Publication: Financial-Stability Challenges in European Emerging-Market Countries
Loading...
Date
2011-08-01
ISSN
Published
2011-08-01
Author(s)
Editor(s)
Abstract
This paper examines the financial-stability challenges that will most likely be faced by European emerging-market countries in adapting to the post-crises environment, including the new financial-stability architecture and the other remaining weaknesses revealed by the global and European crises. The paper first reviews the pre-crisis financial-stability architectures in Europe and across the globe and then identifies the key weaknesses revealed by the global crisis. It then describes the micro and macro-prudential components of the new European System of Financial Supervision and some of its design limitations (and only briefly mentions reforms designed to deal with sovereign debt problems). The paper then identifies ten key areas where there are remaining challenges of implementation and additional reforms: six areas pertaining to all countries in Europe as well as the other major financial centers and four areas more germane to emerging-market countries in Europe. In discussing these ten areas, the paper tries to differentiate the relative challenges faced by categories of emerging-market countries, and their possible links to the excessive build-up of vulnerabilities in the pre-crisis period as a potential source of lessons for policy going forward.
Link to Data Set
Citation
“Schinasi, Garry. 2011. Financial-Stability Challenges in European Emerging-Market Countries. Policy Research working paper ; no. WPS 5773. © World Bank. http://hdl.handle.net/10986/3535 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication Intergenerational Income Mobility around the World(Washington, DC: World Bank, 2025-07-09)This paper introduces a new global database with estimates of intergenerational income mobility for 87 countries, covering 84 percent of the world’s population. This marks a notable expansion of the cross-country evidence base on income mobility, particularly among low- and middle-income countries. The estimates indicate that the negative association between income mobility and inequality (known as the Great Gatsby Curve) continues to hold across this wider range of countries. The database also reveals a positive association between income mobility and national income per capita, suggesting that countries achieve higher levels of intergenerational mobility as they grow richer.Publication The Impact of Trade Promotion Organizations on Exports(Washington, DC: World Bank, 2025-08-13)This paper examines the impact of trade promotion organizations on exports during the COVID-19 pandemic using a World Bank survey. The results suggest that increased trade promotion organization budgets significantly boosted exports during downturns but had no effect during the recovery phase. Interestingly, e-commerce programs adopted by trade promotion organizations negatively affected exports during downturns as they diverted resources away from productive support, especially for sectors not intensive in online trade. These findings suggest that countercyclical trade promotion organizations budgets may enhance trade resilience during similar global shocks.Publication The Future of Poverty(Washington, DC: World Bank, 2025-07-15)Climate change is increasingly acknowledged as a critical issue with far-reaching socioeconomic implications that extend well beyond environmental concerns. Among the most pressing challenges is its impact on global poverty. This paper projects the potential impacts of unmitigated climate change on global poverty rates between 2023 and 2050. Building on a study that provided a detailed analysis of how temperature changes affect economic productivity, this paper integrates those findings with binned data from 217 countries, sourced from the World Bank’s Poverty and Inequality Platform. By simulating poverty rates and the number of poor under two climate change scenarios, the paper uncovers some alarming trends. One of the primary findings is that the number of people living in extreme poverty worldwide could be nearly doubled due to climate change. In all scenarios, Sub-Saharan Africa is projected to bear the brunt, contributing the largest number of poor people, with estimates ranging between 40.5 million and 73.5 million by 2050. Another significant finding is the disproportionate impact of inequality on poverty. Even small increases in inequality can lead to substantial rises in poverty levels. For instance, if every country’s Gini coefficient increases by just 1 percent between 2022 and 2050, an additional 8.8 million people could be pushed below the international poverty line by 2050. In a more extreme scenario, where every country’s Gini coefficient increases by 10 percent between 2022 and 2050, the number of people falling into poverty could rise by an additional 148.8 million relative to the baseline scenario. These findings underscore the urgent need for comprehensive climate policies that not only mitigate environmental impacts but also address socioeconomic vulnerabilities.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Climate Vulnerability and Job Accessibility(Washington, DC: World Bank, 2025-08-11)Many developing cities are facing rapid population growth and extreme climate events. This paper examines the link between job accessibility and climate vulnerability, using data from Antananarivo, Madagascar, which frequently experiences flooding. As in other countries, the analysis finds that men’s commutes are longer than women’s, who tend to walk to work or use public transport. Even after controlling for observables and the potential endogeneity bias associated with commute time, the findings show that climate vulnerability negatively impacts wages, as people avoid commuting long to work due to anticipated potential climate risks. Building climate resilience into urban transport is therefore essential. As predicted by theory, the evidence also shows that the value of commuting is positive, and walking is disadvantageous. Motorized commuting yields higher returns, which could lead to overuse of private cars and taxis, posing decarbonization challenges.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Incentive Audits : A New Approach to Financial Regulation(World Bank, Washington, DC, 2013-01)A large body of evidence points to misaligned incentives as having a key role in the run-up to the global financial crisis. These include bank managers' incentives to boost short-term profits and create banks that are "too big to fail," regulators' incentives to forebear and withhold information from other regulators in stressful times, and credit rating agencies' incentives to keep issuing high ratings for subprime assets. As part of the response to the crisis, policymakers and regulators also attempted to address some incentive issues, but various outside observers have criticized the response for being insufficient. This paper proposes a pragmatic approach to re-orienting financial regulation to have at its core the objective of addressing incentives on an ongoing basis. Specifically, the paper proposes "incentive audits" as a tool that could help in identifying incentive misalignments in the financial sector. The paper illustrates how such audits could be implemented in practice, and what the implications would be for the design of policies and frameworks to mitigate systemic risks.Publication Macroprudential Policy Framework : A Practice Guide(Washington, DC: World Bank, 2014-04-29)This practice guide is primarily intended as a reference and guidance for emerging market economies in their migration to a formal macroprudential policy framework. It relies largely on the existing wisdom, knowledge, and experience and was written with the intention of assisting policy makers (and the World Bank staff working with these authorities) in the implementation of macroprudential policy frameworks in jurisdictions with the following characteristics representative of a typical emerging market and developing economy: 1) a simple and bank-dominated financial system where other financial sector segments are much smaller, but growing; 2) banking supervision function is within the central bank; 3) financial sector regulation/supervision is not integrated; 4) uncertain availability of quality data. A macroprudential policy framework is not a silver bullet for safeguarding financial stability. It is also useful to highlight that a macroprudential policy framework cannot take the place of other public policy frameworks. While pursuing macroprudential policy to build a more resilient financial system, authorities should also take into consideration the significant financial development needs that may exist in their respective jurisdictions. This Practice Guide has been structured in a logical sequence that mirrors implementation. The second and third sections are laid out to clarify and provide some context to the concept of a macroprudential approach to supervision and discuss the institutional framework. The fourth and fifth sections deal with the operational aspects of macroprudential policy framework that are timely detection of systemic risks using early warning systems and addressing the buildup of systemic risks with macroprudential policy instruments.Publication Financial Crisis and Global Governance(World Bank, Washington, DC, 2010)This paper attempts to use network theory, drawn from recent work in sociology, engineering, and biological systems, to suggest that the current crisis should be viewed as a network crisis. The author surveys the concepts of networks, their defining characteristics, applications to financial markets, and the need for supervision and implications for national and global governance. Then, author briefly examines the current financial crisis in the light of the network analysis and surveys the recent reforms in financial regulation and architecture. The paper concludes with an analysis of the policy implications of network analysis.Publication Financial Sector Assessment : Republic of Korea(Washington, DC, 2014-06-01)The initial assessment under the Financial Sector Assessment Program (FSAP) was undertaken in 2003. The first Update mission (April 2013) assessed the observance of selected international standards and codes, and initiated discussions on a broad range of financial sector stability issues. In the case of each of the sector assessments new methodologies adopted since the global financial crisis were employed. The second mission (July 2013) completed its review, documented its assessment in a draft Aide-Memoire, and reviewed with the authorities the Aide-Memoire as well as draft technical notes covering a range of topics. The objectives of the FSAP were to review developments in the financial sector since the initial 2003 FSAP and in light of the lessons from the global financial crisis, assess and formulate recommendations related to financial stability and the financial sector oversight framework. This report presents main findings and recommendations.Publication Bank Deleveraging : Causes, Channels, and Consequences for Emerging Market and Developing Countries(World Bank, Washington, DC, 2012-06)Just before the 2008-09 global financial crisis, policymakers were concerned about the rapid growth of bank credit, particularly in Europe; now worry centers on a potential global credit crunch led by European banking institutions. Overall, credit conditions across Europe deteriorated markedly in late 2011. Spillover effects are being felt around the globe and imply significant channels through which deleveraging could have disruptive consequences for credit conditions in emerging markets, particularly in emerging Europe. Significant liquidity support provided by the European Central Bank was a "game changer," at least in the short term, as it helped revive markets and limited the risk of disorderly deleveraging. However, the extent, speed, and impact of European bank deleveraging remain highly dependent on the evolution of economic growth and market conditions, which in turn are guided by the ultimate impact of European Central Bank liquidity support, resolution of the sovereign debt crisis within the Euro Area, and the ability of the European rescue fund to provide an effective firewall against contagion.
Users also downloaded
Showing related downloaded files
Publication Classroom Assessment to Support Foundational Literacy(Washington, DC: World Bank, 2025-03-21)This document focuses primarily on how classroom assessment activities can measure students’ literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.Publication Lebanon Economic Monitor, Fall 2022(Washington, DC, 2022-11)The economy continues to contract, albeit at a somewhat slower pace. Public finances improved in 2021, but only because spending collapsed faster than revenue generation. Testament to the continued atrophy of Lebanon’s economy, the Lebanese Pound continues to depreciate sharply. The sharp deterioration in the currency continues to drive surging inflation, in triple digits since July 2020, impacting the poor and vulnerable the most. An unprecedented institutional vacuum will likely further delay any agreement on crisis resolution and much needed reforms; this includes prior actions as part of the April 2022 International Monetary Fund (IMF) staff-level agreement (SLA). Divergent views among key stakeholders on how to distribute the financial losses remains the main bottleneck for reaching an agreement on a comprehensive reform agenda. Lebanon needs to urgently adopt a domestic, equitable, and comprehensive solution that is predicated on: (i) addressing upfront the balance sheet impairments, (ii) restoring liquidity, and (iii) adhering to sound global practices of bail-in solutions based on a hierarchy of creditors (starting with banks’ shareholders) that protects small depositors.Publication Argentina Country Climate and Development Report(World Bank, Washington, DC, 2022-11)The Argentina Country Climate and Development Report (CCDR) explores opportunities and identifies trade-offs for aligning Argentina’s growth and poverty reduction policies with its commitments on, and its ability to withstand, climate change. It assesses how the country can: reduce its vulnerability to climate shocks through targeted public and private investments and adequation of social protection. The report also shows how Argentina can seize the benefits of a global decarbonization path to sustain a more robust economic growth through further development of Argentina’s potential for renewable energy, energy efficiency actions, the lithium value chain, as well as climate-smart agriculture (and land use) options. Given Argentina’s context, this CCDR focuses on win-win policies and investments, which have large co-benefits or can contribute to raising the country’s growth while helping to adapt the economy, also considering how human capital actions can accompany a just transition.Publication The Journey Ahead(Washington, DC: World Bank, 2024-10-31)The Journey Ahead: Supporting Successful Migration in Europe and Central Asia provides an in-depth analysis of international migration in Europe and Central Asia (ECA) and the implications for policy making. By identifying challenges and opportunities associated with migration in the region, it aims to inform a more nuanced, evidencebased debate on the costs and benefits of cross-border mobility. Using data-driven insights and new analysis, the report shows that migration has been an engine of prosperity and has helped address some of ECA’s demographic and socioeconomic disparities. Yet, migration’s full economic potential remains untapped. The report identifies multiple barriers keeping migration from achieving its full potential. Crucially, it argues that policies in both origin and destination countries can help maximize the development impacts of migration and effectively manage the economic, social, and political costs. Drawing from a wide range of literature, country experiences, and novel analysis, The Journey Ahead presents actionable policy options to enhance the benefits of migration for destination and origin countries and migrants themselves. Some measures can be taken unilaterally by countries, whereas others require close bilateral or regional coordination. The recommendations are tailored to different types of migration— forced displacement as well as high-skilled and low-skilled economic migration—and from the perspectives of both sending and receiving countries. This report serves as a comprehensive resource for governments, development partners, and other stakeholders throughout Europe and Central Asia, where the richness and diversity of migration experiences provide valuable insights for policy makers in other regions of the world.Publication World Development Report 2006(Washington, DC, 2005)This year’s Word Development Report (WDR), the twenty-eighth, looks at the role of equity in the development process. It defines equity in terms of two basic principles. The first is equal opportunities: that a person’s chances in life should be determined by his or her talents and efforts, rather than by pre-determined circumstances such as race, gender, social or family background. The second principle is the avoidance of extreme deprivation in outcomes, particularly in health, education and consumption levels. This principle thus includes the objective of poverty reduction. The report’s main message is that, in the long run, the pursuit of equity and the pursuit of economic prosperity are complementary. In addition to detailed chapters exploring these and related issues, the Report contains selected data from the World Development Indicators 2005‹an appendix of economic and social data for over 200 countries. This Report offers practical insights for policymakers, executives, scholars, and all those with an interest in economic development.