Corporate Governance and Access to Finance - ESBG

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The commercial success of a savings bank is deeply linked to the economicdevelopment of its region, since it cannot fall back on doing businessanywhere else. The Sparkasse therefore must have a significant interest ina positive economic development of this particular region. Thus a deeplywelcomed economic incentive to finance projects which are strengtheningthe economic potential of the respective region is established.It is not the first priority of the savings bank to make the highest possibleprofit, but to fulfil its task and accomplish its mission (i.e. to guaranteethe provision of financial services – ”Access to Finance“). As far as surplusesdo not have to be retained in order to increase the capital base they willbe used for public welfare oriented purposes, especially in the area ofsocial and cultural engagement as well as promotion of sports.The savings bank is being committed to run a prudent and soundbusiness policy. Based on the savings banks laws of the Länder a numberof especially risk-taking activities are excluded or subject to restrictions. 36The Board of Administration carries out typical supervision and surveillancefunctions. It gives guidance for the business policy, decides on theappointment and the discharging of the Members of the Executive Boardand decides on further issues as laid down in the legal framework:e.g. selling and mortgaging real estate, opening and closure of branchesand generally speaking on the distribution of the surplus as well. The Boardof Administration consists (in most Länder) of representatives of themajor body of the Träger, citizens and for one third of representatives ofthe savings bank’s staff.The Board is in charge to manage the saving banks and is responsible forthe well-functioning and the success of the savings bank.All credit sector institutions (including the savings banks) are supervisedby the Bundesanstalt für Finanzdienstleistungsaufsicht BaFin and theDeutsche Bundesbank. Apart from this supervision savings banks are inaddition supervised by the Sparkassenaufsicht of the Länder, whose taskit is to supervise that administration and management of the savingsbank is in line with the law and the statutes. 37 The Länder task is tocontrol that the business is performed according to the savings bank law,while BaFIN has a financial stability perspective.36,37 Lohmiller, R.:”Sparkassen-Finanzgruppe: Rechtsgrundlagen der Sparkassen”, in:“Enzyklopädisches Lexikon des Geld-, Bank- und Börsenwesens“, 2007.116
Although Sparkassen are legally and economically independent, they arenevertheless linked together by a network structure (Verbund). A veryimportant element of this network structure is the joint liability schemeor “Haftungsverbund” which safeguards the continued existence of itsmember institutions and thus de facto fully protects customers from theloss of their deposits. It means that the network as a whole assumesresponsibility for each of its member institutions. The Haftungsverbundis an amalgamation of 13 protection schemes of the financial group,11 regional Sparkassen guarantee funds, the guarantee fund of theLandesbanken and the guarantee fund of the Landesbausparkassen.These various guarantee funds are interlinked. Should the resources ofthe responsible guarantee fund not be sufficient to support a memberinstitution, the resources of the other guarantee funds will be used inaddition. This is an important factor that contributes to the stability of theGerman banking system. The internal guarantee scheme (which includesliquidity and solvency) consists in an ex-ante pool of funds and acts as aguarantee, instead of the regular deposit insurance. The first fund toreact in case of need is the regional fund. If this regional fund is not enoughto support the ailing institution, cross-regional support could be obtained.On top of this, there is a Risk Monitoring System at the level of the Groupwhich requires minimum standards, establishes common guidelines andaddresses risk situations in case of need. This mechanism is a logicalcomplement of the Joint Liability Scheme, which implies common riskexposures of the Group as a result of the decisions taken independentlyby each member. Thus, the establishment of limits to risk plays a veryimportant role in Sparkassen. The Risk Monitoring System is performed atthe regional level, with a transparency committee at DSGV level. It consistsof a traffic-light system, in which a red colour indicates a problem whichneeds to be closely monitored. If there is a need to intervene, closecooperation with BaFin is carried out. In case of problems a catalogue ofmeasures is available. The Joint Liability Scheme has further implications:for example, rating agencies provide a single rating for the entire group(group rating floor) due to this scheme.Sparkassen business model enables them to operate at the local level but atthe same time to achieve economies of scope thanks to the association withother savings banks. Activities like new product development and support tothe treasury by the Landesbanken and Deka Bank, can be carried out atthe level of the network, ensuring cost-effective processing. Sharing an ITsupplier and the payment system also brings efficiency to the group.117
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BoxesBox 1. German Sparkassen 27Box
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EXECUTIVE SUMMARYBackground and obj
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nnAccess to Finance in enshrined in
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Chart A.Corporate Governance, Acces
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nThe study also shows that Corporat
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1. INTRODUCTION1.1. Focus and objec
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WSBI members are by definition acco
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For the particular case of developi
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2. THE LINK BETWEENCORPORATE GOVERN
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Table 2. Main features of the Missi
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Access to financeSparkassen promote
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All these examples illustrate how p
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In the case of Peru, the profits th
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Among the WSBI institutions that re
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BOX 2. KENYA POST OFFICE SAVINGS BA
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The fact that the banking system is
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3. CORPORATE GOVERNANCE -CONCEPTUAL
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Figure 2. Sound Governance of Finan
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As can be seen in the figure above,
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nnnAt the same time, the distance a
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The first two elements (the ownersh
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nHowever, this does not mean denyin
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Cooperatives are similar to mutuals
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3.4. FoundationsFoundations do not
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3.5. Good Corporate Governance prac
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F. DISCLOSURE AND TRANSPARENCYPrinc
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4. ACCESS TO FINANCE -CONCEPTUAL FR
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4.1. Financial deepening and improv
Page 65 and 66: The board does not have any executi
Page 67 and 68: In other words, sustainable financi
Page 69 and 70: The following table shows how the W
Page 71 and 72: The fourth dimension refers to the
Page 73: Table 8. Access to Finance in the f
Page 76 and 77: Only 27 members established in 21 c
Page 78 and 79: nnDCI (Depth of credit information
Page 80 and 81: 5.2. Corporate Governance and Acces
Page 82 and 83: 5.2.1. Corporate Governance and Ave
Page 84 and 85: Chart 8.Specific Corporate Governan
Page 86 and 87: 5.2.2. Corporate Governance and Ave
Page 88 and 89: Chart 13. Corporate Governance comp
Page 90 and 91: Chart 16. Corporate Governance Inde
Page 92 and 93: Chart 19. Specific Corporate Govern
Page 95 and 96: ANNEX 1: REVIEW OFTHE LITERATUREThe
Page 97 and 98: Even among the relatively narrow un
Page 99 and 100: Figure A.1. Structure of agents' re
Page 101 and 102: The table captures the essence of s
Page 103 and 104: A case study built by Clarke et al
Page 105 and 106: A very recent contribution to the d
Page 107 and 108: For example, in Latin America, WSBI
Page 109 and 110: The paper examines whether a poor e
Page 111 and 112: For the survival of microfinance in
Page 113 and 114: ANNEX 2: CASE STUDIES 32CASE STUDY
Page 115: It is one of the major characterist
Page 119 and 120: Figure A.2. Corporate Loans Market
Page 121 and 122: Financial education is also an impo
Page 123 and 124: Corporate GovernanceKPOSB is wholly
Page 125 and 126: Among the initiatives that the gove
Page 127 and 128: Related to the concession of credit
Page 129 and 130: OPERATIONS1. Deposit Base: It was p
Page 131 and 132: Corporate GovernanceThe Central Ban
Page 133 and 134: To address the problem of capital,
Page 135 and 136: Financial inclusion ranges very hig
Page 137 and 138: CASE STUDY 4:SPANISH SAVINGS BANKS
Page 139 and 140: The uniform financial regulation of
Page 141 and 142: Figure A.3. Governing Bodies - Span
Page 143 and 144: The web-based tool www.rededucacion
Page 145 and 146: On the liability side, CMAC offer m
Page 147 and 148: A specificity of CMAC is that the m
Page 149 and 150: Table A.3.MissionMissionCMAC AREQUI
Page 151 and 152: As of September of 2009, the twelve
Page 153 and 154: Furthermore, the consensus culture
Page 155 and 156: ANNEX 3: QUESTIONNAIREQUESTIONI. Ge
Page 157 and 158: ANNEX 4:THE HONOHAN INDEX 43COMPOSI
Page 159 and 160: COMPOSITE MEASURE OF ACCESS TO FINA
Page 161 and 162: ANNEX 5:QUANTITATIVE RESULTSCountry
Page 163 and 164: Overall Corporate Governance IndexO
Page 165 and 166: REFERENCES- Andrianova, S., Demetri
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- FSD Kenya (2009), Financial Secto
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- World Bank (2006) The Role of Pos
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WSBI - ESBG - The Global Voice of S
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