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Mr. Mauro Mecagni, Daniela Marchettini, and Mr. Rodolfo Maino
Banking in SSA has undergone very significant changes over the last two decades. Financial liberalization and related reforms, upgrades in institutional and more recently the expansion of cross-border banking activities and the rapid development of Pan-African banking groups are signaling greater financial integration and significant changes in the African banking and financial landscape. Nonetheless, excess liquidity in many countries reflects limited lending opportunities and, despite improvements, asset quality and provisioning remain comparatively low. Dollarization has also been a persistent characteristic in several natural resource-dependent economies. This paper discusses key stylized facts and trends of banking development in SSA, looking at a variety of dimensions such as size, depth, soundness, and efficiency. It also assess the rapid expansion of pan-African banking groups, which have overtaken the role of the European and U.S. banks that had traditionally dominated banking activities in SSA, creating significant cross-border networks and becoming the largest participants in new syndicates and large bilateral loans to finance infrastructure development.
Mr. Ulrich Baumgartner, Mr. G. G. Johnson, K. Burke Dillon, R. C. Williams, Mr. Peter M Keller, Maria Tyler, Bahram Nowzad, Mr. G. Russell Kincaid, and Mr. Tomás Reichmann

; (2) the long time lag in a number of cases between identification of the problem and a negotiated settlement; and (3) the difficulties in maintaining or restoring banking inflows to the countries as adjustment policies were being implemented. Although these cases characterize instances where bank financing flows tended to be procyclical and thus destabilizing, they are not necessarily typical and no general conclusion should be drawn from that experience about the role of international banks in development finance. In fact, the important role that banks have

Ms. Margaret Garritsen De Vries

, the momentum of economic growth, expanding exports, and increasing imports that indebted members had been able to resume in 1984 slowed considerably. After an 11 percent rise in 1984, the total export earnings of indebted members, measured in dollars, were to fall by 1 percent in 1985. Their rate of economic growth was to dip in 1985 to just over 4 percent, down from the nearly 5 percent of 1984. Also worrisome were the continuing pressures for protectionism in the industrial members and the marked contraction of commercial bank financing flows. In 1983 total net

Mr. John Lipsky, Mr. Peter M Keller, Mr. Donald J Mathieson, and Mr. Richard N. Williams

countries declined by $21 billion during 1982, to $87 billion ( Table 8 ). At the same time, net bank financing flows to these countries declined by $26 billion, to $25 billion. 24 Previously, both the current account deficit of these countries and bank lending to them had increased every year since 1977. The rate of growth in bank claims on non-oil developing countries, which had averaged 25 percent a year during 1979–81, declined to under 9 percent in 1982 ( Chart 2 ). 25 As a result, the relative share of bank lending in financing the current account deficit of the

Mr. Mauro Mecagni, Daniela Marchettini, and Mr. Rodolfo Maino

than cross-border activities under enhanced prudential standards. The retrenchment of most traditional European bank lenders raises some concerns in regard to development financing, since before the crisis European banks were the principal providers of infrastructure project financing to emerging markets and developing countries, mainly in the form of international syndicated loans ( Feyen and Del Mazo 2012 ; BIS 2012 , and Mecagni 2012). While new European banks have entered the market, most of the new bank financing flows in most recent years were directed to

Mr. Tamim Bayoumi and Mr. Barry J. Eichengreen
Once upon a time, in the 1990s, it was widely agreed that neither Europe nor the United States was an optimum currency area, although moderating this concern was the finding that it was possible to distinguish a regional core and periphery (Bayoumi and Eichengreen, 1993). Revisiting these issues, we find that the United States is remains closer to an optimum currency area than the Euro Area. More intriguingly, the Euro Area shows striking changes in correlations and responses which we interpret as reflecting hysteresis with a financial twist, in which the financial system causes aggregate supply and demand shocks to reinforce each other. An implication is that the Euro Area needs vigorous, coordinated regulation of its banking and financial systems by a single supervisor—that monetary union without banking union will not work.
Mr. Tamim Bayoumi and Mr. Barry J. Eichengreen

interpretation emphasizing hysteresis operating via the financial sector suggests an explanation for why disturbances to Germany became more highly correlated with disturbances to the GIIPS. When Germany experienced a positive aggregate supply shock, in the form of the Hartz II reforms adopted shortly after the advent of the euro, not only did the country’s own growth accelerate but bank finance flowed from Germany and other Northern European countries toward the GIIPS, which were an attractive destination for now more abundant bank finance, as a result of their heretofore

International Monetary Fund

expected higher foreign inflation. However, the colon appreciated by 5 percent in real effective terms during the year, owing largely to the unexpected strength of the U.S. dollar (Figure). Table 7. Costa Rica: Summary of Monetary Accounts Proj. 1996 1997 1998 1999 2000 2001 Public sector and central bank financing (flows; billions of colones) Overall balance -99.5 -75.8 -71.9 -155.6 -205.0 -251.6 Financing 106.4 77.2 77.7 163.1 258.2 251.6 External -6.7 32

International Monetary Fund. Western Hemisphere Dept.

have been rising. Still, there are pockets of vulnerabilities as external financing requirements remain sizable and bank financing flows non-negligible, while FDI is projected to moderate in a few countries. Over the medium term, the improvement in external current account deficits is expected to partially reverse owing to some recovery in international energy prices and the dissipation of the precautionary saving of the private sector’s windfall. Figure 2.16 CAPDR External Position Source: Bloomberg, L.P.; IMF, World Economic Outlook database; national

International Monetary Fund. Middle East and Central Asia Dept.

.9 26.2 25.7 25.6 25.3 Central government finances (In percent of GDP) Revenue 28.6 32.0 33.4 32.3 30.1 28.0 27.6 27.0 26.9 26.7 26.7 Expenditure (incl. net lending) 42.0 40.5 40.2 41.9 41.9 39.8 39.4 39.1 38.9 38.8 39.0 Overall budget balance -13.4 -8.4 -6.8 -9.6 -11.7 -11.8 -11.8 -12.0 -12.0 -12.0 -12.2 Central bank financing (flow) 0.0 11.6 16.5 4.9 0.0 2.3 0.0 0.0 0.0 0.0 0.0 Gross government debt (excluding guarantees) 20