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A SUCCESSFUL PUBLIC BANK IN LATIN AMERICA

:. A SUCCESSFUL PUBLIC BANK IN LATIN AMERICA. José Mena V. BID Seminar on Public Banks February 2005. CONTENT INSTITUTIONAL AND MACRO FRAMEWORK MICROECONOMIC SETTING VISION & MISSION OF BANCOESTADO RECENT PERFORMANCE CONCLUSIONS. I. INSTITUTIONAL AND MACRO FRAMEWORK.

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A SUCCESSFUL PUBLIC BANK IN LATIN AMERICA

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  1. : A SUCCESSFUL PUBLIC BANK IN LATIN AMERICA José Mena V. BID Seminar on Public Banks February 2005

  2. CONTENT • INSTITUTIONAL AND MACRO FRAMEWORK • MICROECONOMIC SETTING • VISION & MISSION OF BANCOESTADO • RECENT PERFORMANCE • CONCLUSIONS

  3. I. INSTITUTIONAL AND MACRO FRAMEWORK • A relatively stable and growing economy • A comparatively adequate financial development, but still large sectors without access to financial services • Pro-market financial regulation and supervision in place • A relatively concentrated banking industry with a large participation of foreign banks • A “leveled playing field” where BancoEstado plays by the same rules than private banks

  4. II. MICROECONOMIC SETTING (Underlying Bank’s conditions) • BancoEstado’s Profile: (Consolidated)* • Total Assets US$ 15 billions • Net worth US$ 816 millions • N° of branches 311 • N° of employees 8,500 • N° of clients 10 millions • N° transactions/month 20 millions *It includes its nine affiliates

  5. It basically operates as a commercial bank, not as a development bank • Social responsibility (role) in the context of sound and competitive policies (no subsidies), intended to maximize social return • It is fully autonomous (from the government/Ministry of Finance or any other political influence) to define its loan and pricing policies

  6. Strong corporate governance and full compliance • Capable and participative management • A permanent struggle for improving available factors’ productivity and efficiency (economies of scope and scale) to minimize costs and prices • Commercial policy focused on providing a full range of financial services, at the lowest possible cost, to people and businesses without access to private banks

  7. III. VISION & MISSION OF BANCOESTADO • Vision => To become a world class institution and accomplish its social mission. • Mission => To offer competitive financial services that contribute to Chile’s development and facilitate the access of all Chilean to products and services that improve their welfare and economic security. • BancoEstado’s vision and mission are shared and decidedly supported by both workers union and management through their solid long-lasting strategic alliance.

  8. IV. RECENT PERFORMANCE (Trajectory/Evolution of main indicators)

  9. Market Completeness

  10. Growing menu of new financial services offered mainly to low-income clients and small businesses

  11. Leading bank in the provision of:

  12. Resource (Savings) Mobilization for Development • Leader in the market for family (passbook) savings

  13. Invaluable Contributions to public confidence and financial stability through sound policies and solvency

  14. Enhancement of monetary policy transmission

  15. Promotion of entrepreneurship

  16. Promotion of competition in a concentrated banking industry

  17. “Lender of last resort” in critical financial episodes • It provided a large amount of capital to bankrupt banks in the severe and generalized 1982-83 private banking crisis • It supplied liquidity to the financial system, with the proper safeguards, during the recent “Inverlink affair”

  18. High Profitability and Growing Transfers to “Social Budget”

  19. V. CONCLUSIONS (Final comments) • A dynamic institutional and macro framework and a correspondingly efficient microeconomic (business) setting are both critical factors for a public bank’s success in emerging economies • A rock solid compromise from workers and management with a clear Bank’s vision and mission has also been a precondition for success

  20. A public bank’s social role or development contribution must be realized by systematically applying sound and competitive policies (no subsidies), and without interference from any political influence • The long term experience of BancoEstado is a clear (irrefutable) evidence that a financially and socially efficient operation of a public bank may render a significant support to the development of a small open economy

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