Financial systems and development

Table 2.4 The institutional structure of selected financial systems, 1985
Assets as a percentage of total gross assets of the financial system
As a percenztage of GNP
Specialized Contractual Collective Long-term debt Net Total
Central Deposit lending savings investment securities financial external
Country banks banks institutions institutions institutionis and equities, assets debt
Developed markets
Australia 5 31 14 17 1 33
Canada 1 33 2 26 8 30 165 -
France 6 56 10 7 5 16 109 -
Germany, Fed. Rep. of 4 41 14 9 2 30 158 -
Japan 2 45 9 6 7 30 300 -
Sweden 4 27 18 16 1 35
United Kingdom 1 35 1 26 3 34 188
United States 2 28 7 19 4 40 210
Average 3 37 9 16 4 31 188 -
Emerging markets
Argentina 32 43 11 5 0 10 .. 80
Brazil 27 32 12 2 4 23 59 50
Chile 14 44 1 11 1 28 75 145
India 10 47 6 12 1 24 65 19
Korea, Rep. of 9 53 14 4 10 10 66 57
Malaysia 7 34 12 13 3 32 247 52
Nigeria 23 46 2 3 7 19 49 26
Pakistan 21 65 1 2 1 11 45 39
Philippines 30 38 14 3 3 14 38 82
Portugal 20 72 1 2 1 4 124 85
Thailand 16 55 12 1 0 17 89 47
Turkey 33 54 4 6 0 3 27 50
Venezuela 20 46 25 1 0 8 65 74
Average 20 48 9 5 2 16 79 62
Note: Total financial system assets are the assets of all the institutions shown in this table plus the stock of outstanding securities and equities. To
eliminate double-counting caused bv the assets of one institution being the liabilities of another, net financial assets have been approximated by
the sum of total liquid liabilities (IFS, line 551) plus securities and equities. To deflate these stocks by the flow of GNP, five-quarter arithmetic
averages are constructed from vear-end data for 1984 and 1985, assuming constant exponential growth during the year.
a. The sum of government bonds, corporate bonds, and corporate equity.
Source: IMF, International Financial Statistics, and World Bank data.
ance companies are also generally considered part termediaries and contractual savings institutions
of the financial sector, but they are not discussed in hold a much larger share of financial assets in highthis
Report.
income countries than they do in developing ones.
Table 2.4 compares the structure of the financial The relatively small domestic financial sectors of
sector in high-income countries with its structure the developing countries stand in sharp contrast to
in some of the more advanced developing coun- their relatively large reliance on foreign financing.
tries. Banks in developing countries hold a bigger Different financial institutions provide services
share of all financial assets (48 percent) than they that are both complementary to and competitive
do in industrial countries (37 percent). The table with each other. Deposit institutions offer payment
understates this dominance, because the develop- and liquid deposit facilities, and contractual saving
countries included are those with the most so- ings institutions provide illiquid savings opportuphisticated
financial systems. When central banks nities that cater to the longer-term needs of cusare
included, the predominance of the banking tomers. Collective investment institutions offer
sectors of most developing countries is even small investors the benefits of professional mangreater,
for the central banks in the sample hold 20 agement and low-cost risk diversification, encourpercent
of the financial sector's assets in develop- aging them to diversify their savings into marketing
countries compared with only 3 percent in de- able securities. On the lending side, commercial
veloped markets. In addition to issuing currency banks have traditionally provided working capital
and overseeing the operation of the payment sys- and trade finance, but longer-term lending is gaintem,
the central bank acts as banker to the govern- ing with the spread of universal banking. Factorment
and to other banks. In contrast, nonbank in- ing companies specialize in financing inventories
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