1 TRANSFORMING PUBLIC SECTOR BANKS -An Investor’s Perspective -

2 TOPICS WHY INVEST WHAT AN INVESTOR WANTS TO GET - Transformation Concerns WHAT CAN HAPPEN IN PRACTICE LESSONS GOING FORWARD

3 WHY INVEST A Variety Of Motives  Open New Markets  Add Value - Build Shareholder Funds and Profitability  Early Mover – Jump Start On Value Creation  Support Infrastructure Development  Complement Commercial Interests

4 WHAT THE INVESTOR WANTS TO GET A Clear Definition Of The Served Market  Geographic Focus  Sectoral Focus  Ring-Fenced Public Sector Lendings  Choice of Distribution Channels

5 WHAT AN INVESTOR WANTS TO GET A Strong Management Team  An Experienced CEO  Balanced Team of Professionals  Recognition of Benefits of Outside Experience

6 WHAT AN INVESTOR WANTS TO GET A Clear Business Plan  The Importance of the Strategic Planning Process  The Conflict Between Operational and Strategic Priorities  Competitor Analysis

7 WHAT AN INVESTOR WANTS TO GET Capability Building  Distribution Channels  Internal Systems and Procedures  MIS  People Strengths and Weaknesses

8 WHAT AN INVESTOR WANTS TO GET Governance and Regulation  Independent Chairman and Board  Role of the Regulator  Commercial and Legal Framework  Auditing and Inspection

9 WHAT AN INVESTOR WANTS TO GET Strong Investor and Capital Base  Spread of Investors  Government Role  Risk Weighted Capital Adequacy  Properly Structured Balance Sheet

10 WHAT AN INVESTOR WANTS TO GET Change Management Skills  Defined “New” Roles  Implementation Planning  Proper Communication with Customers and Staff  Ongoing Capability Assessment

11 WHAT AN INVESTOR WANTS TO GET A Clear Definition of the Served Market A Strong Management Team A Clear Business Plan Capability Building Governance and Regulation Strong Investor and Capital Base Change Management Skills

12 WHAT CAN HAPPEN IN PRACTICE Problems, Mistakes and Mishaps

13 WHAT CAN HAPPEN IN PRACTICE Failure to Tackle Necessary Management Changes  Autocratic Management Teams  Skill “Imbalances”  Conflicts of Interests

14 WHAT CAN HAPPEN IN PRACTICE Governance or Regulatory Weaknesses  Overbearing Chairperson  Unduly Weak or Strong Boards  Political Interference  Inconsistent Central Bank Supervision  Lack of Proper Legal Framework

15 WHAT CAN HAPPEN IN PRACTICE Misunderstanding/Mispricing of Risk  Asset Quality  Institutional Loans  Foreign Exchange and Treasury Risk  Mismatching of Equity Base

16 WHAT CAN HAPPEN IN PRACTICE Conflicting Investor Roles  Short – versus - Long Term Goals  Passive Investors  Conflicts of Interests

17 WHAT CAN HAPPEN IN PRACTICE Poor or Non-Existent Business Planning  Lack of Focus “If You Don’t Know Where You’re Going, All Roads Lead There”  Technology Waste/Overkill  The Price of Poor MIS  The Triumph of Bureaucracy

18 WHAT CAN GO WRONG Cultural Myopia  Ignoring Local Business and Banking Practices.  Failing to Communicate Change to Customers and Staff  Not Recognising the Gradual Pragmatic Nature of Change Management.

19 LESSONS GOING FORWARD The Need to Recognise the Holistic Nature of Bank Transformation The Importance of the Integrity of the Local Banking Systems The Critical Roles of Governance, Regulation, Supervision and Review Changing Global Context Why External Investors Matter How The World Bank and the IFIs Can Help