The Financial Development Report 2 0 11 Insight Report The Financial Development Report 2011 World Economic Forum Geneva, Switzerland World Economic Forum USA Inc. New York, USA The terms country and nation as used in this report do not in all cases refer to a territorial entity that is a state as understood by inter- national law and practice. The terms cover well-defined, geographically self-contained economic areas that may not be states but for which statistical data are maintained on a separate and independent basis. World Economic Forum USA Inc. Copyright © 2011 by the World Economic Forum USA Inc. All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, or otherwise without the prior permission of the World Economic Forum. ISBN-10: 92-95044-59-2 ISBN-13: 978-92-95044-59-3 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. A catalogue record for this book is available from the Library of Congress. Contributors v Academic Advisors vii Preface ix by Klaus Schwab Foreword xi by Kevin Steinberg and Giancarlo Bruno Executive Summary xiii Part 1: Findings from the Financial 1 Development Index 2011 1.1: The Financial Development Index 2011: 3 Striving to Finance Economic Growth by Isabella Reuttner and Todd Glass Appendix A: Structure of the Financial 31 Development Index 2011 Appendix B: Commercial access and 34 corporate governance scores, 2008 vs. 2011 1.2: Benchmarking Financial Development: 35 Challenges and Solutions by Augusto de la Torre, Erik Feyen, and Alain Ize 1.3: Financial Development in the Aftermath 47 of the Global Crisis by Subir Lall 1.4: Reforming the US Housing Finance System 55 by Viral V. Acharya, Stijn Van Nieuwerburgh, Matthew Richardson, and Lawrence J. White Contents Part 2: Country/Economy Profiles 69 How to Read the Country/Economy Profiles 71 List of Countries/Economies 73 Country/Economy Profiles 74 Part 3: Data Tables 315 How to Read the Data Tables 317 Index of Data Tables 319 Data Tables 321 Technical Notes and Sources 393 About the Authors 403 Partner Institutes 407 v EXPERT COMMITTEE* Giancarlo Bruno, Director, World Economic Forum USA Chris Coles, Partner, Actis Michael Drexler, Senior Director, World Economic Forum USA Reto Kohler, Head of Strategy, Corporate and Investment Banking and Wealth Management, Barclays Gerard Lyons, Chief Economist and Group Head of Global Research, Standard Chartered Mthuli Ncube, Chief Economist and Vice President, African Development Bank Raghuram Rajan, Eric J. Gleacher Distinguished Service Professor of Finance, The University of Chicago Booth School of Business Nouriel Roubini, Professor of Economics and International Business, Leonard N. Stern School of Business, New York University and Chairman, Roubini Global Economics Kevin Steinberg, Chief Operating Officer, World Economic Forum USA Augusto de la Torre, Chief Economist for Latin America and the Caribbean, World Bank Ksenia Yudaeva, Director of the Macroeconomic Research Center, Sberbank We thank Hope Steele for her superb editing work and Neil Weinberg for his excellent graphic design and layout. We would also like to thank Chris Ryan and Asaf Farashuddin for their assis- tance in assembling data for this Report. We would like to thank Dealogic, IHS Inc. and Thomson Reuters for their generous contribution of data for this Report. Contributors EDITOR Isabella Reuttner, Senior Project Manager, World Economic Forum PROJECT TEAM Todd Glass, Project Associate, World Economic Forum USA Marc Wagner, Project Manager, World Economic Forum USA PROJECT ADVISORS James Bilodeau, Associate Director and Head of Emerging Markets Finance, World Economic Forum USA Margareta Drzeniek Hanouz, Director, Senior Economist, World Economic Forum Thierry Geiger, Associate Director, Economist, World Economic Forum CONTRIBUTORS Viral Acharya, Professor of Finance, Leonard N. Stern School of Business, New York University, USA Erik Feyen, Senior Financial Economist, Financial Systems Practice, World Bank Alain Ize, Consultant for Latin America and the Caribbean, World Bank Subir Lall, Division Chief, International Monetary Fund (IMF), Washington DC Matthew Richardson, Professor of Applied Economics, Leonard N. Stern School of Business, New York University, USA Augusto de la Torre, Chief Economist for Latin America and the Caribbean, World Bank Stijn Van Nieuwerburgh, Associate Professor of Finance, Leonard N. Stern School of Business, New York University, USA Lawrence White, Professor of Economics and Deputy Chair of the Economics Department, Leonard N. Stern School of Business, New York University, USA Contributors * The Forum is grateful for the support of the Industry Partners who served on the Expert Committee. Any findings contained in the Report are solely the view of the Report’s authors and do not reflect the opinions of the Expert Committee members. vi Contributors FROM THE WORLD ECONOMIC FORUM Kevin Steinberg, Chief Operating Officer, World Economic Forum USA † Michael Drexler, Senior Director and Head of Investors Industry † Giancarlo Bruno, Director and Head of Financial Services Industry † Abel Lee, Associate Director and Head of Insurance and Asset Management † Trudy Di Pippo, Associate Director † Anuradha Gurung, Associate Director † Irwin Mendelssohn, Associate Director † Kerry Wellman Jaggi, Associate Director † Lisa Donegan, Senior Community Manager † Nadia Guillot, Senior Community Manager Andre Belelieu, Project Manager † Tik Keung, Project Manager † Elisabeth Bremer, Senior Community Associate † Amy Cassidy, Team Coordinator † Alexandra Hawes, Team Coordinator † Dena Stivella, Team Coordinator † Centre for Global Competitiveness and Performance Jennifer Blanke, Senior Director, Lead Economist, Head of the Centre for Global Competitiveness and Performance Beñat Bilbao-Osorio, Associate Director, Economist Ciara Browne, Associate Director Roberto Crotti, Junior Quantitative Economist Tania Gutknecht, Senior Community Associate Satu Kauhanen, Coordinator † Employees of the World Economic Forum USA. vii Academic Advisors Academic Advisors Mario Blejer Universidad Torcuato di Tella Thorsten Beck Tilburg University Richard Cooper Harvard University Erik Feyen The World Bank Luc Laeven International Monetary Fund Ross Levine Brown University Subir Lall International Monetary Fund Maria Soledad Martinez Peria The World Bank Sergio Schmukler The World Bank Luigi Zingales University of Chicago The Forum is grateful for the support of the Academic Advisors who contributed to the Report. Any findings contained in the Report are solely the views of the Report’s authors and do not reflect the opinions of the Academic Advisors. [...]... difficulties The first is the two-way direction of causality between economic development and financial development Because the impact of financial development on economic development lags behind that of economic development on financial development, it is possible to assess the quality of financial development policies, since they are revealed by observed changes in financial development The second... they exhibit The statistical benchmarking methods described above should prove useful for countries attempting to enhance the effectiveness of their financial development policies, as well as for researchers seeking to further their understanding of the financial development process 1.1: The Financial Development Index 2011 Box 2: Financial development in the aftermath of the global financial crisis... Romania The Financial Development Index 2011 rankings The overall rankings and scores for this year’s Financial Development Report can be seen in Table 1, along with the 2010 rankings, the Index scores, and the change in score from last year Looking broadly across the results for the 60 economies covered in the Index, some general trends emerge 2011 rank Australia Adjustments to the Financial Development. .. utilize this Report to promote the potential of financial systems as enablers of growth and individual prosperity On behalf of the World Economic Forum, we wish to particularly thank the members of the Expert Committee, the Academic Advisors, and Isabella Reuttner and Todd Glass for their boundless support Executive Summary Executive Summary The Financial Development Report 2011 and the Financial Development. .. regulations The higher the degree of financial development, the wider the availability of financial services that allow the diversification of risks This increases the long-run growth trajectory of a country and ultimately improves the welfare and prosperity of producers and consumers with access to financial services The link between financial development and economic growth can be traced back to the work... Business environment 5 Non-banking financial services 3 Financial stability Financial access 1.1: The Financial Development Index 2011 Figure 1: Composition of the Financial Development Index 6 Financial markets Policymakers Financial intermediaries 7 Financial access End users of capital Source: World Economic Forum 5 Box 1: Benchmarking financial development: Challenges and solutions Please see Chapter... ( the Index”), which ranks 60 of the world’s leading financial systems and can be used by countries to benchmark themselves and establish priorities for financial system improvement The Financial Development Report is published annually so that countries can continue to compare themselves with their peers and track their progress over time In recognition of the diversity of economies covered by the. .. organize the information in a way that is analytically useful and revealing In particular, the coefficients of the income and population size terms can be used to rank financial development indicators according to their order of appearance (the minimum income level required for their emergence), the shape (convex or concave) of the paths they follow after they emerge, and the returns to scale that they... of financial development explain a considerable portion of the cross-country differences in growth rates of economies.1 It is against this backdrop that the fourth annual Financial Development Report aims to provide policymakers with a common framework to identify and discuss the range of factors that are central to the development of global financial systems and markets It provides the Financial Development. .. topic Although the financial crisis of 2008 has put significant strain on the global financial system, emerging economies have been quite successful in weathering the proverbial storm However, many questions regarding the role of financial development in emerging and developing economies remain In the wake of the crisis, global leaders and policymakers must determine whether financial development can . The Financial Development Report 2 0 11 Insight Report The Financial Development Report 2011 World Economic Forum Geneva,. contributed to the Report. Any findings contained in the Report are solely the views of the Report s authors and do not reflect the opinions of the Academic