements for Ensuring an

Adequate Liquidity Position of

Banks and Savings Banks


Page 247 of 335

8


Criterion

Requirement

for banks to set

up a liquidity

risk

management

system

1) to define the

principles of liquidity

risk management;

2) organize liquidity

risk management;

3) establish procedures

for the identification,

measurement,

mitigation and

monitoring of liquidity

risk;

4) establish an

information system in

support of liquidity risk

management;

5) ensure prompt and

adequate response in

the event of increased

liquidity risk;

6) put in place a system

of internal controls for

liquidity management.

In order to provide

financial security for the

bank, and financial

institution, local

regulatory legal acts shall

be developed and

approved by the

competent authorities

(officials) of the bank,

and financial institution.

These legal acts should

provide efficient

management and control

over the liquidity risks,

credit, country, market,

operational risks and

determine the order and

the corresponding

procedures of

identifying, monitoring,

estimating and limiting

risks.

Local regulatory legal

acts should be developed

in accordance with The

Instruction on Banks and

other regulatory legal

acts, regulating the

activity of banks and

financial institutions.

Under the risk management

strategies and procedures the

bank should implement

with regard to liquidity risk:

a) procedures for liquidity

management, taking into

account competence and

responsibility division,

b) liquidity identification,

measurement and monitoring

methods,

c) contingency plans to ensure

undisrupted operations, taking

into account the need to

maintain liquidity in crisis

situations.

Banks have to establish their

strategy for liquidity risk

management that is to be

approved by banks’

management and revised at

least annually or as often as

necessary.

Banks need to have

contingency plan that detail

the strategy in crisis

conditions.

The contingency plans have

to provide the management

responsibilities and the

procedures to be followed

when the contingency plans

are activated and have to

identify the potential liquidity

sources for covering the

liquidity deficits in crisis

conditions.

Banks need to have internal

structures for monitoring and

administering the liquidity

risk.

(1) For the purpose of liquidity

risk management, the bank shall

shape and carry out a policy of

regular liquidity management to

be approved by the bank's

management, encompassing the

following:

1. Planning of anticipated

identified and eventual cash

outflows and sufficient cash

inflows, by taking into account the

normal course of business and

eventual liquidity crisis situations,

2. Regular liquidity monitoring

and management,

3. Definition of appropriate

measures for preventing or

eliminating causes of illiquidity

and definition of other

possibilities for such measures.

(2) The bank shall verify regularly

the correctness and

appropriateness of assumptions

used in establishing liquidity

management policies.

(3) The bank shall adopt a

contingency plan and create

conditions for implementing this

plan in order to prevent or

eliminate the causes of liquidity

crises.


Page 248 of 335

9


Criterion

Liquidity

ratios

– at least 1.0 if

calculated as the

average

liquidity ratio

for all business

days in a month;

– not less than

0.9 for more

than three days

in a row;

– at least 0.8 if

calculated for

one business

day only.

- minimum 0.2 for

momentary liquidity

- minimum 0.7 for current

liquidity (assets /liabilities

with remained maturity

less than 30 days)

- The minimal allowable

value of the short-term

liquidity ratio is set at 1.

- The minimal allowable

value of the minimal

liquid-to-total assets ratio

of a bank and non-banking

financial institution is set

at 20 percent.

- Total negative

mismatches between assets

and liabilities in respect of

maturities uncompensated

by positive gaps in the

preceding periods, is taken

into account with the risk

of simultaneous

withdrawal at a rate of 80

percent, when calculating

required liquidity.

Differentiated ratios:

For banks with assets higher then 200 million (of local

currency):

Short term indicators

- minimum 0 for T1 –Short term liquidity GAP

(difference in first and second degree liquidity reserves

and value of external unstable funds)

- minimum 1 for T2 – Short term liquidity rate (first

degree and supplement liquidity reserves / by external

unstable funds)

Long term indicators:

-minimum 1 for T1 - illiquid assets / own funds – Own

funds (minus capital for market risk) / illiquid assets.

- minimum 1 for T2 – illiquid and partly liquid assets /

own funds and external steady funds – own funds (minus

capital for market risk) and steady external funds / illiquid

and partly liquid assets.

For banks with assets lower then 200 million (of local

currency):

- minimum 0.2 for T1 – first degree and supplementary

liquidity assets / total assets

- minimum 1 for T2 – illiquid assets / own funds

For branches of foreign credit institutions with assets

higher than 200 million (local currency)

- minimum 0 for T1 – short term Gap of liquidity

- minimum 1 for T2 – short term liquidity

For branches of foreign credit institutions with assets

lower than 200 million (local currency)

-minimum 0.2 for T1 – first degree and supplementary

liquid reserves / total of assets

Effective liquidity / necessary

liquidity = 1

for per each bend and in total.

The following time bends are

used:

- up to 1 month inclusive

- 1 -3 months inclusive

- 3 – 6 months inclusive

- 6 -12 months inclusive

- More than 12 months

High liquidity risk towards a

single person is considered

the one that represents at least

10% of the balance liabilities,

other than loans, and of the

off balance sheet financing

commitments issued by bank.

In case the liquidity risk

towards a single person is

more than 15% of the balance

liabilities, other than loans,

and of the off balance sheet

financing commitments

issued by bank, banks will

calculate the necessary

liquidity by registering at

sight balance sheet liabilities

to that person at their

accounting value.

A bank shall

calculate the

liquidity ratio daily

for an individual

category for the

previous working

day.

(4) The category one

liquidity ratio shall

be at least 1.

(5) The category two

liquidity ratio is of

an informative

nature.

(6) If a bank does

not achieve the

requirement set out

in the fourth

paragraph of this

article, it shall state

the reasons for

failure to do so in its

liquidity ratio report.


Page 249 of 335

10

Country Serbia Republic of Belarus Romania Slovenia

Criterion

Definition

and

classification

of assets

according to

their

liquidity

First-degree liquid receivables of

a bank

mean cash and receivables

falling due within a month from

the date of

the liquidity ratio calculation,

including the following:

– vault cash, gyro account

balances, gold and other

precious metals;

– balance on accounts with

banks that have been awarded at

least

BBB by the latest

Standard&Poor’s or Fitch/IBCA

rating or at least Baa3 by

the latest Moody’s rating;

– deposits with the National

Bank of Serbia;

– cheques and other monetary

receivables under collection;

– irrevocable credit facilities

approved to the bank;

– listed shares and bonds.

Other receivables of a bank

falling due within a month from

the calculation of the liquidity

ratio shall be understood as such

bank’s second-degree liquid

receivables.

- Disposable funds,

commodities and jewels,

accounts with National Bank,

Funds in central banks of A

countries, international

financial institutions, securities

of the Government and the

National Bank of the Republic

of Belarus, and governments

and central banks of A

countries, credit lines and

interbank deposits secured by

them in the of the Republic of

Belarus – 100%

- Funds in B countries banks

and securities issued by them,

securities issued by banks of A

countries, credit lines and

interbank deposits secured by

them – 80%

- Funds in C countries central

banks and securities issued by

them, securities issued by

banks of B countries, credit

lines and interbank deposits

secured by them – 50%

- Other assets including

matured once – 0%

- assets for which the bank has

reserved provisions are reported at

their net value (accounting value less

provisions);

- on balance sheet assets at sight

(cash current account with the central

bank, deposits at sight with the

central bank and with banks) will be

registered in the first liquidity bend,

at the accounting value diminished

by eventual provisions;

- other at sight assets such as debit

current accounts and respective

attached receivables will be

registered in the first liquidity bend at

an adjusted value, determined by

applying to the accounting value

diminished by provisions an

adjustment factor (1-k);

- overdue loans and placements to

banks classified as standard and sub-

standard will be arranged in the first

liquidity bend at an adjusted value

obtained by applying to the

accounting value diminished by

provisions an adjustment factor (1-k);

- k is determined reporting the

balance of overdue loans and

placements qualified as ―doubtful‖

and ―loss‖ to the total balance of

loans and placements.

Financial assets are classified by residual maturity

in the following two categories of maturity bands:

(a) category one: financial liabilities with a residual

maturity of up to 30 days, and

(b) category two: financial assets with a residual

maturity of up to 180 days.

Other assets classified (apart from by maturity):

- financial assets to an obligor, rated and impaired:

- individually, only financial assets to obligors for

which no problems are expected in the settlement of

obligations and who settle their obligations at

maturity or with a delay of up to 30 days,

– collectively, only financial assets to obligors

which meet the conditions for classification into

groups A and B pursuant to point 13 of the

Regulation on the Assessment of Losses from Credit

Risk of Banks and Savings Banks,

- only the sum of financial assets that the bank has

freely at its disposal,

- among the off-balance-sheet items, only forward

transactions, contractually obtained credit lines and

the un drawn portion of loans are taken into

consideration.


Page 250 of 335

11

Country Serbia Republic of

Belarus

Romania Slovenia

Criterion

Definition

and

classification

of liabilities

according to

their

liquidity

Bank's liabilities

payable on demand

and with no agreed

maturity shall

constitute a part of

the bank’s liabilities.

They shall be as

follows:

– 40% of demand

deposits by banks;

– 20% of demand

deposits by other

depositors;

– 10% of savings

deposits;

– 5% of guarantees

and other sureties,

and

– 20% of

undisbursed

irrevocable credit

facilities.

Other liabilities of a

bank falling due

within a month after

the calculation of

liquidity ratio shall

be understood as

such bank’s

liabilities with

agreed maturity.

- Balances of

current accounts of

corporations, bank

holdings (deposits),

loans and other

funds of

corporations and

individuals raised

on demand, funds

available on

correspondent

accounts with other

banks – 20%

- Banks holdings

(deposits), loans

and funds with

correspondent

banks (on demand)

– 60%

- Other liabilities,

including the

matured once –

100%

- guarantee liabilities are to

be considered in

determining the effective

liquidity only if they are

irrevocable and

unconditioned;

- at sight liabilities such as

banks’ current accounts and

deposits, clients’ current

accounts and deposits, will

be registered on the first

liquidity bend at an adjusted

value, only if the calculated

value is positive. The

adjusted value is determined

by deducting from the

current balance of each

balance category at the end

of the reported month the

average balance of those

categories for a previous 6

months period. In case the

adjusted value is zero or

negative, these liabilities

will not be considered in

determining the liquidity;

Financial liabilities are classified by residual maturity in the following two categories

of maturity bands:

(a) category one: financial liabilities with a residual maturity of up to 30 days, and

(b) category two: financial liabilities with a residual maturity of up to 180 days

Other liabilities

- sight deposits of households and non-financial companies in category one are given

a weighting of 50%;

- sight deposits of households and non-financial companies in category two are given

a weighting of 45%;

- among off-balance-sheet items the following are taken into consideration:

- forward transactions, open uncovered letters of credit, contractually approved credit

lines for banks and the un-drawn portion of approved loans which are not eligible

financial assets for collateralization of liabilities of the Eurosystem, as defined in the

resolution of the Bank of Slovenia, regulating general rules for monetary policy

implementation, all taken into consideration in the amount of 100%;

– contractually approved credit lines for non-banks, excluding credit lines approved

for covering open letters of credit, are taken into consideration in the amount of 20%;

– warranties issued, guarantees and stand-by letters of credit, and limits approved for

current accounts and cards are taken into consideration according to the residual

maturity in the amount of 5%.

Liabilities pursuant to letters of credit are taken into consideration in an individual

category in the amount of the uncovered portion according to the remaining period of

validity, or according to the residual maturity after the documents are submitted.


Page 251 of 335

12

Country Serbia Romania

Criterion

Notification to the Central

Bank (Supervisor)

If the liquidity of a bank reaches a critical level, the bank shall

notify the National Bank of Serbia thereof not later than on the

following business 4th

day. Such notification shall contain data

on the exact shortfall amount of liquid assets, causes of illiquidity

and the activities planned for their elimination.

Monthly reporting of the liquidity ratios and

of high exposures to liquidity risk.


Page 252 of 335

13

Bibliography

Acts and regulations of Supervisors in countries: Serbia, Belarus, Poland, Romania

and Slovenia.

Basel Committee on Banking Supervision (2008) – Liquidity Risk: Management and

Supervisory Challenges

Basel Committee on Banking Supervision (2008) – Principles for Sound Liquidity

Risk Management and Supervision

Committee of European Banking Supervision (2007) - CEBS’s Technical Advice to

the European Commission on Liquidity Risk Management: Survey of the Current

Regulatory Frameworks Adopted by the EEA Regulators.


Page 253 of 335


Page 254 of 335

SPI Project:

“Reducing Cash Transactions”

Questionnaire on

Costs and Benefits of various means of payments

Prepared by SPI Albania Secretariat

Contact persons: Mrs. Anuela Ristani, Director of Operations, [email protected]

Ms. Elona Bollano, Director of Analytics and Policy, [email protected] Address: Twin Tower I, Kati 6, Apt. A3. Tel. +355 42 280 359; Fax. + 355 42 280 371


Page 255 of 335

wb323932

Text Box

Annex VIII-9

2

I. Context The Albanian authorities have undertaken several legal and administrative initiatives to reduce cash transactions in economy with final objective to shrink the informal economy.

July 2007, was amended the Law on Taxation Procedures in the Republic of Albania that are in line with cash reduction initiative. The upper limit allowed to use cash for the purchase of goods and services was revised downward from 1,000,000 lek to 300,000 lek, but not more than 10% of the total purchases of that fiscal year / tax period. All the acquisitions above this amount should be paid through the banking system.

May 2007 was issued the Decree on minimal reference monthly wage to be used in the computation of the social security, health insurance and tax contributions with the provision that contributions have to be paid to the respective state institutions through the banking system or the post office network.

General Directorate of Taxation is working for modernizing the payment procedures in order to facilitate the non-cash payment of the taxes through the establishment of the on-line payment system and the simplification of the procedures to be followed by the taxpayers.

In 2003 Bank of Albania in collaboration with other institutions initiated a campaign on the reduction of cash usage in economy1. In addition to this campaign, in order to facilitate the interbank payments BoA has established: (i) the Albanian Interbank Payment System (AIPS) that settles systemically important

payments This is a system based on the core RTGS principles; (ii) The Albanian Electronic Clearing House System (AECH), an electronic clearing

system owned and operated by BoA, in which files of bulk (high volume) low value payment instructions are exchanged among banks and other credit institutions after the net positions have been settled through RTGS.

AIPS and AECH have automated the clearing service provided by the Bank of Albania to commercial banks for processing payments to their clients. The implementation of these systems improvements in the national payments system in terms of increasing speed, reducing cost and security increasing in their processing. Despite these initiatives undertaken it seems that the intended effects are not completely materialized and the volume of cash transactions continues to be high. The high level of cash transaction raises concerns to the banks. These concerns are related to the costs associated with handling the cash and with the inefficiency produced by the high level of unused liquidities. SPI Albania is running a project on reducing cash transactions with two objectives:

1. To prepare a protocol on a common policy in respect of the actions and measures to by be undertaken by the banks for reducing the volume of cash transactions.

2. To build consensus among banks in order to sign and implement the protocol. 1 Some of the changes and amendments presented above were identifies during this campaign.


Page 256 of 335

3

PWG composition Project Owner: Oliver Whittle, Raiffeisen Bank Project Manager: Robert Wright, Raiffeisen Bank Deputy Project Manager: Elivar Golemi, Bank of Albania Project Working Group Members: Jonida Vaso, Union Bank

Griselda Cela, Credins Bank Liliana Nanaj, American Bank of Albania Elird Qendro, Mirela Pekmezi, Italian Bank of Development

II. Purpose of the banking survey The purpose of the survey is to assess and quantify the costs associated to various cash transactions, the impact of reducing cash transactions on banks’ profit and loss account and the costs and commissioning level of non-cash payments denominated in Lek. PWG proposed to AAB to sponsor a national wide survey on the causes and costs of cash transactions for consumers and companies. As the proposal was not approved, we are seeking through this bank survey to get your validation on the qualitative cost-benefit analysis and your assessment on the causes determining consumers and companies to use largely cash transactions. The questionnaire is structured as follows:

I. Cost and Benefit Qualitative Analysis on the impact of reducing cash transactions.

II. Questionnaire A. Management of Cash B. Management of non-cash payments C. Network

III. Procedures to run the banking survey You are kindly requested to support the clarification of the above mentioned issues by answering this questionnaire. As the information involves several departments in the bank (Cash management, Payment management, Treasury, Security, Human Resources etc), we suggest you appoint a person that gathers all necessary information from the respective departments. We estimate that filling in the questionnaire would take: For the first section on the Qualitative Analysis 10 – 20 minutes, for the Questionnaire, for the first section on Management of cash about 2 hours, for the second section on Management of non-cash payments about 1 hour and for the section on the Network about 20 minutes. Please send your answers to SPI Secretariat who stands ready to offer you more details.


Page 257 of 335

4

Your answers will be treated in strict confidentiality. The results of the banking survey will be disclosed only at aggregate level Please send your answers by December, XX, 2008. For eventual further clarification needs, please indicate below the contacts of the person who completed the questionnaire: Name…………… Position…………………. Bank………………………. Email address:……………….. Tel/Fax……………….. Thank you for participating in this survey!


Page 258 of 335

IV. Impact of Reducing Cash Transactions - Cost and Benefit Qualitative Analysis The cost-benefit analysis is intending to assess the impact of reducing cash transactions on the banks’ profit and loss account, on the retail sector and companies, on consumers and authorities. Assuming that the total amount of payments does not change, by reducing cash transactions the non-cash payments will increase. Given this, the qualitative analysis refers also to the effect and consequences of increasing non-cash payments. Firms comprise banks, shops, utilities companies and other companies. Authorities refer to those state institutions that have with companies and consumers (tax authorities, customs and other similar) cash transactions and those state institutions that regulate the payment system, Bank of Albania. For the purpose of this survey: • In cash transactions are considered:

- Clients’ cash deposits and cash withdrawals and cash payments for utilities - Bank own cash transactions supporting clients’ transactions

• In non-cash transactions are considered:

- Debit and Credit card pmts - Credit transfers (which can be paper based or electronically - internet/home banking) - Direct debits, Standing orders and Cheques

We would very much appreciate if you could validate our assessments by ticking in the respective boxes2. In case you do not agree with the stated impact/rational, please state there your reasons. Firms/Banks Costs / Benefits

Impact Comments Validation/ Comments

Rejection/ Comments

Costs = Reducing cash transactions with a corresponding shift in the non-cash payments might not have a significant impact on the overall costs

One-off Higher

2 Legend: + increase

- decrease = no effect


Page 259 of 335

6

Costs / Benefits


Rejection/ Comments

Operational + The increase in the non-cash payments might involve the development of new products that would generate additional costs. As the introduction of new non-cash payment instruments might not be related exclusively to the reduction in the cash payments but also to the general development strategy of a bank/company, the impact of the measures reducing cash payments on these expenses are to be taken into account, but their reducing-cash determined level is not too high.

IT & Infrastructure

+ As stated above, some of the expenses with new and more sophisticated products due to the decrease in cash payments might require additional programming and security costs.

Other

+ Other extra costs related to the increased activity in cashless payments, but not too high.

On going Lower Expenses with human resources

= Reducing cash transactions with clients would decrease the staff and time allocated to these activities. At the same time, the generated shift in the non-cash payments might involve more staff allocated to these activities or a better use of the existing staff. The two opposite evolutions might offset each other.

Cash management expenses

- A lower level of cash transactions would decrease the expenses and the uncertainty of cash management, operative cash centers, of collecting and counting money, the transport to/from the BoA, security and counterfeits issues, etc.

Other expenses - By reducing cash transactions, banks might experience decrease in costs with commissions paid to secure liquidity. By increasing the non-cash payments, the commissions paid to BoA/banks would increase. Overall effect could be an offsetting situation.

Losses from cash handling

- The losses out of handling cash would decrease in case the volume and value of cash transactions would decrease.

Benefits Higher Additional products / additional business

+ The decrease in the cash payments and the extensive development of the cashless payments would establish new markets for banks and increase the business activity in existing markets.


Page 260 of 335

7

Costs / Benefits


Rejection/ Comments

The reduction of cash transactions by shops, utilities companies and other firms would determine the important increase in the volume of non-cash payments of the banks.

Income + The eventual decrease in the commissions charged for cash transactions could be offset by the revenues from a higher volume of non-cash payments. By improving the liquidity management of banks and companies, lower amounts of the daily level of cash balance could mean additional placements with (other) banks and BoA and additional income from interest.

Other The reduction of cash transaction will improve the efficiency of the payment system in the banking level and domestic wise level.

Equity

relief = Not the case

Total impact Same costs, more benefits

In the initial period, the development of new product and/or the decrease of commission level for the cash payments would generate costs for firms. While in long run, the improvement of the products and the establishment of new product would increase the business activity and even open new markets generating extensive benefits.

Non Financial Firms – companies and retail sector Costs / Benefits


Rejection/ Comments

Costs =/- Reducing cash transactions with a corresponding shift in the non-cash payments might significant reduce costs and increase the benefit to companies and in the retail sector

One-off Higher Operational + Firms might have some additional costs related to

the acceptance of the new / improved non cash payments such as training the staff, security or others alike. There could be some extra fees to be paid (merchants).

On going Lower


Page 261 of 335

8

Costs / Benefits


Rejection/ Comments

Expenses with human resources

= For firms, the overall impact is likely to be a net reduction in these expenses.

Cash management expenses

- A lower level of cash transactions would decrease the expenses and the uncertainty of cash management. No need to transfer cash to/from the banks (time consuming and commissions to be paid when depositing/withdrawing cash)

Other expenses = This might not be the case of firms other than banks if they do not pay commissions for cash transactions with banks.

Losses from cash handling

- The losses out of handling cash would decrease in case the volume and value of cash transactions would decrease.

Benefits Higher Increase in sales / additional business

+ Cashless pmts allow the consumers to spend more than the cash they possess in a moment of time. For retailers mean higher volume of sales

Better choice + Development of new products would align better the needs and the financial position of the clients with banks’ and other firms’ products and services.

Better choice + Development of new products would align better the needs and the financial position of the clients with banks’ and other firms’ products and services.

Income from interest

+ By improving the liquidity management of companies, lower amounts of the daily level of cash balance could mean additional placements with (other) banks and additional income from interest.

Other + The quality of service might increase for merchants, in terms of processing time and comfort (no need for changes at the time of purchase).

Total impact Same

costs, more benefits

The decline in the lost risks and the reduction in the time spent for cash transactions, as well as more choices and improved access to finance, would have a higher impact on firms than the increase in their costs.


Page 262 of 335

9

Consumers Costs / Benefits Impact Comments

Validation/ Comments

Rejection/ Comments

Costs Lower Higher risks - Risks of theft, lost, counterfeit or damage of the

banknotes would decrease in case of less cash transactions

Higher prices + In case the cash transactions are charged now, the impact could be neutral on the overall costs for consumers. If not, there will be an increase in the prices paid by consumers.

Quality of service

- The quality of service might increase for consumers, in terms of processing time and comfort.

Benefits Higher Better choice + Development of new products would align better

the needs and the financial position of the clients with banks’ and other firms’ products and services.

Price reduction

- Please see above the rationale for higher prices.

Improved access

+ Banks and other firms might design products that fit to a larger share of consumers. The volume of operations run through a banks account might also improve access to the lending products.

Interest income

+ By decreasing cash pmts, higher amounts of the cash balance in the bank account, mean additional deposits with banks and additional income from interest.

Other + The reduction of cash payments will produce time savings for consumers

Total impact Lower costs and higher benefits

The decline in the loss risks and the reduction in the time spent for cash transactions, as well as better choices and improved access to finance, would have a higher impact on consumers than the increase in their costs.

Authorities Costs / Benefits Impact Comments

Validation/ Comments

Rejection/ Comments

Costs Lower One-off + Implementing new means of payments would

bring additional costs for collecting authorities. In case that new regulations or amendments in


Page 263 of 335

10

the legislation would be necessary for this, there are some regulatory costs. The cost increases for BoA would be limited, as the payment systems on large and small payments are already established.

On going Operational

-- The staff, transportation and security costs would decrease for the collecting authorities. The costs of the cash transactions with the state treasury might be unchanged because of offsetting moves in the commissions paid for cash and non-cash operations. In addition to staff, transportation and security, the control costs would decrease for regulating authorities.

Interest expenses

+ Increasing deposits with the banks (decreasing money in circulation) mean increased reserve requirement balances with the central bank, mean increase in interest expense for the central bank. In the overall economy, this expense mean interest income for the banking sector.

Benefits Higher Statutory goals

+ Fulfillment of the statutory goals related to the reduction of informal economy (government). Fulfillment the statutory goals related to the effective functioning of the national payments system (BoA).

Increase income to state budget

+ More business would generate additional revenues in the state budget through tax on income fees for payment system operators.

Other = Total impact Lower

costs and higher benefits

One-off cost would increase, but the ongoing cash related costs would have a significant decrease. Benefits, monetary and non-monetary are increasing.

Summary of CBA of the PWG recommendations for the CPC Stakeholders Costs Benefits Total

Banks No effect Higher Same overall costs & More benefits

Non-financial firms Lower Higher Few initial costs & More benefits

Consumers Lower Higher Some short term costs & long term benefits

Authorities Lower Higher Lower costs & More benefits

Overall economy More benefits Some costs


Page 264 of 335

11

V. Questionnaire The purpose of the survey is to assess and quantify the costs associated to various cash transactions for the period 2006 – 2007, the impact of reducing cash transactions on banks’ profit and loss account and the costs and commissioning level of non-cash payments denominated in Lek. The survey is trying also to get banks’ opinions on their customers’ behavior related to cash transactions. General information – To be answered by the Retail department 1.What is the percentage of clients’ cash transaction in Lek, compared to the total volume

of cash transactions? 2006_______% 2007_______%

2. According to your estimations, what is the cost structure in your bank for clients’ cash

transactions in Lek? Type 2006 (in %) 2007 (in %) Human resources Information technology Security Operational Other (please specify 3.What is the percentage of clients’ non-cash transaction in Lek, compared to the total

volume of clients’ transactions? 2006_______% 2007_______% 4. According to your estimations, what is the cost structure in your bank for clients’ non-

cash transactions in Lek? Type 2006 (in %) 2007 (in %) Human resources Information technology Security Operational Other (please specify

A. Cash Management

Cash transactions envisaged: - clients’ cash deposits and cash withdrawals and cash payments for utilities - bank own cash transactions supporting clients’ transactions


Page 265 of 335

12

A.1. Clients’ cash transactions - To be answered by HR department 1. How many employees do you have working on the cash desks (cashiers) at the bank level? 2006__________ 2007__________ 2. How many operation managers do you have in branches, in total? 2006__________ 2007__________ 3. How many branch managers do you have, in total? 2006______ 2007______ 4. What is the average annual cost (salary and contributions) for: 2006 2007 A cash officer? _________ _________lek An operation manager? _________ _________lek A branch manager? _________ _________lek - To be answered by Cash Management Department 5. How many hours, in average per day, is a cashier handling cash transactions in Lek?

____________ 6. During a normal day, how many hours, in average, does the operation manager dedicates to the management of Lek cash issues? __________ 7. During a normal day, how many hours, in average, does the branch manager dedicates to the management of Lek cash issues? __________ 8.1 Is the customer service staff involved in Lek cash transactions (for checking identities, balances, etc)? Yes__ No__ 8.2 How many hours, in average per day, is a customer service staff involved in cash transactions in Lek? ___________ 9. What was the annual total value of clients’ cash transactions in Lek for 2006 and 2007? Please fill in the table below. Transactions in lek 2006 2007 Cash deposits Cash withdrawals:

Over the counter ATM

10. What are the commissions paid by bank’s clients for the 2006 and 2007? Please fill in the table below, detailed for households and business, if the commissions are different: Transactions in lek Households Business


Page 266 of 335

13

2006 2007 2006 2007 Cash deposits Cash withdrawals:

Over the counter From ATMs

Bank’s client Client from other bank

Payments in cash for utilities – for clients

Payments in cash for utilities – for non-clients

11.1 Do you remunerate your clients’ current account? Yes No 11.2 If Yes, what is the (average) annual interest rate on the current account?

_______2006 _______2007

To be answered by the Retail department ATM network 1. How many ATMs does your bank have? _____________ 2. ATM technical maintenance is done internally or outsourced (please select one of the

options)? a. Internal b. Outsourced c. Only some operations are outsourced

3. How much does it cost to maintain the ATM, if managed? 2006 2007

a. Internally _______ _______ lek b. Outsourced _______ _______ lek c. Outsourcing only some operations _______ _______ lek

4. How much do you pay to the card company? 2006 2007

Annual fee ________ _______lek Per client transaction:

For successful transactions _________ _______lek For unsuccessful transactions _________ _______lek

Per non-client transaction: For successful transactions _________ _______lek For unsuccessful transactions _________ _______lek

A.2. Bank’s own cash transactions (intra banking, inter banking, and bank-Bank of Albania) - To be answered by HR department 1. What is the average annual cost (salary and contributions) for:


Page 267 of 335

14

2006 2007 the treasury specialist? _______ _______lek the Treasury Unit manager? _______ _______lek

- To be answered by Treasury department

2. How many specialists do you have in your Cash Management Unit dealing with cash transactions (front and back office)? 2006______ 2007_______ 3. During a normal day, how many hours does the specialist dedicate to cash transactions in Lek? ______________ 4. During a normal day, how much time does the Unit manager dedicate to the supervision of cash transactions in Lek? ______________ 5. What was the annual total value of cash transactions in Lek of your bank for 2006 and 2007? 2006 2007 Outgoing cash

To the bank account with BoA To other banks

Incoming Cash From cash withdrawals from the account opened with BoA

Out of which, how much was based on an overnight loans taken from BoA

From other banks 6. What was the daily average cash balance in Lek of your bank?

2006 _________ 2007 _________ 7.1 What was the total commission cost of bank’s own cash transactions in lek? 2006 _________ 2007 _________ 7.2 What was the total commission income of bank’s cash transactions in lek? 2006 _________ 2007 _________ 8.1 What was the total cost for bank’s Lek cash purchase from other banks? 2006 _________ 2007 _________ 8.2 What was the total income for bank’s Lek cash sale to other bank? 2006 _________ 2007 _________


Page 268 of 335

15

9. What was the total interest cost of bank’s overnight loans in Bank of Albania, in lek? 2006 _________ 2007 _________ 10. What was the total interest income of bank’s overnight deposits in Bank of Albania, in lek? 2006 _________ 2007 _________ - To be answered by the Security department 11. Is cash transportation done by an internal unit or outsourced (please select one of the options)?

a. Internal b. Outsourced c. Only some operations are outsourced

12.1 In case of an internal management, what are the annual costs for 2006 and 2007 related to:

2006 2007 - Total costs _______ _______ or - Staff _______ _______ - Cars depreciation _______ _______ - Security _______ _______ - Others _______ ________ 12.2 In the case of outsourced services, what was the total yearly amount paid to the transport and security company? 2006________ 2007__________ 13. Has your bank an insurance policy for:

-Covering operational risk for handling cash Yes No - Covering robbery or theft of cash damages Yes No

14. If Yes, how much do you pay for the insurance on: 2006 2007

- Cash _______ _______ - Against robbery or theft _______ _______

15. During 2006 and 2007 have you experienced losses due to the following. If Yes, how much? 2006 2007 - uncovered operational risk for handling cash _____ _____ - losses from cash (such as fake money, mistakes) _____ _____


Page 269 of 335

16

A.3. Consumers’ behavior - To be answered by the Retail department 1. Please give us your assessment on the volume of cash transactions for each of the

following market segments. Please select one of the options below for each of the segments.

(1 uses mostly cash; 2 moderate, uses mainly cash and some cashless service; 3 balanced, uses cash and cashless services; 4 uses mostly cashless services)

A. Households / Individuals 1 2 3 4 Comments ____________________________________ B. Micro business (x capital) 1 2 3 4 Comments ____________________________________ C. Small & Medium enterprises (x capital) 1 2 3 4 Comments ____________________________________ D. Corporate (x capital) 1 2 3 4 Comments ____________________________________ 2. The literature, based on the empirical evidence, has identified reasons why cash is a preferred means of payment. A. Based on your experience, can you confirm the following reasons and indicate the respective importance (from low to high as below) for the Albanian consumers? 1 low importance 2 medium importance 3 high importance

A. Matter of habit Yes No 1 2 3

B. Low perceived costs Yes No 1 2 3

C. Widespread acceptance Yes No 1 2 3

D. Anonymity Yes No 1 2 3

E. Clear perception of the amount at disposal Yes No 1 2 3

F. Clear perception of the amount spent Yes No 1 2 3

G. High level of commissions for cashless payments Yes No 1 2 3


Page 270 of 335

17

H. Limited coverage with POS network Yes No 1 2 3

I. Other _________________ 1 2 3 B. Based on your experience, can you confirm the following reasons and indicate the respective importance (from low to high as below) for the Albanian businesses? 1 low importance 2 medium importance 3 high importance

A. Low perceived costs Yes No 1 2 3 B. Widespread usage Yes No 1 2 3

C. Widespread acceptance Yes No 1 2 3 D. Anonymity / Easy to hide the real activity Yes No 1 2 3 E. High speed of transaction settlement Yes No 1 2 3

F. High level of commissions for cashless payments Yes No 1 2 3

G. Not enough restrictive regulations on cash Yes No 1 2 3

H. Not enough controls from the state authorities Yes No 1 2 3

I. Limited coverage with POS network Yes No 1 2 3

J. Other ____________________ 1 2 3


Page 271 of 335

18

B. Management of cashless payments, denominated in Lek Non cash transactions comprise:

- Credit transfers - Payments cards, - Non cash payments for utilities, - Direct debit, - Standing orders, Cheques.

- To be answered by the Operations department 1. Please state the annual total value of third parties non-cash transactions: 2006 2007 Total

Households Businesses

B. 1. Front office - To be answered by the Human Resources department 1. How many employees do you have working on customers’ service at the bank level?

2006_________ 2007__________ 2. What is the average annual cost (salary and contributions) for 2007a customer service employee?

2006_________ 2007__________ - To be answered by the Operations department 3. How many hours, in average per day, is a customer service employee handling non-cash payment in Lek? ____________ 4. During a normal day, how many hours, in average, does the operation manager dedicate to the management of Lek non-cash payments issues? 2006_________ 2007__________ 5. During a normal day, how many hours, in average, does the branch managers dedicate to the management of Lek non-cash payments issues? 2006_________ 2007__________ B.2. Back office - To be answered by the Operations department 1.How many employees do you have in the back office area in your branches working on

cashless payments in lek? 2006_________ 2007__________


Page 272 of 335

19

2. How many hours, in average per day, is a back office employee in branches handling non-cash payments in Lek?

2006_________ 2007__________ 3. How many hours, in average per day, is a back office employee handling non-cash payments in Lek?

2006_________ 2007__________ - To be answered by the Human Resources department 4. How many employees do you have in the back office area in your head office/processing center working on cashless payments in lek?

2006_________ 2007__________

5. What is the average annual cost (salary and contributions) for: 2006 2007

An employee in the back office of a branch _________ _________lek An employee in the back office of HO _________ _________lek B.3 Product development - To be answered by the Operations department 1. Do you have a product development unit that deals with cashless payments? Yes No (if No, please pass to question 6 below) - To be answered by the Human Resources department 2. How many employees (specialists) do you have working in product development unit – for Lek non-cash payments? 2006_________ 2007________ 3. What is the average annual cost (salary and contributions) for: 2006 2007 a specialist? _________ _________lek an unit manager? _________ _________lek - To be answered by the Operations department 4. How many hours per day in average does such an employee spend in dealing with cashless payment?

2006_________ 2007________ 5. How many hours per day in average does the manager of the Product development unit spend in dealing with non-cash payments?

2006_________ 2007________


Page 273 of 335

20

6. Please fill in the table with the annual number of transactions, total annual value and the average payment commission per value / payment transaction on the following non-cash payments, for 2006 and 2007:

Number of transactions

Total value Lek

Households Businesses

Transaction Fee Transaction Fee Non-cash payments

2006 2007 2006 2007 2006 2007 2006 2007

Credit transfers incoming (please specify the scaled range values if applicable)

Credit transfers outgoing (please specify the scaled range values if applicable)

Direct debits Cards payments

Debit cards Credit cards Other cards (please specify)

Cheques Other (please specify)

6.1 For interbank credit transfers, to whom does your bank apply the commission (please select): When Client Non-client Sender (outgoing) Receiver (incoming) C. Network - To be answered by the Retail department C. 2 POS

1. How many POS does your bank have? _____________

2. Do you apply commissions for your clients (please select): a. To the cardholder


Page 274 of 335

21

b. To the shop (merchant) c. Both

3. If Yes, how much is the commission per transaction (in lek)? 2006 2007

a. Cardholder __________ _________ b. Shop __________ _________

3.1 How much is the monthly commission paid by the merchant, if applicable? 2006__________ 2007 _________

4. For non-clients of your bank , the commission is paid by (please select):

a. The cardholder b. The shop / merchant c. Both

5. How much is the paid commission per transaction, in lek (please select)?

2006 2007 a. Cardholder ________ ________ b. Shop/merchant ________ ________

C. 3. On line services – homebanking 1. Do you provide the homebanking service? Yes No

2. If Yes, since when did you started to provide this service? __________

3. Do you apply a commission for providing this service? Yes No

4. If Yes, what is the level of this commission? 2006___________2007________ 5. What kind of incentives do you offer in order to stimulate the use of this service? ________________________________________________________________________________________________________________________________________________


Page 275 of 335

Attachment

Template of the Cost – Benefit Qualitative Impact assessment

Project:









Reduced transaction

costs


Business development Industry competitiveness

Industry reputation (tick in a box) Short description of the context [from project matrix]: Stakeholder proposing the project: Other Stakeholders involved (sponsors): Project objectives [from project ToRs]:

Description of the project contribution toward financial modernization [from impact drivers of the projects matrix]:

Project Working Group [composition]:


Page 276 of 335

2

The EU Better Regulation Approach

Steps Purpose Analysis of impact



7. Costs to regulated firms and regulator




Regulated firms Impac t Comments Costs One-off Operational

Infrastructure

IT Other On going Human resources Expenses Benefits Additional products / additional business

Cost saving / + revenues Equity relief

Total impact Consumers Impact Comments Costs Higher risks Higher prices Lower quality of service Benefits Better choice Price reduction Improved access Total impact


Page 277 of 335

3

Authorities Impact Comments Costs One-off On going Direct Indirect

Benefits Statutory goals Increase income to state budget Others Total impact Summary of CBA Stakeholders Costs Benefits Total Regulated firms Consumers Authorities Overall economy Legend: + increase

- decrease = no effect


Page 278 of 335


Ms. Endrita Xhaferaj, Director, Financial Modernization Program &Analytics, [email protected] Address: Twin Tower I, Kati 6, Apt. A3. Tirana, Albania. Tel. +355 42 280 359; Fax. + 355 42 280 371

www.spi-albania.eu

SPI Albania Project: Reducing Cash Transactions

Main Findings of the Survey with Banks on Costs and Benefits of various means

of payments 1. Summary findings of the survey and impact assessment

1. Respondent banks represent a large share of the banking market, therefore the results of the survey may be considered as relevant. To a large extent, the findings of this survey can be generalized to the entire banking system1. For some of the questions, the answers were either not relevant or not uniform in order to allow extrapolations, analysis and conclusions.

2. The respondents’ opinion validates the PWG’s cost- benefit qualitative analysis to the extent that the total impact of cash reducing would be net cost savings.

3. Total cash transactions increased by 21% (in real terms) from 2006 to 2007. Cash transactions in Lek remain at a high level in spite of all the measures taken. Cash withdrawals over the counter are around 6 times higher than those from ATM, possible causes being the limitation in amounts for cash withdrawal from ATM, and the lack of commissions on withdrawals over the counter.

4. Cash transactions in foreign currencies have also increased in 2007 compared to 2006, which leads to the conclusion that further measures are to be taken in reducing both cash transactions in Lek and in foreign currency.

5. Human resources costs are the main component of costs related to cash transaction and can be decreased by cash reduction.

6. Banks’ cash transactions are mainly composed by deposits and withdrawals at their accounts with Bank of Albania. Withdrawals from the account with BoA are not commissioned; therefore BoA’s respective costs are not covered.

7. Credit transfers, both incoming and outgoing make up for more than half of clients’ non-cash transactions in Lek and are mostly used for high value transactions. Meanwhile, within different types of non-cash transactions, card payments are the main ones that have increased both in number and value, from 2006 to 2007.

8. Banks do not show to pay particular attention to structures for developing new products. Commissions, often high, are applied to most of cashless payment methods (POS, internet banking), which might be a deterrent to reducing cash transactions. Measures can be taken to improve the network extension of POS devices and lower the commissions applied to non cash transactions.

1 The respondent banks cover different types of operational and ownership structures.


Page 279 of 335

wb323932

Text Box

Annex VIII-10



www.spi-albania.eu

2

9. The respondent banks have assessed that the main reasons for individuals and businesses preference towards cash transactions are anonymity and widespread acceptance of cash payments. Measures can be taken to improve the network extension of POS devices and lower the commissions applied to non cash transactions.

10. Banks suggest also that a decrease in the settlement period as well as more restrictions to cash use might be effective in reducing businesses’ cash transactions.

11. Current losses of banks from clients’ cash withdrawals, as assessed by the impact assessment analysis, amounts to 451.4 million Lek for year 2007.

12. The potential benefits from cash reduction in the first year of application are assessed to be around 3,459 million Lek.

13. The present value of additional benefits to the whole banking system from cash reduction in the 5 upcoming years is assessed to amount to around 13.5 billion Lek.


Page 280 of 335


2. Detailed presentation of the survey findings 2.1. Characteristics of the surveyed sample Conclusion: The respondent banks are only 6 but they represent all three groups (G1, G2 and G3) of small, medium and large banks, and their aggregated market share (taking as reference indicator their total assets) is 59.8 %. Therefore the survey results could be considered relevant and representative of the banking system. Total members of AAB (no.): 16 banks Market Share (100%): 100% Total respondent banks (no.): 6 banks Respondent ratio: 37.5% Market share of the respondent banks: (reference indicator: total assets) 59.8% Size of the respondent banks: small, medium, large Graph 1. Respondent banks by size and market share

0%

10%

20%

30%

40%

50%

60%

G1 G2 G3-

1

2

3

4

Market Share (%) Nr. of respondents The presence of all 3 groups of banks in the respondent banks’ panel is important, since they deal with different amounts and structures of cash transactions, and also have different structures employed to manage cash transactions and related issues. 2.2. The aggregated answers to the questionnaire 2.2.1. Impact of Reducing Cash Transactions - Cost and Benefit Qualitative Analysis

Conclusions:

- The results from the survey validate PWG’s cost-benefit qualitative analysis on the impact of reducing cash transactions, thus few initial costs in the short term, and more long term benefits, for both banks and consumers.

Ms. Endrita Xhaferaj, Director, Financial Modernization Program &Analytics, [email protected]

Address: Twin Tower I, Kati 6, Apt. A3. Tirana, Albania. Tel. +355 42 280 359; Fax. + 355 42 280 371 www.spi-albania.eu

3- In the initial period, the development of new product and/or the decrease of commission level for the cash payments would generate some costs for firms.


Page 281 of 335



www.spi-albania.eu

4

- In the long run, the improvement of the products and the establishment of new product would increase the business activity and even open new markets generating extensive benefits.

Only two of the respondent banks gave their opinion on the qualitative cost-benefit analysis intended to assess the impact of reducing cash transactions on the banks’ profit and loss account, agreeing that the total impact of cash reducing would be net cost savings. 2.2.2. Cash transactions Conclusions:

- The real increase of total cash transaction is around 21% in 2007 compared to 2006.

- There is a high and stable level of clients’ cash transactions in LEK.

- Cash transactions in foreign currencies have increased in 2007 compared to 2006 at a faster pace than those in Lek, which leads to the conclusion that measures are to be taken in reducing both cash transactions in Lek and in foreign currency.

- Cash withdrawals make up for more than half of clients’ cash transactions in Lek. There was a net outflow of cash in both years, with a decreasing trend though.

-Cash withdrawals over the counter are around 6 times higher than those from ATM, mainly because of the limitation in amounts for cash withdrawal from ATM, and because withdrawals over the counter are free of commission charges.

- The cost structure for clients’ cash transactions shows a quite unchanged structure in time with human resources having around 70% of total. Reducing cash transactions should decrease notably the human resources costs.

-Banks’ cash transactions are mainly composed by deposits and withdrawals at their accounts with Bank of Albania. Withdrawals from the account with BoA are not commissioned; therefore BoA’s respective costs are not covered.

- The annual average cash balance in the banks has increased from 2006 to 2007, meaning an increase of missed interest income. 2.2.2.a. Clients’ cash transactions in Lek The percentage of clients’ cash transaction in Lek, compared to the total volume of cash transactions is high, at around 70%, and has not changed much from 2006 to 2007. In spite of the measures taken by the Government, there is still a very high level of cash transactions run by banks’ clients, therefore more regulatory and self – regulatory measures are needed in order to restrain the volume of cash transactions.


Page 282 of 335


Graph 2. Clients’ cash transactions in Lek

Cash transactions in Lek to total cash transactions

0%

10%

20%

30%

40%

50%

60%

70%

80%

2006 2007

2.2.2.a.1. Structure of clients’ cash transactions in Lek Total clients’ cash transactions in Lek increased with 21% in 2007 compared to 2006, meaning a real increase in the volume of clients’ cash transactions in Lek of 17%, taking in consideration inflation in 2007. Graph 3. Clients’ cash transactions in Lek (in mln Lek)

In mln Lek0

200,000

400,000600,000

800,000

1,000,000

1,200,000

Total clients’ cash transactionsin Lek

895,587 1,085,673

Cash deposits 389,385 493,850

Cash withdrawals: 506,202 591,823

2006 2007

Both cash deposits and cash withdrawals have increased in 2007 compared to 2006. Figures show also a net outflow of cash (withdrawals higher than deposits) of Lek 116,817 in 2006 and Lek 97,973 in 2007, evidencing a decreasing trend (19% lower in 2007 compared to 2006). Cash withdrawals made up for 57% of total cash transactions in Lek in 2006 and 55% in 20072. The vast majority of cash withdrawals are performed over the counter in both 2006 and 2007 (87% and 86% respectively). Graph 4. Composition of Cash transactions in Lek



52 There was noted a difference in the value range for cash deposit between these data (extrapolated based on received answers) and BoA statistics for 2008.


Page 283 of 335


2006

ATM13%

Cash withdraw

als57%

Cash deposits

43%

Over the counter

87%

2007

ATM14%

Cash withdraw

als55%

Cash deposits

45%

Over the counter

86%

Although the percentages of withdrawals from ATM are higher in 2007, the increase is only by 1 point of percentage, against a 17 per cent increase of total cash withdrawals. Using total clients’ cash transactions in Lek and data on the percentages of clients’ cash transactions in Lek to the total volume of cash transactions, we can calculate the composition of the latter as follows: Table 1. Total clients’ cash transactions, by type of currency (In mln Lek) 2006 2007 Clients’ cash transactions in lek 895,587 1,085,673 Clients’ cash transactions in Foreign currency 370,451 488,907 Total clients’ cash transactions 1,266,038 1,574,580

Graph 5. Composition of clients’ cash transactions by type of currency

2006 71%29%

69%31%

Clients’ cashtransactions inLek

Clients’ cashtransactions inForeign currency

2007

Considering the inflation rate in year 2007, as well as Lek overvaluation on foreign currencies for that year, we can see that the real increase of total cash transaction is around 21%. Cash transactions in foreign currencies have increased at a faster pace than those in Lek, which leads to the conclusion that measures are to be taken in reducing both cash transactions in Lek and in foreign currency. Table 2. Total clients’ cash transactions, by type of currency

(In mln Lek) 2006 2007 Nominal change

Real change

Clients’ cash transactions in lek 895,587 1,085,673 21% 17% Clients’ cash transactions in Foreign currency 370,451 488,907 32% 30%

Total clients’ cash transactions 1,266,038 1,574,580 24% 21%



6


Page 284 of 335


2.2.2.a.2. Costs of clients’ cash transactions in Lek 2.2.2.a.2.i. Cost structure for clients’ cash transactions in Lek



7

Banks were asked to provide estimates on the cost structure for cash and for non-cash transactions in Lek as follows. Graph 6. Average cost structure for clients’ cash transactions

2006 69%

8%8%15%

2007 72%

7%8%13%

Human Resources IT Security Operational

The cost structure shows a majority of human resources costs, of around 70% of total costs, and this rate has increased from year to year. Obviously, by reducing cash transactions, the banks’ human resources costs will decrease. 2.2.2.a.2.ii. Costs with human resources The banks’ staff dealing directly with clients’ cash transactions, in all three categories of personnel at the branch level, has increased from 2006 to 2007, especially cashiers, whose number has risen around 34% within one year, generating more expenses to the banks. Taking in consideration the inflation during 2007, there is no real increase in the average salary for none of the positions. Table 3. Number of cashiers, operations managers, and branch managers

In thousands Lek Cashiers Operations Managers

Branch Managers

2006 2007 2006 2007 2006 2007 Total (for 60% of the market) 346 463 40 54 129 169 Extrapolated for the whole System 577 772 67 90 216 283 Average Annual Cost/staff (in thousand Lek)

603 617 1,141 1,155 1,361 1,425

Average hours per day handling cash in Lek /staff

5.7 2.9 2.3

The cashiers spent, in average, the largest part of their day handling cash transactions in Lek, which shows again the large load of Lek cash transaction in the daily average of transactions. Therefore, a reduction in cash transactions would impact mostly cashiers, which make up for 14-15% of the total of banks employees, creating the possibility to create more jobs for other products selling.


Page 285 of 335



www.spi-albania.eu

8

Table 4. Number and percentage of cashiers to total banks’ employees 2006 2007 Cashiers 577 772 Total Banks' employees3 4,189 5,155 Cashiers to total employees 14% 15%

Operations and Branch Managers dedicate in average 2-3 hours to the management of Lek cash issues, and most of banks do not have customer service involved in cash transactions. If cash transactions would be reduced, operational and branch managers would have more time to develop cashless transactions, to improve service quality or to increase sales. Taking in consideration data from the above tables we have estimated the total costs for human resources related to cash transaction in years 2006 and 2007, using the full time equivalent for the hours each category of employees spend on cash transactions. Table 5. Total salary costs with clients’ cash transactions in Lek at system level

2006 2007 Cashiers Operational

Managers Branch

Managers Cashiers Operational Managers

Branch Managers

FTE4 156.75 79.75 63.25 156.75 79.75 63.25 Average annual cost with cash transactions in Lek/staff (in thousand Lek)

429 414 391 440 419 410

Total annual staff cost with cash transactions in Lek at system level (in thousand Lek)

359,925 493,249

EUR equivalent (in thousands EUR)

2,924.3 3,989.2

2.2.2.a.2.iii. Other cost categories Using the data on the structure of costs with clients’ cash transactions and the estimated data on the human resource costs, the figures for the other categories of costs can be calculated: Table 6. Total costs for clients’ cash transactions

2006 2007 In thousands Lek EUR Lek EUR Human Resources 359,925 2,924 493,249 3,989 IT 40,662 330 46,050 372 Security 44,072 358 51,849 419 Operational 80,012 650 91,418 739 Total costs 524,672 4,262 682,567 5,520

3 Bank of Albania’s statistics 4 FTE – Full Time Equivalent (8 hours/day)


Page 286 of 335



www.spi-albania.eu

9

2.2.2.a.3. Other information on cash management costs 2.2.2. a.3.i. Costs with cash transportation Cash transportation is outsourced in 4 of the respondent banks (with 17% of market share, while only some operations are outsourced in the other 2 (with 43% of market share). All banks have reported the following annual costs for either totally or partly outsourced services of transport and security for 2006 and 2007 as follows: Table 7. Cash transportation costs 2006 2007 Total transport and security costs (6 banks, in mln Lek) 123 146 Total clients’ transactions in Lek (6 banks, in mln Lek) 537,352 651,404Average rate per million clients’ cash transaction (Lek) 229.3 223.4 Total clients’ and banks’ transactions in Lek (6 banks, in mln Lek) 640,701 746,846

Average rate per million of total cash transactions (Lek) 192.3 194.8 2.2.2.a.3.ii. Insurance costs for cash Most of the banks have an insurance policy covering both operational risk for handling cash and robbery or theft of cash damages. Furthermore, between 2006 and 2007, there are reported losses from cash (such as fake money, mistakes, etc) that altogether with the processing, handling, and transportation, add to the costs caused by cash transactions. Based on the data provided by 2 banks, the loss rate was of about 0.008 Lek for a thousand Lek transaction in 2006 and of about 0.012 Lek for a thousand Lek transaction in 2007. This could lead to the conclusion that, at the banking system level, the losses from cash transactions might have been of around 9 million Lek in 2006 and of around 14 million Lek in 2007 (in case the non-response by the other banks is due to the lack of evidence and not to the non-occurrence of such events). A reduction in cash transactions and in the amount of cash to be handled on daily basis would bring a decrease in all the above mentioned costs. 2.2.2. a.4. ATM Network The total number of ATM terminals provided by banks, at the end of 2007 was 443, 43% higher than in 2006. It is to be noted that the in spite of the 43% increase in the number of ATMs, the value of cash withdrawals through ATMs has increased only by 24%, thus not at the same pace. In fact the average cash withdrawal per ATM, derived by the data on the total system, has fallen by 13%. Table 8. ATM terminals and transactions 2006 2007 Nr. of ATM terminals provided by the banks 309 443 Total cash withdrawals through ATMs (in mln Lek) 66,037 82,132


Page 287 of 335


Average annual withdrawal per ATM (in mln Lek) 213.7 185.4 Half of the respondent banks (45% of market share) use a totally outsourced ATM technical maintenance, and in the other half (15% market share) only some maintenance operations are outsourced. 2.2.2.a.5. Benefits from clients’ cash transactions in Lek The information given by 3 of the respondent banks on commissions paid by banks’ clients in 2006 and 2007 is not sufficient to derive proper results on the rates of commissions applied on cash deposits and withdrawals. However, it is reported that there are no commissions paid by customers on cash withdrawals over the counter, which gives them an incentive to perform cash transactions rather than cashless ones. Banks might consider changing the commission policy with the perspective to increase withdrawals from ATMs and decrease the work of cashiers. Only 2 out of 6 respondent banks (32% market share) report to remunerate their clients’ current account, and the average annual interest rate used is around 0.3% for 2006 and 0.2% for 2007. 2.2.2.b. Banks’ cash transactions in Lek Banks’ transactions in Lek have not changed much from 2006 to 2007. They are estimated at around 230 billion Lek in 2007, with 4% increase from 2006. Graph 7. Banks’ cash transactions in Lek

-

0

0

0

0

0

2006 2007

Mill

ions

of L

ek

Incoming CashOutgoing cash

2.2.2.a.1. Structure of banks’ cash transactions in Lek Main banks’ cash transactions in Lek are cash deposits with and cash withdrawals from their account with Bank of Albania. Selling and buying cash between banks does not seem to have an important role in the banks’ own cash transactions. Actually banks do not pay any commissions to Bank of Albania for cash withdrawals or deposits. BoA should start charging commissions to cash transactions, which could



10


Page 288 of 335



www.spi-albania.eu

11

be the benchmark for a change in banks’ commissioning policy for clients’ cash transactions in Lek. Table 9 .Composition of banks’ cash transactions in Lek (at system level) (In mln Lek) 2006 2007 Outgoing cash 96,918 118,813

To the bank account with BoA5 95,950 118,111

To other banks 968 702 Incoming Cash 124,692 111,079 From cash withdrawals from the account opened with BoA6

123,090 108,164

From other banks 1,602 2,915 2.2.2.b.2. Costs of banks’ cash transactions in Lek The banks’ staff dealing with banks’ cash transactions, in the treasury unit has increased in number and average annual costs to the bank (in terms of salary and benefits). The specialists at the treasury unit spent more than half of their working day handling cash issues, therefore reducing cash transactions would give the possibility to re-direct their activities to other transactions. Table 10. Number of Treasury Unit specialist and managers, and total salary costs with cash transactions in Lek at the banking system level (FTE).

In thousands of Lek Treasury specialist

Treasury Unit manager7

2006 2007 2006 2007 Total (for 60% of the market) 7 10 Extrapolated for the whole System 18 25 Average Annual Cost 677 778 1,195 1,519 Average hours per day handling cash 5.2 2.7 FTE 143.00 74.25 Average annual cost with cash transactions in Lek

440 506 403 513

Total annual cost with cash transactions in Lek

7,922 12,640

On the total commission cost and income of banks’ own cash transactions in Lek there were only 2 responses and the data provided were not relevant to the banking system level. The data provided and estimation on the whole system, show that there were more than 3 billion Lek average cash balance in the system in years 2006 and 2007. Table 11. The daily average cash balance in Lek In mln Lek 2006 2007 Total (6 banks, 60% market share) 1,927 2,088 Total System (extrapolated) 3,211 3,480

5 Bank of Albania statistics 6 Bank of Albania statistics 7 There is no information from the respondent banks on the number of Treasury Units Managers.


Page 289 of 335



www.spi-albania.eu

12

Interest rate of overnight deposits 3.39% 3.97% Total missed interest income 108.9 138.2

On the question on total interest cost of banks’ overnight loans with Bank of Albania, in Lek, there was only one response from one bank, and it can not be relevant to draw conclusions. However, the average interest rate applied by Bank of Albania on overnight loans was 6.89% in year 2006 and 7.47% in 20078. 2.2.3. Non cash transactions

Conclusions:

- Clients’ non-cash transactions in Lek have slightly decreased from 2006 to 2007.

- Credit transfers, both incoming and outgoing, make up for more than half of clients’ non-cash transactions in Lek and are mostly used for high value transactions.

- Within the different types of non-cash transactions, card payments are the main ones that have increased both in number and value, from 2006 to 2007.

- Direct debit is the less spread type of non-cash payment.

- In the cost structure for clients’ non-cash transactions, IT costs have a higher weight, while HR costs a lower one compared to cash transactions cost structure.

- Banks do not show to pay particular attention to developing new products in payments area (with specific structures).

- Some banks apply commissions on POS use to shops and the cardholder which might be a deterrent to cashless methods of payments.

- Internet banking is used for payments in large amounts and the commissions are still high. 2.2.3.a. Clients’ non-cash transactions in Lek The percentage of clients’ non-cash transactions in Lek in the total volume of clients’ non-cash transactions is lower than the same rate for cash transaction, at around 50% and fairly stable in time. Graph 8. Clients’ non-cash transactions in Lek

8 Bank of Albania statistics


Page 290 of 335


0%

10%

20%

30%

40%

50%

60%

2006 2007Non - cash transactions in Lek to total non - cash transactions

2.2.3.b. Structure of clients’ non-cash transactions in Lek From the reports from 6 banks on non-cash transactions in Lek, data were extrapolated for the whole system as in the following table. There were no complete data on each type of cards payments, and data on commissions paid for each type were not uniform and could not be used to come up with results. Within the different types of non-cash transactions, card payments are the main ones that have increased both in number and value, from 2006 to 2007. Table 12. Number, value and average amount of clients’ non-cash transactions

Number of non-cash transactions

Value of non-cash transactions,

in mln Lek

Average value of non-cash transactions, in

Lek

2006 2007 2006 2007 2006 2007

Credit transfers incoming 40,690 23,550 54,520 99,209 1,339,887 4,212,696

Credit transfers outgoing 60,368 34,918 57,654 91,614 955,042 2,623,690

Direct debits 10,713 12,133 36 74 3,360 6,099

Cards payments 5,599,368 6,708,940 52,240 65,087 9,330 9,702

Cheques 6,358 4,437 2,661 1,573 418,528 354,519 Largest part of the value of non-transaction payments is composed by incoming and outgoing credit transfers. The graph below shows that instruments such as direct debits are almost not developed at all, while use of cheques is decreasing. Graph 9. Value of non-cash transactions in Lek, by type of transaction



13


Page 291 of 335


200633%

34%

0%

31%

2%

2007 38%

36%

0%

25%

1%

Credit transfers incoming Credit transfers outgoing Direct debitsCards payments Cheques

Cards payments are the most used non cash payments for small value transactions (used more by individuals). Credit transfers are the most used non cash payments for higher value transactions (used more by businesses). 2.2.3.c. Cost structure for non - cash transactions The structure of costs related to non-cash transactions differs form that of cash transactions mainly regarding human resources and IT costs. Obviously, IT costs have a higher weight on non-cash transaction costs than in cash transactions ones.



14

However, they show a decreasing tendency form 2006 to 2007 (24% and 20% of total costs, respectively. Graph 10. Average cost structure for clients’ cash transactions

200643%

24%10%

23%

200746%

20%10%

24%

Human Resources IT Security Operational

Human resources costs have a proportion of 24-25 percentage points lower on costs related to non cash transactions than on costs related to cash transactions. 2.2.3.d. Product development As of end of 2007, there was only one out of 6 respondent banks having a product development unit that deals with cashless payments, with only one employee who spends all working time in dealing with cashless payments.


Page 292 of 335



www.spi-albania.eu

15

Considering the responses, banks do not pay enough attention to developing new products in order to increase cashless transactions. 2.2.3.e. POS network The total number of POS devices provided by banks, at the end of 2007 was 1832, 48% higher than in 2006, when the total number of POS’ was 1234. At the end of year 2008, the total number of POS’ was 29539, or 61.2% higher, which shows the increasing trend of the number of POS devices during the last years. From the total number of POS devices provided by banks at the end of 2008, around 77 % are located in Tirana and some other regions around Tirana10. Most of the banks apply commissions for the merchant that uses the POS at the shop and some banks also for the cardholder. Applying such commissions to the cardholder is a deterrent to the expansion of cashless methods of payments, and measures should be taken to avoid them. 2.2.3.f. On line services – home banking 4 out of the 6 respondent banks (representing 29% of the market share), were providing online services by the end of year 2007 or have started doing so in 2008. The online banking has been initiated since year 1999, and all the providing respondents report to apply a commission for this service. The figures for Internet Banking transactions performed in the entire banking system11 are shown in the table below, and evidence an increase in both number and value of transactions. Table 13. Internet / Home Banking statistics 2006 2007 2008 Nr. of transactions 19,096 42,447 88,261 Value of transactions (mln. ALL) 16,830 48,490 104,880 Average value for one payment (ALL) 881,336 1,142,366 1,188,294

However, evidently, internet banking is used for payments in large amounts and the commissions are still high. There are not reported incentives offered in order to stimulate the use of this service, only different marketing campaigns used to promote it. 2.2.4. Consumers’ behavior

Conclusions:

- The respondent banks have assessed that the volume of cash transactions decreases evidently from individuals to corporate.

9 Bank of Albania’s statistics. 10Bank of Albania’s statistics. The allocation of POS devices was referred to the BoA branches location 11 Bank of Albania’s statistics.


Page 293 of 335



www.spi-albania.eu

16

- Anonymity and widespread acceptance of cash payments make cash transactions most preferred for both individuals and businesses.

- Measures can be taken to improve the network extension of POS devices and lower the commissions applied to non cash transactions.

- Banks suggest also that a decrease in the settlement period as well as more restrictions to cash use might be effective in reducing businesses’ cash transactions. 2.2.4.a. Use of cash and cashless payments According to banks’ opinions, individuals and micro businesses tend to have the highest level of cash transaction and use very few or none cashless services. In larger enterprises there is a higher level of non cash transactions, but still to a limited extent. Table 14. Use of cash and cashless payments

Total responses

1 2 3 4 Average

level of use Households / Individuals 5 2 3 1.6 Micro businesses 5 3 2 1.4 Small&Medium enterprises 5 1 2 2 2.2 Corporate 5 3 2 3.4

(1 uses mostly cash; 2 moderate, uses mainly cash and some cashless service; 3 balanced, uses cash and cashless services; 4 uses mostly cashless services) 2.2.4.b. Reasons for cash preference by individuals The banks’ experience shows that the main reason for cash being a preferred means of payment for the Albanian consumers is that individuals wish to preserve their anonymity. The widespread acceptance of cash as a payment method is another important factor that makes it the preferred method. Of medium importance are factors like the limited network of POS devices, and the high level of commissions charged. Table 15. Reasons for cash preference by individuals

Total responses

1 2 3 Avg. level of importance

Limited coverage with POS network 5 1 2 2 2.2 Anonymity 5 1 4 2.8 Widespread acceptance 5 2 3 2.6 Low perceived costs 4 1 2 1 2 Clear perception of the amount at disposal 5 1 3 1 2

Matter of habit 5 3 2 1.8 Clear perception of the amount spent 5 1 4 1.8 High level of commissions for cashless payments 4 2 1 1 1.8

(1 low importance, 2 medium importance, 3 high importance) 2.2.4.c. Reasons for cash preference by businesses


Page 294 of 335



www.spi-albania.eu

17

Main reasons for cash preference remain the same for businesses as for individuals, emphasizing their tendency o hide their real activity. Also, for businesses a very important factor is the high speed of transaction settlement. In spite of the measures undertaken recently by the Government, there are still not enough restrictive regulations on cash, and this seems to be of medium to high importance to businesses, together with the low perceived costs of cash and limited coverage with POS network. Table 16. Reasons for cash preference by businesses

Total responses

1 2 3 Avg. level of importance

Widespread usage 5 1 4 2.8 Anonymity / Easy to hide the real activity 5 1 4 2.8

High speed of transaction settlement 5 2 3 2.6 Low perceived costs 5 3 2 2.4 Widespread acceptance 5 3 2 2.4 Not enough restrictive regulations on cash 5 1 1 3 2.4

Limited coverage with POS network 5 3 2 2.4 High level of commissions for cashless payments 4 1 2 1 2

Not enough controls from the state authorities 5 1 3 1 2

(1 low importance 2 medium importance 3 high importance)


Page 295 of 335



www.spi-albania.eu

18

3. Summary of the Impact Assessment Analysis 3.1. Current situation The quantitative impact assessment analysis aimed at assessing the economic impact of reducing cash transactions on banks’ balance sheet and income statements. Estimations of costs and losses produced by the maintaining the current situation are presented in the following table. Table 17. Current situation of loss from banks cash transactions Costs of cash transactions at the banking system level per year: (in mln Lek) 2007

- personnel costs 493 - security & transportation 143 - others 46 - lost income coming from non – placed sources 138 Total annual costs at the banking system level 821

% of cash deposits 45%

% of cash withdrawals 55% Total annual costs for cash withdrawals at the banking system level 451.4 Total income from withdrawals at the banking system level -

Net annual loss with cash withdrawals at the banking system level -451.4 Under the current situation, the total annual net loss at the banking system level from cash withdrawals are of about Lek 451 million, respective EUR 3.7 million. 3.1. Impact of cash transactions reduction on the banks’ financial statements The impact of reducing cash on banks’ financial statements was measured based on a scenario analysis, using the following assumptions:

1. the total volume of clients’ cash transactions reduces by 20%; 2. the current structure of cash deposits and withdrawals in total clients’ cash

transactions is preserved; 3. a decrease of 20% of clients’ cash transactions is due entirely to withdrawals; 4. 50% of the decrease in the clients’ cash withdrawals leads to an increase of

clients’ deposits (59,182 mln Lek); 5. out of the additional deposits, 10% will be deposited with the central bank as

a corresponding increase in the minimum reserve requirements; 6. the rest of the additional deposits is used half in short term loans to customers

and half in interbank deposits (we assume that none of this goes to trading securities);

7. a decrease by 20% of the client’s cash withdrawal leads to a decrease by 20% (21.682 mln Lek) in the banks’ withdrawals from BoA;

8. a decrease by 20% in clients’ cash withdrawals determines a decrease of 20% in total personnel expenses (at branch level and at HO level) at the banking system level;


Page 296 of 335



www.spi-albania.eu

19

9. a decrease by 20% in clients’ cash withdrawals determines a decrease of 20% in total administrative expenses;

10. A decrease by 20% in clients’ cash withdrawals determines a decrease of 20% in total expenses.

With such assumptions the effect on the banks’ balance sheets and on banks’ profit and loss account, at the banking system level, in the first year of application of the reduction in cash transactions with 20%, is described in the bellow tables: Table 18. Impact of reducing cash transactions on banks’ balance sheet, in mln Lek, in the first year of reducing cash transactions by 20%, at the banking system level

ASSETS Additional amount

LIABILITIES Additional amount

+ Customer loans 26,632 + Customer Deposits 59,182 Other Loans Banks Deposits + Total Customer Loans 26,632 + Total Deposits 59,182 Problem Loans Money market funding Other non-performing

Loans Other Negotiable

Instruments

Total Problem Loans Total Money Market Funding

Total Loans + Minimum Reserves

with BoA 5,918 Other Funding

+ Due from Other Banks 26,632 Other Bonds

Other Securities Subordinated Debt Investment Securities Other Funding Trading Securities Total Other Funding Total Securities Non-earning Assets Loan Loss and Other

Reserves

- Cash and Due from Banks

Other Non Equity Reserves

Intangible Assets Total Loan Loss & Other Reserves

Other Non-earning Assets

Total Non-earning Assets

Other liabilities

Fixed Assets Total Liabilities

59,182 Total Fixed Assets Equity Reserves Total Assets 59,182 Retained Earnings Other Equity Reserves Minority Interests Total Equity Reserves


Page 297 of 335



www.spi-albania.eu

20

Table 19. Impact of reducing clients’ cash transactions on the banks’ income statements, in the first year of reducing cash transactions by 20%, at the banking system level

INCOME STATEMENT ITEMS

Explanations Additional

amount

+ Interest Income From additional loans and deposits with other banks 4,180.1

- Interest Expense For additional customer deposits 473.5 Net Interest revenue 3,706.7

+ Commission Income

As cash transactions over the counter are not charged – no impact on income As cash withdrawals from ATMs are charged – a decrease in this commission (but not significant, having in mind the low percentage)

- Commission Expense As cash bought/sold from/to banks is not significant, we consider only the commission paid to BoA for cash withdrawals and deposits.

Net Commission Revenue

0

Net Trading Income

Other Operating Income

Total Operating Income

- Personnel Expenses Less personnel involved in cash management

-98.7

- Other Administrative Expenses

Less expenses with cash management (overheads, for example)

- Other Operating Expenses

Less expenses with cash management: security, transportation

-38.0

Loan Loss Provisions Other Provisions

- Total Operating Expense

-136.60

Non-operating Income

Pre-Tax Profit 3,843.3 Taxes 384.3 Post-Tax Profit 3,458.9

The present value of additional benefits to the whole banking system from cash reduction in the 5 upcoming years is assessed to amount to around 13.5 billion Lek.


Page 298 of 335

1

Attachment

Template of the Report on the findings of the survey

SPI Project:

1. Summary findings of the survey and impact assessment [synthesis of the main conclusions] 2. Detailed presentation of the survey findings 2.1. Characteristics of the surveyed sample Conclusion: [on the relevance of the answers] Total number of banks: Aggregated Market Share: (100%) Total respondent banks (no.): Respondent ratio: Aggregated market share of the respondent banks: (reference indicator: total assets) Size of the respondent banks: small, medium, large [graphs] 2.2. The aggregated answers to the questionnaire 2.2.1. Cost and Benefit Qualitative Analysis

Conclusions: Details 2.2.2. Cost and Benefit Quantitative Analysis Conclusions: For each question:

Conclusions Details on answers, tables, graphs Interpretations Correlations


Page 299 of 335


Page 300 of 335

1

Annex VIII-11

SPI Project

Final Project Working Group Recommendations

Available at: http://www.spi-

albania.eu/admin/js/filemanager/files/web/2009program/liquidity/SPI%20Albania%2

0Project%20on%20Liquidity%20Risk%20Management%20-

%20PWG%20Recommendations(11[1][1].08.09).pdf

Project information


Italian Banking

Association

CRITERIA


Asymmetric

information

reduction

Completeness

of the market

Increased

opportunities

to engage in

financial

transactions

Reduced

transaction

costs

Increased

competition

Business

development

Industry

competitiveness

Industry

reputation

Short description of the context:

Stakeholder proposing the project:

Other Stakeholders involved (sponsors):

Project objectives:

Description of the project contribution toward financial modernization:


Project Owner:

Project Manager:

Co- Project Manager:

Project Working Group Members:

PWG Meetings:

1st meeting – [date]; Output:

2nd

meeting – [date]; Output:

3rd


4th


Contributions:

PWG members: [documents and activities]

SPI Secretariat: [documents and activities]


Page 301 of 335

http://www.spi-albania.eu/admin/js/filemanager/files/web/2009program/liquidity/SPI%20Albania%20Project%20on%20Liquidity%20Risk%20Management%20-%20PWG%20Recommendations(11%5b1%5d%5b1%5d.08.09).pdf




http://www.spi-albania.eu/admin/js/filemanager/files/web/2008program/projects/cashtransiction/00%20SPI_Albania_CASH_first_meeting_minutes.pdf

http://www.spi-albania.eu/admin/js/filemanager/files/web/2008program/projects/cashtransiction/secondmeeting/00_SPI_Albania_CASH_Second_meeting_minutes_Draft.pdf

http://www.spi-albania.eu/admin/js/filemanager/files/web/2008program/projects/cashtransiction/thirdmeeting/01%20SPI%20Albania%20CASH%20Third%20meeting%20minutes.pdf

http://www.spi-albania.eu/admin/js/filemanager/files/web/2008program/projects/cashtransiction/fourthmeeting/01%20SPI%20Albania%20Cash%20Transactions%20Fourth%20Meeting%20minutes.pdf

2

Other Supportive Activities:

Date: [description of activity]

Methodology: EU Better Regulation (Annex 8)

1. Summary of PWG analysis

2. PWG recommendations

2.1. Proposals for regulatory measures to be taken by the public institutions

2.2. Proposals for self regulatory measures to be taken by the private institutions

2.3. Proposed Action Plan for implementing PWG recommendations

3. Proposed SPI Committee Decisions

Annexes (Note on international experience, Report on main findings of the banking

survey, Summary of discussions in PWG meetings, Scoping the Problem document,

SPI Albania Methodology, etc.)


Page 302 of 335


Ms. Endrita Xhaferaj, Director of Financial Modernization Program and Analytics, [email protected] Address: Twin Tower I, Kati 6, Apt. A3. Tirana, Albania. Tel. +355 42 280 359; Fax. + 355 42 280 371

Annex VIII-12

Template of the Activity Plan [week]

Meetings to be attended

Project

Counterpart Place Hour

1. 1. PWG activities

Names of active projects (PMG formed)

1.1. Project analytics activities:

1.2. Project Support activities:

2. PMG Formation

Names of pre-active projects (only PO appointed)


2.2. Project Support activities: 3. Project Planning

Names of projects under planning


3.2. Project Support activities:

4. SPI Secretariat other operations


Page 303 of 335


Page 304 of 335

SPI Albania Monthly Activity Report April 2009

I. SPI Albania Activity Highlights The most important April achievements on SPI Albania are:

• Donors’ Coordination Conference. SPI Albania, represented by Mr. Libero Catalano, Chairman of the Albanian Association of Banks and SPI Committee member, and Mrs. Ramona Bratu, SPI Albania General Manager, participated in the Regional Donors' Coordination Conference. Mr. Catalano had an intervention under the Financial Cooperation Discussion section of the Conference, emphasizing on the SPI Albania infrastructure that could be used as a hub for coordinating donors’ support to the financial sector. Copies of the SPI Albania Secretariat Presentation were made available to all the participants.

• Reducing Cash Transactions - The Project analytics successfully concluded with the approval by PWG members of the final PWG recommendations on legislative and self-regulatory measures to promote reduction of cash usage in Albania. The latter include the draft Protocol to be signed by second-level banks. The document will be sent to SPI Committee for endorsement. Immediate follow-on action is an awareness-building seminar on the PWG recommendations.

• Consumer Financial Education - During the last PWG meetings, PWG members discussed and approved the recommended National Strategy for Consumer Financial Education as well as the Medium-Term Action Plan that provides the basis of the PWG recommendations. Given the challenge to orchestrate a complex country-wide activity, the PWG will start high-level bilateral consultations to mobilize interest in Consumer Financial Education.

• Public Procurement Law - Proposed by the Ministry of Finance, the new project is being launched to revise the law that provides for Public Procurement procedures in order to facilitate the acquisition of financial and other services that involve commercial banks or consulting companies. The Deputy Minister of Finance will be the Project Owner and the General Director of Debt Department of the same Ministry will be the Project Manager.

• Liquidity Risk Management - Based on the data collected through the survey on banks’ experience in managing liquidity risk, SPI Secretariat drafted a summary of the main findings which was delivered to the Bank of Albania PWG members in order to assist them in formulating the regulatory proposals. BoA’s regulatory proposals will be discussed in the next PWG meeting.

II. Detailed Project Activities 1. Reducing Cash Transactions The Project Working Group members gathered for the fifth meeting which led to the following results:

• Based on the consultation feedback that SPI Secretariat gathered from the PWG members and other banks, the PWG discussed the proposed regulatory and self regulatory changes. For each of the regulatory measures proposed, SPI Secretariat has outlined the responsible authority issuing the relevant regulation, the type of the regulation as well as the amendment proposal.

• The Consultation Paper included also a proposed draft protocol to be signed by all the banks in order to implement the self-regulatory measures proposed by the PWG members. The draft protocol aims at reducing the level of expensive and inefficient cash transaction in the Albanian economy by promoting the use of more efficient non cash payments methods.

• Based on the comments and suggestions of the PWG members, SPI Secretariat drafted the PWG Recommendations document which is the project’s exhaustive documentation highlighting not only the results but the entire analytical process grounding the PWG final proposals.

2. Consumer Financial Education

SPI Albania SecretariatMrs. Anuela Ristani, Director of Operations, [email protected]

Ms. Endrita Xhaferaj, Director of Financial Modernization Program and Analytics, [email protected]: Twin Tower I, Kati 6, Apt. A3. Tirana, Albania. Tel. +355 42 280 359; Fax. + 355 42 280 371

www.spi-albania.eu


Page 305 of 335


mailto:[email protected]

mailto:[email protected]

http://spi-albania.eu/admin/js/filemanager/files/web/2008program/projects/cashtransiction/fifthmeeting/02/02%20SPI%20Albania%20Project%20on%20Reducing%20cash%20transactions%20-%20PWG%20Recommendation.pdf


http://www.spi-albania.eu/admin/js/filemanager/files/web/2008program/projects/cashtransiction/fifthmeeting/02/01%20SPI%20Albania%20Cash%20Transactions%20Fifth%20Meeting%20Minutes.pdf

http://spi-albania.eu/admin/js/filemanager/files/web/2008program/projects/cashtransiction/fifthmeeting/03%20SPI%20Albania%20Draft%20Protocol%20on%20Common%20Policy%20to%20Reduce%20Cash%20Transactions.pdf

http://spi-albania.eu/admin/js/filemanager/files/web/2008program/projects/cashtransiction/SPI%20Albania%20Project%20on%20Reducing%20cash%20transactions%20consultation%20paper%20Draft.pdf



http://www.spi-albania.eu/admin/js/filemanager/files/web/2008program/projects/cashtransiction/fifthmeeting/02/01%20SPI%20Albania%20Cash%20Transactions%20Fifth%20Meeting%20Minutes.pdf

http://spi-albania.eu/admin/js/filemanager/files/web/2009program/liquidity/firstmeeting/SPI%20Albania%20Main%20Findings%20on%20Banks%20experiences%20in%20liquidity%20risk%20management.pdf

http://spi-albania.eu/admin/js/filemanager/files/web/2009program/liquidity/firstmeeting/SPI%20Albania%20Liquidity%20Questionnaire%20on%20Bank%20experiences.pdf

http://spi-albania.eu/admin/js/filemanager/files/web/2009program/liquidity/firstmeeting/SPI%20Albania%20Liquidity%20Questionnaire%20on%20Bank%20experiences.pdf

http://www.spi-albania.eu/en/2009-program/enhancing-banks-liquidity-risk-management/

http://www.spi-albania.eu/en/2009-program/revising-public-procurement-law/

http://www.spi-albania.eu/admin/js/filemanager/files/web/2008program/projects/consumereducation/thirdmeeting/SPI%20Albania%20CFE%20Project%20Implementation%20Plan.pdf


http://www.spi-albania.eu/admin/js/filemanager/files/web/2008program/projects/consumereducation/thirdmeeting/02%20SPI%20Albania%20CFE%20Project%20Draft%20National%20Strategy%20revised.pdf

http://spi-albania.eu/en/2008-program/improving-consumer-financial-education/



http://www.spi-albania.eu/admin/js/filemanager/files/web/news/SPI%20Albania%20Donor%20Conference%20SPI%20Secretariat%20Presentation.pdf

http://www.spi-albania.eu/admin/js/filemanager/files/web/news/SPI%20Albania%20Donor%20Conference%20SPI%20Committee%20Presentation.pdf

http://www.keshilliministrave.al/?fq=brenda&m=news&lid=9752

wb323932

Text Box

Annex VIII-13

The Project Working Group gathered in their third and final PWG meeting, which resulted in the followings: • The PWG approved the Note on Alternative Funding Sources for CFE in Albania. The note reflects the SPI

Secretariat research on available funding for the improvement of Consumer Education in Albania following the observations made by the PWG members with regards to the scarce financial resources available for supporting consumer financial education initiatives.

• PWG approved the draft strategy and action plan for consumer financial education representing the fulfillment of the objectives set for the project. These two documents represent the basis of the PWG recommendations document.

3. Improving Capital Adequacy Regulation SPI Secretariat finalized the questionnaire for assessing the impact of the adoption of the Basic Indicator Approach for operational risk and of the Standardized Approach for credit risk on banks’ regulatory capital needs and distributed it to the 12 PWG participating banks for completion. After a considerable period, 8 out of 12 banks succeeded in responding. SPI Secretariat will analyze the answers and prepare a document with the main findings of the survey. This document will assist Bank of Albania in their consideration for the most suitable Basel II implementation pace.

III. Other SPI Activities• Following SPI Committee’s March meeting decision, SPI Secretariat prepared a Note on Alternative

Funding Sources for SPI Albania in order to cover the financial needs after the termination of Convergence Program support. The note highlights the identified possibilities for SPI Albania’s external funding as well as the proposed action plan.

• In order to raise awareness and disseminate the SPI Albania experience in handling modernization projects through public-private dialogue, SPI Regional Operations Director road-showed the SPI Platform to the Armenian Financial Community (as a USAID guest) and presented a case study on the SPI Albania financial sector modernization initiative within the World Bank Group Public- Private Dialogue International Workshop organized in Vienna.

• SPI Secretariat drafted the Terms of References for the new BoA proposed project on a Unique and Rationalized Reporting System. The draft Terms of References were delivered to the BoA Project Manager for review.

IV. Highlights of Expected May Activities• Cash Transactions and Consumer Financial Education : After the approval of the PWG Final

Recommendations, SPI Secretariat will present them to the SPI Committee for endorsement and will take actions for their enactment.

• Capital Adequacy - During their third meeting, the PWG will discuss on the changes brought by the new regulation on capital adequacy as intended by Bank of Albania.

• Bank’s Liquidity Management- During the second meeting, the PWG members will discuss on the BoA proposed regulatory changes with regard to the liquidity risk management for all the second level banks.

• Public Procurement – After gathering representatives from Ministry of Finance, Public Procurement Agency, Banks and Consulting Companies, PWG will gather in their first PWG meeting to approve the Terms of References as well as the Scoping of the Problem and Note on International Experience.

• Unique and Rationalized Reporting System . – Upon approval by the Project Owner and Project Manager of the draft ToRs, SPI Secretariat will start recruiting the PWG members for their first PWG meeting.

• TAIEX – SPI Secretariat will draft the applications for external expertise on the projects on Public Procurement, Unique Reporting System and legal framework to facilitate mergers and acquisitions of banks and submit them to TAIEX program through the respective institutions (Ministry of Finance and Bank of Albania)

• Note on Alternative Funding Sources – SPI Secretariat will closely monitor all the updates with regards to the IPA Adriatic call for proposal launches and expected implementation manual to be issued by the Ministry of Integration. SPI Secretariat will inform SPI Committee and all involved stakeholders accordingly.

2


Page 306 of 335

http://www.spi-albania.eu/admin/js/filemanager/files/web/news/SPI%20Albania%20Note%20on%20Alternative%20Funding%20Suorces.pdf

http://spi-albania.eu/en/2009-program/unique-and-rationalized-reporting-system/

http://www.spi-albania.eu/en/2009-program/revising-public-procurement-law/

http://spi-albania.eu/en/2009-program/enhancing-banks-liquidity-risk-management/

http://www.spi-albania.eu/en/2008-program/reviewing-the-capital-adequacy-regulation/

http://spi-albania.eu/en/2008-program/improving-consumer-financial-education/

http://spi-albania.eu/en/2008-program/reducing-cash-transactions/



http://spi-albania.eu/admin/js/filemanager/files/web/2009program/reportingsystem/SPI_Albania_Reporting_System_ToRs_revised.pdf

http://www.spi-albania.eu/admin/js/filemanager/files/web/news/SPI%20Albania%20-%20Summary%20Vienna%20PPD%20Workshop.pdf

http://www.spi-albania.eu/admin/js/filemanager/files/web/news/SPI%20Albania%20-%20Presentation%20Vienna%20PPD%20workshop.pdf

http://www.spi-albania.eu/admin/js/filemanager/files/web/news/SPI%20Platform%20Presentation%20in%20Yerevan.pdf



http://spi-albania.eu/admin/js/filemanager/files/web/2008program/projects/capitaladequancy/SPI%20Albania%20Project%20Capital%20Adequacy%20CB%20Questionnaire.pdf


http://www.spi-albania.eu/admin/js/filemanager/files/web/2008program/projects/consumereducation/thirdmeeting/02%20SPI%20Albania%20CFE%20Project%20Draft%20National%20Strategy%20revised.pdf

http://www.spi-albania.eu/admin/js/filemanager/files/web/2008program/projects/consumereducation/thirdmeeting/01%20SPI%20Albania%20CFE%20Note%20on%20Alternative%20Funding%20Sources.pdf


SPI Romania Working Plan for September 2007

Week SPI projects for 2008 SPI 2008 arrangements Stress testingConsumer

education

Credit Rating

AgencyLSD LGs MiFID IFRS

Positive

infoOmbudsman DIs AML

Law on

security

Sept 3-7

6 project proposals; research for new proposals;

questionnaire sent to NACP, MEF and other institutions

procedures for contracting STCs (meetings, ToRs,

acceptance, forms); finalize and send questionnaire on

SPI activity

follw up with NBR

outline of the document on the national strategy and

start drafting it

ask NBR for the draft regulation

prepared proposal for action plan; asked for a new PO appointment

follow up with PO on the next action

finalize questionnaire and

send it to RBA

follow up with NBR on the

questionnaire

follow up with MEF

follow up with MEF

follow up with MoIA

Sept 10-14

research for new proposals; 12 project proposals; re-send

questionnaire to banks; follow up with MEF and NACP and

others

Meeting with STCs; Draft action plan for the Migration Team and strategy; Send

signed letter to RBI; Contracts with STCs; Discussion with NBR

representative

prepare the document on

national strategy

research on the principles for designing a database

legal opinion of the consultancy cmpany received

by RBA

collect answers to the questionnaire; prepare invitation

letter to NSC

follow up with RBA; prepare letters to MEF and NBR plus

docs packages

Sept. 17-21

Attend public hearing on Green Paper; Meeting with EBF;

Meeting with Banca Intesa; 3 project proposals

Appointment of RBI representative; send action

plan to the other members of the Migration Team

finalize the document on

national strategy

finalize the principles for designing a

database; follow up with RBA for PO appointment

Seminar for presentation of the

legal opinion

send invitation letter to NSC

prepare doc on the

unsolved issues

follow up with MEF

follow up with MEF

Sept. 24 - 28

Organize debriefing on the public hearing; 6 project

proposals

First meeting of the Migration Team to discuss on the

proposed action plan

send the document to

PWG for approval

send principles and udated action

plan to PWG

centralize answer and formulate final list of criticalities and the expected

support

send the doc to PWG

and RBA

PROJECTS TO BE FINALIZED Implementation Follow-UpPRIORITIES

SPI PROJECTS


Page 307 of 335

wb323932

Text Box

Annex VIII-14


Page 308 of 335

SPI Secretariat Semi-Annual Activity Report

January - June 2007

SPI Program Development Highlights

35 Project Working Group Meetings 7 Technical Seminars

1 Public Consultation on EC Green Paper on Retail Financial Services

Legislative Stage Law on Safety Debit Instruments Electronic Processing (2 laws) Amendments of the Anti Money Laundering Law

Self-Regulatory Implementation Stage

Positive Credit Information Sharing Ombudsman

Finalized Projects Rural Lending IFRS Provisioning

New Projects MiFID Implementation Credit Rating Agencies Development Lagging Behind Projects

Consumer Education Stress Testing Lending Databases Bank Letters of Guarantee Law


Page 309 of 335

wb323932

Text Box

Annex VIII-15

A. SPI Stakeholders Analysis

Authorities

• stimulated the direct intervention and contributions of authorities in order to ensure a balanced approached in designing the PWG solutions (Debit Instruments, AML, Ombudsman, Rural Lending, Security Law, Consumer Education);

• raised awareness on the authorities’ positions vis-à-vis specific issues relevant for the consultation process among stakeholders (Positive Credit Information Sharing, LGD Database);

• supported the authorities to take leadership on projects in order to coagulate the banking community opinions (Bank Letters of Guarantee);

• supported the NBR by mobilizing international expertise (Spanish, Italian, Polish, German, etc.) in updating the current provisioning regulations to be in line with IFRS and Basel II standards and in reviewing the methodology for stress testing for companies and firms (with the support of Bank of Italy);

• outlined the effects of some projects on ensuring and monitoring financial stability (Positive Information Sharing, Lending Databases);

• raised awareness on the impact of certain regulations on the financial industry and the need for issuing additional regulations for effective implementation (MiFID Implementation);

• launched a regulatory impact assessment knowledge transfer program with NBR and MEF aimed at strengthening the evidence-based regulatory design skills, part of the EU “better regulation” approach;

• supported MEF review on the fiscal treatment of provisions based on evidence on the impact of the new regulations on the general budget (IFRS Provisioning);

• supported relevant authorities in conducting the public consultation with market players and consumers on the European Commission Green Paper on Retail Financial Services in the Single Market.

Banks

• provided evidence for promoting the banking sector perspective on the need to have a more efficient

payment infrastructure, a rationalized AML reporting system, an Ombudsman institution, an industry-wide lending databases (through regulatory impact assessments and/or international benchmarking);

• took actions to ensure that, in identifying the solution, the PWG is aware of the diversity of opinions within the banking community (Positive Information Sharing, Debit Instruments);

• enabled consensus reaching by proposing compromise solutions (Debit Instruments, Ombudsman); • facilitated international knowledge and expertise sharing by providing TAN’s or PR’s opinions on

debated issues (AML, Ombudsman, Lending Databases, Rural Lending, IFRS); • facilitated the finding of feasible solutions such as a possible off-the-shelf solution and a possible

database architecture for the Lending Database project; • supported improvement of the banks’ image (by promoting Ombudsman and Consumer Education

projects); • outlined market-based alternative solutions that could lead to the project objective achievement (Rural

Lending, Ombudsman, Positive Information Sharing); • outlined the benefits of a transfer of knowledge from the NBR to banks in the area of stress testing; • facilitated the transfer of regulatory impact assessment knowledge so that banks can benefit from this tool

in supporting the proposed legal and institutional changes.

Consumers

• prevented shift of responsibilities from banks to consumers of financial services (Debit Instruments); • assessed impact of regulatory changes on consumers in order to ensure that proposed solutions generate

benefits to the consumers (AML, Debit Instruments); • provided international experience on consumer education (Consumer Education); • supported the establishment of the Bank Ombudsman as a solution for a prompt, unbiased, accessible,

and free resolution of customer complaints; • improved access to credit for potential good borrowers (Positive Credit Information); • supported cost reduction of bank products and services from the consumer point of view (reduced fees

and commission – AML, Debit Instruments, Positive Information Sharing, Security Law, Law on Bank Guarantees) and quality improvements (Ombudsman, Debit Instruments).

2


Page 310 of 335

3

B. Accomplishments 1. Supporting preparation of law amendment proposals for enactment

Electronic processing of debit instruments Project objective: A document presenting the solution for electronic processing and clearing of debit

instruments acceptable to all stakeholders together with the technical and functional specifications, as well as the proposals for amending the relevant legal and regulatory framework.

The SPI Secretariat assisted the PWG in finalizing the law amendment proposals and the secondary regulations by facilitating the dialogue among stakeholders for reaching the compromise solution. Also, the SPI Secretariat supported the law amendment enactment by preparing for MEF (the legislative initiator) all the necessary enactment documents: impact assessment analyses, EU directives compliance tables, etc. Earlier, the SPI Secretariat prepared a decision note for the main stakeholders (NBR and RBA Board) in order to secure their consensus and commitment on the project action plan before moving to the operational stage. On the analytical side, the SPI Secretariat together with Convergence undertook a regulatory impact assessment for banks and consumers, aimed at strengthening the evidence for regulatory actions. The SPI Secretariat will continue to support the SPI Committee in monitoring the progress with the law amendment proposals enactment.

Amendment of AML law Project objective: The AML law amendment proposal agreeable to all relevant stakeholders, supported

by an economic assessment of the regulatory framework already in place and of the proposed changes. The SPI Secretariat supported the law amendment enactment by preparing for MEF (the legislative initiator) all the necessary enactment documents: impact assessment analyses, EU directives compliance tables, etc. Also, the SPI Secretariat tabled a compromise solution by making a risk-based delimitation between EU and selected OECD countries and the other countries and also by proposing to set a higher reporting threshold for resident-to-non-resident transactions. The SPI Secretariat ensured a transparent dialogue of all stakeholders in finalizing the proposed law amendments. Earlier, the SPI Secretariat has provided the PWG with international experience benchmarks for amending the law. It outlined a structured approach by tabling the current and proposed law provisions with their supporting arguments, backed by a regulatory impact assessment for banks and consumers undertaken together with Convergence, and the opinion requested from the peer reviewer. The SPI Secretariat will continue to support the SPI Committee in monitoring the progress with the law amendment proposals enactment.

Amendment of law on goods safeguard Project objective: A law amendment proposal that would reduce the banks’ administrative burden

pertaining to goods and persons security, while keeping necessary security requirements. The SPI Secretariat has facilitated a meeting to be held in July between the PWG representatives and the delegates of the ministry to get an update on the law enactment progress. This action followed the notification by MIAAR that the proposals of the PWG have been considered by the ministry in the drafting of the new law on the goods and persons security. Earlier, the SPI Secretariat supported the SPI Committee in following up with the Ministry of Internal Affairs and Administrative Reform (MIAAR) on the enactment progress of the proposed PWG law amendment proposals. The SPI Secretariat will continue to support the SPI Committee in monitoring the progress with the law amendment proposals enactment.

2. Supporting self-regulatory implementation

Credit positive information sharing Project objective: The achievement of a broad endorsement of positive credit information sharing based

on a system of market based and / or regulatory incentives.


Page 311 of 335

The SPI Secretariat is currently supporting the expanded project working group (in which both NASPDP and NACP participate) in continuing the discussions in order to strike a balance between the need to protect the consumer data and to dispose of adequate information for improving financial institutions’ credit risk management. The dialogue regarding the outstanding issues from the proposed draft data privacy regulation has been opened on the occasion of the joint conference with NASPDP, organized with the support of the SPI Secretariat. On the expansion of positive credit information sharing side, the commitment of the two largest banks to share positive credit information marked the successful achievement of the project objective. As a result of the public-private moral suasion, BRD started disseminating positive credit information in June 2007 and BCR is taking steps to implement positive credit information as of September 2007. Earlier, the SPI Secretariat provided to the two largest banks documentation aimed at supporting them in making this strategic decision, which took into account both risk management and business considerations. The supporting documents outlined the benefits, risks and technical implementation steps of positive credit information sharing. Likewise, the SPI Secretariat had frequent discussions with BCR and BRD second-tier management in order to outline the benefits of positive credit information and clarify the project objective.

Ombudsman Project objective: A formal recommendation to the banking industry that a Banking Ombudsman is

created in Romania, backed by evidence of benefits for banks and consumers in the experience of other countries

Following the SPI Committee endorsement for the establishment of the Ombudsman scheme as an independent, private and voluntary scheme, which marked the successful achievement of the project objective, the SPI Secretariat supported the PWG with the implementation arrangements, by coordinating the PWG work on drafting the setting up documents (by-laws and terms of reference for the Bank Mediator). These actions have been undertaken in accordance with the detailed project implementation plan prepared by the SPI Secretariat and approved by the project working group. Earlier, the SPI Secretariat has triggered the discussions around the project by preparing a proposal for a simplified Ombudsman scheme based on the recommendation made by Convergence. The SPI Secretariat has also structured the main issues related to the establishment of the Ombudsman (organization, participation, operating principles, financing, etc.) in order to enable the PWG to outline the possible options, based on the background study prepared by Convergence. Likewise, in order to provide support to the PWG for converging to a common point of view, the SPI Secretariat has asked the opinion of the peer reviewer and outlined the self-regulatory option proposal. The SPI Secretariat will support the PWG in submitting the setting up documentation for the approval of the RBA General Assembly and other stakeholders involved (i.e. NBR, NACP).

3. Bringing projects to closure

Rural lending Project objective: A detailed study, outlining a set of specific recommendations for the “secondary”

rules and regulations that will need to be enacted for a market in agricultural warrants-backed lending to develop (addressed to the banking industry and to the specific agencies and departments charged with the issuance of such rules).

Based on the technical document that the SPI Secretariat has prepared drawing from the foreign expert report, the PWG developed a hybrid public-private solution for removing the current deadlock in utilizing warrants–deposits certificates. This solution has been presented to the Ministry of Agriculture, together with the regulations which will enable the implementation of the solution identified. The set of proposed regulations has been prepared under the coordination of the SPI Secretariat. Earlier, the SPI Secretariat has prepared an analysis of the current regulatory framework in order to enable the PWG to identify the roadblocks to the development of warrants deposit certificates (WDC) backed lending. The SPI Secretariat has also facilitated the transfer of knowledge among the various stakeholders by preparing and sharing a comprehensive set of current regulations so they could reach a common understanding. The SPI Secretariat together with Convergence assessed the project status and proposed measures to revive it, such as the appointment of a technical anchor and improving the operational

4


Page 312 of 335

5

profile of the PWG. The Convergence-appointed expert and the SPI Secretariat held extensive consultations with all relevant stakeholders (banks, Ministry of Agriculture, depositaries, grain producers, RCGF, etc.) in order to assess the current deadlock in utilizing warrants–deposits certificates. SPI Secretariat has outlined a proposal for private stakeholder actions that could accelerate the development of the warrants-deposit certificates (WDC) backed lending and proposed an action plan based on a structured approach in order to enable a restructured PWG to achieve the project objective. The SPI Secretariat will continue to support the PWG in implementing the solution identified.

IFRS Provisioning Project objective: A summary document presenting a set of principles commonly agreed by stakeholders

on a feasible update of the prudential requirements that would meet supervisory objectives and reflect the IFRS standards.

The SPI Secretariat together with the technical anchor supported the PWG in outlining the principles for a feasible solution for the update of the current provisioning rules, thus marking the successful achievement of the project objective. The SPI Secretariat also outlined the need for a full impact assessment in order to support the MEF decision on the fiscal treatment for provisions following the enactment of the new regulations and mobilized a specialized PWG to conduct the RIA, with the support of Convergence. Earlier, the SPI Secretariat prepared a document outlining the ECB and BCBS guidelines and the similarities and difference between IFRS and Basel II approaches in order to enable the PWG outline the main issues that should be tackled by the new regulation. Likewise, the SPI Secretariat has supported the PWG deepen its understanding of international practiced by designing and running a survey with mother entities; by mobilizing, with the support of Convergence, two experienced international experts (as technical anchors and peer reviewer); and by organizing a Workshop on the International Experience with Provisioning in View of IFRS and Basel II Implementation on April 11, 2007. The workshop enjoyed the participation of more than eighty bankers and NBR representatives and included presentation of eight international speakers who outlined both international supervisory practices and market solutions (methodologies and practical tools, including IT) for provisioning in view of IFRS and Basel II implementation. The SPI Secretariat will continue to support the PWG in the implementation of the regulatory solution identified.

4. Launching new projects

Credit rating agencies development Project objective: Prepare a set of draft regulations (and associated documentation) that will spell out

the institutional, financial and organizational conditions under which local rating agencies could be licensed to carry out rating activities for listed companies. This documentation will include considerations on implementation constraints and criticalities, in order to allow for the further development of these rating agencies into local ECAIs, in conformity with the Basel II/CRD requirements.

The SPI Secretariat supported the PWG in reshaping the project objective. The SPI Secretariat gathered the opinions of the PWG regarding the draft NSC regulation, in order to outline the implementation constraints and criticalities. Also, the SPI Secretariat is in the process of identifying, with the support of IFC, a suitable project technical anchor to share the international experience with building domestic credit rating agencies. Based on the input received from the PWG and the technical anchor, the SPI Secretariat will support NSC in finalizing its draft regulation and will outline the implementation constraints and criticalities.

Implementation of MiFID Project objective: To identify the problems perceived in MiFID implementation and to find solutions for

facilitating a smooth and rapid process. The SPI Secretariat has organized a workshop in July 2007, with the participation of relevant authorities and international experts in order to raise awareness on the MiFID implications and to foster dialogue between authorities and market players so as to create synergies for a rapid and a proper


Page 313 of 335

implementation. Following the workshop, the SPI Secretariat prepared a proposal for an action plan outlining the necessary steps for ensuring a timely and effective implementation of MiFID, to be endorsed by the SPI Committee at its July meeting. The SPI Secretariat will support the PWG in implementing the action plan.

5. Supporting projects lagging behind

Consumer education Project objective: A white paper on the benefits of financial education, including a public endorsement

for a nation-wide financial literacy campaign. The SPI Secretariat gathered from the OECD Financial Education Program the international best practices in the area of promoting financial literacy in order to prepare the drafting the national strategy for consumer education. Also, the SPI Secretariat invited a specialized ONG to participate in the PWG and to explore synergies between the various initiatives for promoting consumer education. Earlier, the SPI Secretariat prepared a background document on the international experience with consumer financial education. The document outlined that, in practice, there are a variety of initiatives undertaken by both public and private organizations to provide financial education to consumers. The project strategy meeting discussed the background document prepared by the SPI Secretariat and outlined a feasible strategy for promoting financial education in Romania. Based on the international experience on the matter, and taking into account national specificities, the SPI Secretariat will prepare an outline of the national strategy for promoting consumer education, to be discussed and endorsed by the PWG.

Stress testing Project objective: Improve the NBR methodology for stress testing for companies and households and

create a framework for the NBR to share its knowledge in the area of stress testing for banks with credit institutions.

The SPI Secretariat prepared a background paper on the role, formulation and international experience of stress testing in banks and asked for the NBR input on the central bank experience in banks’ stress testing and the recommended guidelines for banks. Earlier, the SPI Secretariat proposed the reshaping of the collaboration between banks and NBR to address the specific technical needs of the NBR in the area of stress testing for households on the one hand and to develop a knowledge transfer component where the central bank could support the banking community in improving its knowledge of stress testing on the other hand. With the support of Convergence, the SPI Secretariat has also mobilized Bank of Italy to provide the necessary technical assistance to the NBR for improving its stress testing methodology for households and firms. Following the finalization of the background stress testing document, based on the NBR input, the paper will be disseminated and discussed with banks.

Lending databases

Project objective: A set of recommendations on the consensus-building, practical and technical steps that the banking system will need to take in order to make the loss given default (LGD) and mortgage loan servicing (MLS) databases an operational reality.

Following the SPI Committee endorsement of the project rescue strategy, the SPI Secretariat requested that more banks and the NBR Supervision Department participate in the project. The project rescue strategy has been prepared by the SPI Secretariat as a result of the weak feedback received from the PWG, in order to have a more active engagement of the local stakeholders, given the high importance of this project for the Romanian banks. Earlier, The SPI Secretariat has activated the project through a technical workshop on the International Experience with Lending Databases, with the participation of the Italian Banking Association. Also, the SPI Secretariat has continued to explore possible off-the-shelf database solutions as well as to define a possible LGD database information requirements and architecture. The SPI Secretariat will organize a meeting with the expanded PWG to discuss and endorse the project action plan, which will be submitted to the SPI Committee for its consideration by mid September.

6


Page 314 of 335

7

Law on bank guarantees Project objective: The RBA law amendment proposal supported by a legal comparison of similar laws

in other EU countries and RIA so as to facilitate the enactment of a domestic regulation on bank guarantees.

The SPI Secretariat supported the RBA in identifying a local independent expert who is currently drafting the law proposal. This action is in line with the plan proposed by the SPI Secretariat for speeding up the PWG work, including the recommendation for appointing a local independent expert and a foreign peer reviewer to prepare the draft law and for having a more structured approach, based on a concrete action plan. The PWG should be in position to submit the final law proposal to the SPI Committee for its endorsement by end of 2007.

C. Other SPI Activities

EC Green Paper Consultations on the Retail Financial Services in the Single Market The SPI Secretariat conducted the public consultation on the EC Green Paper and compiled the Romanian stakeholders’ position, which was sent to the European Commission on July 13, 2007. Earlier, the SPI Secretariat has organized the Round Table on the EC Green Paper on June 19, at the Info Europa Center. The participants (financial market authorities, market players, and consumer protection bodies) outlined that the Round Table represented “the first initiative aimed at gathering the feedback from all relevant Romanian stakeholders on the EC financial market policies and an indication of Romania’s financial sector maturity”. The event represented an important catalyst for the broad consultation process.

RIA Capacity Building Program with Authorities Following the RIA awareness raising seminars with PWG members held on January 15-16, Convergence launched, with the support of the SPI Secretariat, a “Regulatory Impact Assessment Capacity Building Program with the Authorities”, aimed at supporting the financial market regulatory authorities to make evidence-driven policy choices, in line with the “better regulation” concept promoted by the European Commission. The RIA program gathers representatives of the NBR, NSC, Insurance Supervision Commission, Commission for Supervision of Private Pension Systems, MEF, NACP, and General Secretariat of the Government. So far, three technical seminars were held, where participants acquired hands on experience on performing RIA and got familiar with the RIA methodology and consultation process. At present, participants are in the process of completing two ex post impact assessments on two regulations issued by the NBR and NSC under the guidance of RIA experts from the UK and Irish FSA. The program will continue by introducing RIA in the official regulatory process and by building the necessary institutional capacities for carrying out RIA within regulatory authorities.

July 16, 2007


Page 315 of 335


Page 316 of 335

1

Annex VIII-16

Questionnaire

on the SPI Secretariat Activity

In Relation to Preparation of SPI Projects Purpose of the questionnaire: SPI is looking to continuously improve its performance in order to make its activity more efficient and to bring it closer to the stakeholders’ needs and expectations. This questionnaire has been prepared to capture the SPI community’s assessment on the role, responsibilities, and activities of the SPI Secretariat, and to gather suggestions on further improvements.


Page 317 of 335

2

I. Background The SPI Secretariat actively supports the project working groups in their activities (for a list of projects and activities please see the website) and assists the SPI Committee in the general oversight of the program. Within the SPI Program architecture, the SPI Secretariat plays a pivotal role along several dimensions. The SPI Secretariat supports the project working groups achieve the project objectives by: organizing the project working groups’ activity:

- prepare draft terms of reference (TORs) for the selected projects; - support project management team (PMT) in organizing the working group

meetings; - support PMT in conducting technical meetings of the project working groups; - keep record (minutes) on the discussions held within the project working groups

meetings; - distribute materials, documentation, and relevant information to the PWG

members; - support PMT in ensuring that assignments are run on time;

performing analytical work: - prepare background documentation for the projects, according to the TORs; - collect and centralize individual contributions of the PWG members; - conduct surveys for regulatory impact assessments and for other purposes; - perform regulatory impact assessments, according to the TORs; - support the PMT in preparing project reports; - prepare the SPI Committee decision document/s on the project;

providing international technical support: - search for international experience, according to the TORs; - identify suitable technical expert and support in hiring international experts; - interfacing with international experts to ensure their knowledge is applied to the

project needs; - organizing seminars and workshops for sharing the international relevant

experience, according to the TORs;

consensus building: - maintain a neutral and objective “honest broker” position among PWG members,

while they discuss pros and cons of specific issues; - outline the issues under discussions and possible solutions; - support the different stakeholders’ representatives in the PWG to reach commonly

agreed solutions; - look for third parties’ opinion in disputed matters; - providing ideas on compromise solutions; - interfacing with “conflicting” parties;


Page 318 of 335

3

preparing SPI decision documents on the projects: - prepare the technical documents by integrating the stakeholders solutions; - prepare decision documents for the SPI Committee endorsement.

II. Survey Procedure We are sending this questionnaire to all Project Working Group members of the SPI projects. Please send your answers to the questionnaire to [name of the person] at [e-mail address] late than [deadline]. Your answers will be confidentially treated and will be provided to SPI Secretariat and other SPI stakeholders in aggregate format only. For additional information please contact [name of the person] (phone number ……………). Please fill in the following details to be used in case communication will be needed: Respondent: Project: Role: Project Owner, Project Manager, Project Working Group Member Email: Phone no:


Page 319 of 335

4

III. Questionnaire on the SPI Secretariat Activity 1. How do you appreciate the role of the SPI Secretariat in organizing the activity of

your project working group (PWG)? Please tick in the appropriate box: Very good

Good

Please state reasons

Satisfactory

Unsatisfactory

Please provide suggestions on ways of improving the SPI Secretariat’s role in organizing the PWG activity. ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 2. How do you appreciate the preparation of the Project TORs by the SPI Secretariat?

Please tick in the appropriate box: Very good

Good


Satisfactory

Unsatisfactory

Please provide suggestions on ways of improving the planning of the SPI projects. ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 3. How do you appreciate SPI Secretariat’s support in organizing your PWG meetings?


Good


Satisfactory

Unsatisfactory


Page 320 of 335

5

Please provide suggestions on ways of improving the SPI Secretariat’ role in organizing the PWGs meetings. ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 4. How do you appreciate SPI Secretariat’s contribution in helping conduct the PWG

meeting? Please tick in the appropriate box: Very good

Good


Satisfactory

Unsatisfactory

Please provide suggestions on ways of improving the SPI Secretariat role in conducting the PWGs meetings. ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 5. How do you appreciate the records (minutes) of the discussions held in the PWG

meetings? Please tick in the appropriate box: Very good

Good


Satisfactory

Unsatisfactory

Please provide suggestions on ways of improving the evidence on the PWGs discussions ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………


Page 321 of 335

6

6. How do you appreciate the documentation and information provided by the SPI

Secretariat for your Project? Please tick in the appropriate box: Very good

Good


Satisfactory

Unsatisfactory

Please provide suggestions on ways of improving the communication with the PWGs ……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 7. How do you appreciate in general the analytical work performed by the SPI

Secretariat? Please tick in the appropriate box: Very good

Good


Satisfactory

Unsatisfactory

Please provide suggestions on ways of improving the analytical contributions of the SPI Secretariat………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 8. How do you appreciate the background documentation provided by the SPI

Secretariat (in case the project TORs provided such a responsibility)?


Good


Satisfactory

Unsatisfactory


Page 322 of 335

7

Please provide suggestions on how SPI Secretariat could improve the quality of the background documentation provided ………………………………………………………………………………………………................................................................................................................................................ 9. How do you appreciate SPI Secretariat work in preparing the Regulatory Impact

Assessment (if the case)? Please tick in the appropriate box: Very good

Good


Satisfactory

Unsatisfactory

Please provide suggestions on ways of improving the SPI work in performing RIA………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 10. How do you appreciate SPI Secretariat activity in providing international support for

the project (if the case)? Please tick in the appropriate box: Very good

Good


Satisfactory

Unsatisfactory

Please provide suggestions on ways of improving SPI Secretariat activity in this area………………………………………………………………………………………………………………..…………………………….………………………………………………………………………………………………………………………………………………………………………………………………………………………………………..


Page 323 of 335

8

11. How do you appreciate SPI Secretariat’s support in preparing the project reports? Please tick in the appropriate box: Very good

Good


Satisfactory

Unsatisfactory

Please provide suggestions on ways of improving SPI Secretariat’s support in preparing the projects reports……………………………….………………………………………… 12. Did you find your opinion correctly reflected in the centralized documents? Please tick in the appropriate box:

Yes No

13. How do you appreciate in general the consensus building contribution of the SPI

Secretariat? Please tick in the appropriate box: Very good

Good


Satisfactory

Unsatisfactory

Please provide suggestions on ways of improving the consensus building activities………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………… 14. Has the SPI Secretariat maintained a neutral and objective position during PWG

discussions? Please tick in the appropriate box:

Yes No


Page 324 of 335

9

15. Has the SPI Secretariat supported PWG in reaching the commonly agreed solutions? Please tick in the appropriate box:

Yes No

16. Has the SPI Secretariat outlined correctly the issues in discussion and provided

solutions in the project documents? Please tick in the appropriate box:

Yes No

17. In retrospect, how do you rate the importance of the “honest broker” role played by

the SPI Secretariat (as illustrated in questions 11 through 16) in the implementation of the Financial Sector Modernization Program?

Please tick in the appropriate box:

Very Important Quite Important Not So Important Irrelevant

18. What are the main benefits of a “honest broker” supporting the Program? Please rate each benefit with 1 being least relevant to 5 being most relevant Benefits Rating

1 2 3 4 5 a. To identify issues relevant to public-private stakeholders b. To define a project scope to accurately reflect the needs of

all stakeholders

c. To assemble and support a project working group d. To prepare background information and analyses for the

project working group, including Regulatory Impact Assessment

e. To use technical expertise efficiently to find practical solutions

f. To keep the project working group work at good pace, anticipating and overcoming obstacles

g. To help with consensus-building h. To prepare a convincing SPI Committee decision paper i. To keep attention on prompt enactment of issues decided

under the SPI framework.


Page 325 of 335

10

19. Has the SPI Secretariat kept you informed on the progress with non-PWG activities (follow up with relevant authorities, SPI Committee decisions, project implementation, etc.) related to the project?

Please tick in the appropriate box:

Yes No

20. Please make any additional suggestions for improving the SPI Secretariat work in

supporting the PWGs. ………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………


Page 326 of 335

1

Annex VIII-17

Summary Findings of the Evaluation of SPI Secretariat Activity for 5 SPI Albania Completed

Projects

1. Improving Banks Liquidity Risk Management PWG members 2. Reducing Cash Transactions 3. Consumer Financial Education 4. IFRS Implementation 5. Improving Auction Procedures: (i) Civil Procedure Code (ii) Bailiff Practices

November 2009

Purpose of the evaluation: to improve SPI Secretariat performance in order to make its activity more efficient and to bring it closer to the stakeholders’ needs and expectations. The evaluation aimed at capturing the PWG’s assessment on the role, responsibilities, and activities of the SPI Secretariat, and to gather suggestions on further improvements.


Page 327 of 335

2

I. Statistics of the survey

No. of active PWG members: 52

No. of respondents: 26

Participation ratio: 50 %

II. Summary findings of the survey

No. SPI Secretariat Activity Aspect General Assessment

For the 5 projects

1. Role in organizing PWG activity Very good 5- Very Good

2. Preparation of the Project TORs Very good 5- Very Good

3. Support in organizing PWG meetings Very good 5- Very Good

4. Contribution in helping conduct the

PWG meeting

Very good 4- Very Good; 1-Good

5. The records (minutes) of the

discussions held in the PWG meetings

Very good 5- Very Good

6. Quality of documentation and

information


7. Quality of the analytical work Very good 5- Very Good

8. Quality of the background

documentation


9. Preparing the Regulatory Impact

Assessment

Very good 2 Very Good; 1-Good; 2 -

n/a

10. Providing international support for the

project

Good 4 – Good; 1- n/a

11. Support in preparing the project reports Very good 5- Very Good

12. Correctness in reflecting opinions in

the centralized documents

Yes 5- Y

13. Contribution in consensus building Very good 5- Very Good

14. Neutrality and objectivity during PWG

discussions

Yes 5- Y

15. Support to PWG in reaching the

commonly agreed solutions

Yes 5- Y

16. Correctness in outlining the issues in

discussion and in providing solutions in

the project documents

Yes 5- Y

17. Importance of the “honest broker” role

played by the SPI Secretariat

Quite

important

2- Very Important; 3- Quite

Important

19. Information on the progress with non-

PWG activities

Yes 5- Y


Page 328 of 335

3

Main benefits of an “honest broker” supporting the Program

Benefits No. of points

% of max

1. To assemble and support a project working group 21 84

2. To identify issues relevant to public-private stakeholders 22 86

3. To prepare background information and analyses for the project

working group, including Regulatory Impact Assessment

22 90

4. To define a project scope to accurately reflect the needs of all

stakeholders

22 90

5. To keep the project working group work at good pace,

anticipating and overcoming obstacles

20 80

6. To help with consensus-building 21 85

7. To prepare a convincing SPI Committee decision paper 20 81

8. To use technical expertise efficiently to find practical solutions 21 84

9. To keep attention on prompt enactment of issues decided under

the SPI Albania framework.

21 87


Page 329 of 335


Page 330 of 335

1

EBF Letter to the SPI Committee To: SPI Committee Subject: EBF support in implementing and operating an SPI Platform Dear SPI Committee members,

Please receive our warmest congratulations for the decision of entering into the public – private partnership for your country financial sector modernization. It is European Banking Federation’s deepest belief that the SPI Platform will contribute to your efforts to coagulate forces around the development priorities of your country and to approach them in an effective and timely manner. European Banking Federations is hereby reiterating its support for the implementation of the SPI Platform. We stand ready to help you in ensuring funding for the newly established partnership through information and facilitation of regional networks. European Banking Federation is also prepared to assist SPI in identifying the most appropriate solutions to the problems raised by its stakeholders through international experience, technical assistance and knowledge sharing. European Banking Federation could consider also other cooperation and supportive actions as required by our Associates in order to help them and you to face the challenges of this initiative.

Yours sincerely, Guido RAVOET Secretary General


Page 331 of 335

wb323932

Text Box

Annex IX-1


Page 332 of 335

1

EBF Support Offer to its Associates for Establishing and

Operate SPI Platforms

I. SPI ToolkitEBF took an active stance in preparing theSPI Platform toolkit, in determining its mostuseful content for Associates.

EBF can help its Associates in reading, Interpreting and using the SPI PlatformToolkit.

II. Initiating the SPI Platform

EBF could support its Associatesin building consensus within the bankingcommunity and of the public authorities for establishing the SPI Platform by participating in seminars

III. Establishing the SPI Platform

EBF could join SPI Committeeas a non-voting member, if invited


Page 333 of 335

wb323932

Text Box

Annex IX-2

2

IV. Applying for fundingEBF could support application forfunding SPI Platform

EBF could support the formationof regional partnerships

V. Operating the SPI Platform (1)

EBF could provide/intermediate provision of expertise on specific topics

EBF could facilitateknowledge sharing

EBF could facilitate accessto international experience

V. Operating the SPI Platform (2)

EBF could act as a hub for demand and offer for technical assistance

EBF could be a forum for sharing knowledge and experiences


Page 334 of 335

1

Annex IX-3

EBF Letter to the SPI Committee

To: SPI Committee

Subject: EBF support in implementing and operating an SPI Platform

Dear SPI Committee members,

Please receive our warmest congratulations for the decision of entering into the public

– private partnership for your country financial sector modernization.

It is European Banking Federation’s deepest belief that the SPI Platform will

contribute to your efforts to coagulate forces around the development priorities of

your country and to approach them in an effective and timely manner.

European Banking Federations is hereby reiterating its support for the implementation

of the SPI Platform. We stand ready to help you in ensuring funding for the newly

established partnership through information and facilitation of regional networks.

European Banking Federation is also prepared to assist SPI in identifying the most

appropriate solutions to the problems raised by its stakeholders through international

experience, technical assistance and knowledge sharing.

European Banking Federation could consider also other cooperation and supportive

actions as required by our Associates in order to help them and you to face the

challenges of this initiative.

Yours sincerely,

Guido RAVOET

Secretary General


Page 335 of 335

spi platform toolkit

Documents

theyhave spi platform

real economy

world bank

bank clients

financial institutions

constructive leadership

fluid financialintermediation

result of visionary