2.3.5. Collaborate with Authorities and Law Enforcement to Identify Gaps in Market Oversight, Supervision, Compliance, and Consumer Protection
Most countries have a system of law enforcement already in place, but law enforcement may be lacking in capacity. USAID can assist with regulatory framework, organizational transformation (e.g. limiting corruption), and compliance tracking within law enforcement entities. Externally, USAID can increase law enforcement’s capacity to protect consumers in the financial marketplace (Source: Mobilizing Private Finance for Development: A Comprehensive Introduction).
- Ability to have commercial disputes resolved in a timely manner
- Access to reliable credit information on borrowers
- Burden of banking/finance regulations and supervision
- Quality of accounting and auditing standards and qualified accountants/auditors in target sector/region
Improved regulatory framework, organizational transformation, compliance, and limited corruption
MUST HAVE’S, CRITICAL POINTS, OR QUESTIONS TO CONSIDER
VIGNETTE: FORMALIZING PROPERTY RIGHTS IN POST-CONFLICT COLOMBIA
Following the collapse of the former Soviet Union in the late 1980s’, most banks in Central and Eastern and the Former Soviet Union (CEE/FSU) were effectively insolvent and widely mistrusted by the public. Competent Central Banks and other regulatory authorities, having legitimacy with the public, are a key requirement for a sound banking system and the sustainable economic growth which a dynamic but secure banking system supports.
From 1994 on, USAID played an instrumental role in the establishment and strengthening of strong credible bank supervision authorities, primarily at Central Banks in 23 CEE/FSU countries. USAID took the lead among donors in helping to put in place all elements necessary to supervise a market-oriented private banking system, the legal regulatory framework, licensing, on-site supervision, off-site reporting analysis, problem bank resolution, enforcement authorities, and a professional bank supervision staff that could implement the new laws/regulations, policies and procedures.
The wholesale reform and modernization of Central Bank regulatory departments has paid huge dividends. It was key to building confidence in the new banking systems, thereby attracting deposits and other capital which in turn was loaned to new and newly privatized businesses in need of capital. It was also a critical factor in the rapid entry of EU banks into the region, and bringing with them the billions of dollars of lending and investment capital which they hold.