Transcript Document
Enhancing the Efficiency of the Remittance
Market in the Czech Republic: an overview
of the situation and future programs
Ministry of Finance
Remittance Seminar
Prague, Czech Republic
February 24, 2008
Donald F. Terry
Special Advisor
Payment Systems Development Group
The World Bank
Presentation structure
A. The growing attention to International
Remittances: the CPSS-World Bank General
Principles
B. The remittance market in the Czech Republic:
Overview
C. Enhancing the efficiency of the remittance
market in the Czech Republic
Development and Implementation of the General
Principles for International Remittance Services
•The General Principles are a multilateral effort to address a global challenge
Lower costs, better performance, safer transfers
Single country implementation
with authorities and stakeholders
Regional initiatives with regional partners
Global Public/Private Partnership
Coordination group to develop implementation
guidelines and monitor implementation
Development of the General Principles
Request from the International Community
Request from G-8
In 2004, The World Bank was asked by the G-8 to take the lead in an international effort
to improve remittance services. The Payment Systems Development Group worked with
the Bank for International Settlements to address the request for better remittance
services.
•The General Principles are a multilateral effort to address a global challenge
Lower costs, better performance, safer transfers
Chairs:
World Bank PSDG and CPSS
Single country implementation
with authorities and stakeholders
Regional initiatives with regional partners
Global Public/Private Partnership
Coordination group to develop implementation
guidelines and monitor implementation
Development of the General Principles
Request from the International Community
Members:
AMF, ADB, Central Banks of
Brazil, Europe, Germany, Italy,
Mexico, Philippines, Sri Lanka,
Turkey, EBRD, HKMA, IADB, IMF,
Fed Board of Governors, Fed of
New York, World Bank
Secretariat:
World Bank PSDG, CPSS, DFID
The World Bank PSDG and the Bank for International Settlements CPSS chaired the
Task Force that developed the Principles. The Principles have been endorsed by the G8, G-20 and the Financial Stability Forum
An international remittance is a cross-border,
person-to-person payment of relatively low value
Typically by migrant workers to their families. Especially from developed to
developing countries
Person-to person, low value - ie not commercial or wholesale payments
Domestic remittances also exist
Recurrent - but typically made by individual transfers (eg not by standing
order)
Typically credit transfers
For remittance service providers (RSPs), often indistinguishable from any
other retail cross-border transfers
Premise is that best way to reduce cost is to
have competition as far as possible
The principles are not a call for remittances to
be regulated. Sometimes it may be more
important to remove existing regulation
They do not aim to set specific service levels.
Low price may often be more important than
high level of service
Purpose is to tackle weaknesses in the market that
inhibit competition (including poor regulation)
Remittances are part of an individual’s access to
financial services
A good remittance product improves value to the
user in the short term and access to other
financial products in the long term
There are no standard solutions
Issues
with remittances:
Usually expensive
Sometimes slow
Sometimes inconvenient
Occasionally unreliable
Focus here is on payment system aspects (not developmental,
immigration, balance-of-payments or other aspects)
GP1: The market for remittances should be
transparent and have adequate consumer
protection
Transparency means information about the
service (price, speed, fx charge etc).
Transparency promotes competition and
should drive down prices
Especially important for remittances:
“Access” problems for users
Complex to work out price
What is appropriate consumer protection?
Most important are probably “error resolution”
procedures (RSPs’ own or national schemes).
Beware of the cost of some possibilities!
GP2: Improvements to payment system
infrastructure that have the potential to increase
the efficiency of remittance services should be
encouraged
Domestic payment infrastructure.
Remittance services usually depend to some
extent on this. But the infrastructure may not
always be very efficient, especially in receiving
countries.
Cross-border payment infrastructure.
Greater standardisation to help STP in
correspondent banking?
Direct links between domestic systems as an
alternative to correspondent banking?
Linkages of different networks?
GP3: Remittance services should be supported
by a sound, predictable, non-discriminatory
and proportionate legal and regulatory
framework
Does not mean special laws/regulations for
remittances
Sound, predictable, non-discriminatory …
… and proportionate! Avoid danger of overregulation. What is the problem regulation is
meant to cure? Is regulation the best way to
cure it?
For key corridors, sending and receiving
countries may want to cooperate if there
seem to be legal obstacles
GP4: Competitive market conditions, including
appropriate access to domestic payments
infrastructures, should be fostered in the
remittance service industry
Importance of contestability and removing
barriers to entry
Avoid exclusivity conditions (as opposed
to an agent choosing to offer only one
remittance service)
Are there problems with direct or indirect
access to domestic payment systems?
GP5: Remittance services should be
supported by appropriate governance and risk
management practices
RSPs face financial risk (eg if liquidity is
supplied to disbursing agents), legal risk,
operational risk, risk of fraud, reputational
risk
Good governance and risk management
practices by RSPs make remittance
services safer and help protect consumers
…
… but there is unlikely to be any systemic
risk so protection measures should be
proportionate to the risks
Who should take action?
Many people may need to take action. But Remittance Service
Providers and the authorities have particularly important roles:
Remittance
Service Providers
should participate actively in the application
of the general principles
Public Authorities
should evaluate what action to take to
achieve the public policy objectives through
implementation of the general principles
• Form of action by authorities?
Monitoring?
Dialogue?
Monitoring
and
outreach?
Less interventionist
Catalyst/
facilitator?
Regulation?
More interventionist
Direct
provision?
The General Principles have been
formally endorsed by the G-8, G-20
and the Financial Stability Forum
Both Sending and Receiving
Countries have been urged to adopt
them!!!
•The General Principles are a multilateral effort to address a global challenge
Lower costs, better performance, safer transfers
Single country implementation
with authorities and stakeholders
Regional initiatives with regional partners
Global Public/Private Partnership
Coordination group to develop implementation
guidelines and monitor implementation
Development of the General Principles
Membership:
ADB, AMF, CEMLA, CGAP, DFID,
EBRD, IADB, IMF, UNDP, US
Treasury, USAID, World Bank
Request from the International Community
The World Bank PSDG is chairing a Coordination Group that developed Guidelines for
the application of the General Principles and stocktaking methodology
•The General Principles are a multilateral effort to address a global challenge
Lower costs, better performance, safer transfers
Single country implementation
with authorities and stakeholders
Regional initiatives with regional partners
Global Public/Private Partnership
Coordination group to develop implementation
guidelines and monitor implementation
Examples:
WHF (with MIF-IADB/CEMLA),
CISPI, API, SADC, and other
available tools, as FSAPs
Development of the General Principles
Request from the International Community
This group has drafted a guidance note for practitioners to use in performing
assessments based on the General Principles. It includes a number of
questionnaires and other assessment tools.
•The General Principles are a multilateral effort to address a global challenge
Lower costs, better performance, safer transfers
Single country implementation
with authorities and stakeholders
Regional initiatives with regional partners
Global Private-Public Sector Partnership
Coordination group to develop implementation
guidelines and monitor implementation
Development of the General Principles
Request from the International Community
Assessments:
El Salvador (September 2006)
Morocco (November 2006)
Honduras (April 2007)
Haiti (September 2007)
Sri Lanka (Q1 2008)
Nigeria (February, 2008)
Uganda (April 2008)
Czech Republic (May 2008)
Next:
Brasil (March 2009)
UAE (April 2009)
Improvements in the remittance market are achievable,
when international and national authorities work with
the private sector to achieve the goals of the
Principles.
The pilots undertaken so far have led to remittance
market improvements, and the assessments developed
are a good tool to provide recommendations and
promote cooperation between authorities.
The World Bank will continue to lead teams in
implementing the principles (with an increased focus
on Africa and South Asia within regional initiatives
going forward)
World Bank Remittance Price Database
To design a refined methodology to gather comparable
remittance price data and measure the economic gains from
lower costs to consumers
Increase transparency
Increase competition
The project will assist with the delivery of General Principle 1
120 corridors analyzed
Next data release: March/April 2009
Available in English, French, Spanish and Italian. Soon in
Russian and Arabic at http://remittanceprices.worldbank.org
The Country Pairs
The
Country Pairs
(“The corridors”)
Some information about the remittance market
structure and scenario in the Czech Republic
The steps made and the future path
The Ministry of Finance (MOF) of the Czech Republic requested the World Bank
to support its efforts to enhance the efficiency of the remittance market in the
country.
A World Bank Team of experts visited Prague in May 2008 and worked very
closely with the MOF with important contributions from Marc Hollanders (Special
Advisor for Market Infrastructure and Financial Stability, Bank for International
Settlements, and Co-Chairman of the Task Force that produced the GPs).
The team had the opportunity to hold open discussions with several institutions of
the public and private sector, and it has gathered representative opinions from
different players in the remittance market on the current status of the remittance
market and ongoing reforms.
A final report was produced and was presented to the authorities for their
consideration and deliberations.
In December 2008 the MOF and the WB signed an agreement for the
implementation of two of the recommendations included in the final report
Preliminary work has begun and starting from summer 2009 activities will enter in
the operative phase
Main Features of
FIRST
QUESTION:
Remittances
in the
the Market for
Czech Republic
Volume of remittances sent from
the Czech Republic in 2007
54.966.000.000 MLN CZECH CROWNS
or
3.427.532.890 US DOLLARS
or
2/2.4% of the national GDP
(possibly more, if we consider the illegal market!)
Number of migrants who are
potentially sending money:
400.000! (regular migrants)
+ ??? (200.000???)
Countries of Origin:
• EU (in particular the Slovak Republic and Poland)
• Ukraine
• Vietnam
• Commonwealth of Independent States (Russia,
Moldova, others)
• China
• Mongolia
Main Remittances Service Providers (RSPs)
• Money Transfer Operators (MTOs)
• Banks
• Česká Pošta
• Irregular/llegal channels
Average Cost
To remit the average sum of 200
Euros, the cost can go from 8 to
14%, depending on several factors
Enhancing the Efficiency of the Remittance Market:
Applying the General Principles for International
Remittances Services in the Czech Republic
General Principle 1
Transparency and consumer protection
The market for remittance services should be transparent and have
adequate consumer protection.
CURRENT STATUS:
•
Critical information on the market of remittances and the behavior/preferences of
migrant communities is not fully available, calling for further investigation and
research.
•
Transparency on the real cost is not full, as the exchange rate, a relevant component
influencing the cost of the remittances, is not yet disclosed in a comprehensible way
for the average consumer under all circumstances.
•
The Consumer Protection Strategy of the MoF aims at increasing the customers’
understanding of the main financial instruments, but is not specifically targeted
toward the migrants and, so far, might have a limited impact on the issues related to
remittances.
•
The Financial Arbiter’s role in the remittance field is limited by the present restriction
of its jurisdiction to the payments among EU countries.
General Principle 2
Payment system infrastructure
Improvements to payment system infrastructure that have the
potential to increase the efficiency of remittance services
should be encouraged.
CURRENT STATUS:
• The CR is implementing the SEPA Project and it is now facing the task of
adapting its system to the EU environment.
• The domestic infrastructure is well distributed across the country and access
points and payment instruments are widely available. New technologies are in
place and ready to be used more extensively.
• Besides a single agreement with Slovakia aimed at settling separately and with
a special procedure cross border payments, there are no major links between
the national payment infrastructure and those of the major receiving countries.
• The connection of commercial banks to SWIFT is widely available, but no
direct correspondent relations among national and foreign banks in the
countries of origin of migrants have been created so far.
• Česká Pošta has 3,387 agencies on the territory and it is active on the market
of remittances, but so far there has not been any project about the connection
of its infrastructure with that of the national postal services of the major
receiving countries.
General Principle 3
Legal and regulatory environment
Remittance services should be supported by a sound, predictable, nondiscriminatory and proportionate legal and regulatory framework in
relevant jurisdictions.
CURRENT STATUS:
• The CR is adapting its legal system to the acquis communautaire, adopting all
the different directives the EU has produced in the field of the payment
systems. Particular relevance in this moment has the adoption of the Payment
Service Directive.
• In accordance with Act No.6/1993 Coll., the CNB administers payments and
clearing between financial institutions, promotes the smooth and efficient
operation thereof, and contributes to the safety, soundness and efficiency of
payment systems and to its development.
• For the time being and until the forthcoming reforms will not be fully adopted
and implemented, the CNB might not have complete oversight powers over
the remittance segment of the payment system (i.e. the RSPs and the circuits
supportig their business). Its mandate derives from the The Foreign Exchange
Act and its later modifications (Act No. 219/1995 Coll. of 26 September 1995)
and not from specific payment system law and regulation.
• The only law specifically applicable to remittances is the new law on the AML
regime recently adopted by the President of the CR.
General Principle 4
Market structure and competition
Competitive market conditions, including appropriate access to domestic
payments infrastructures, should be fostered in the remittance industry.
CURRENT STATUS:
• The presence in the country of the Office for the Protection of Competition, and a
precise legislation on this issue, can be seen as a reassuring fact about the general
level of competition in the country. Furthermore, the CR is one of the few countries
where exclusivity agreements are not applied by the major MTOs, possibly as they are
discouraged by the action of competition authorities.
• At the same time, the average cost of sending remittances, higher than in other
European countries, can be an indicator of the fact that competition forces in the
market do not play at their full potential.
• The high number of potential RSPs, might be reduced by the skeptical approach that
many commercial banks have towards the profitability of this specific market.
• The national postal system, thanks to its wide distribution, plays a role in the market,
but it has inadequate technological infrastructures and procedures to be a real
competitor in the market. This is more evident taking into consideration the fact that in
the last year the volume of transactions operated by WU using the Post office logistic
distribution, has registered an increase of 50%.
• The access to the domestic payment infrastructure is proportionally regulated and
non banks institutions have either direct access, if they can meet predetermined
requirements, or indirect access through banks.
General Principle 5
Governance and risk management
Remittance services should be supported by appropriate governance and
risk management practices.
CURRENT STATUS:
• In general, the adoption of manuals, codes, and good governance
procedures and the specific training of the employees are required by the
Anti-Money Laundering Law and by the Foreign Exchange Law and the RSPs
interviewed have confirmed their compliance with the laws.
• Nowadays, in the Czech Republic some RSPs still assume credit and
liquidity risks as they disburse the funds to the beneficiary before they
themselves receive the necessary funds from the paying institution. At
present these exposures are not deemed of systemic proportion.
Notwithstanding the possible reputational risk must not be underestimated.
• In case of frauds or insolvencies the legal framework in the CR presents
some gaps that could lead to the scarce protection of the consumers of
those RSPs which are not under the supervision of the CNB.
• There is no structured coordination among RSPs and no industry code of
conduct or guidelines for governance and risk management.
TO SUM UP: The role of the Remittance Service Providers to enhance the
efficiency in the remittance market in the Czech Republic
CURRENT STATUS:
• RSPs in the Czech Republic are generally transparent about the
services offered, even though, as already mentioned, further efforts
should be done in order to make as clear as possible the real impact of
the exchange rate applied on the final cost of the transactions.
• The level of cooperation among banks or between banks and other
RSPs in Czech Republic is not particularly solid. However, it is
necessary to mention the coordination effort among 5 major RSPs and
the Cash and Payment Systems Department of the Czech National
Bank, aimed at discussing the reform of the legislation on remittance
services.
• No Code of conduct has been produced by the market on all the
aspects of the remittance business
TO SUM UP: The role of the Remittance Service Providers to enhance the
efficiency in the remittance market in the Czech Republic
CURRENT STATUS:
• Most of the RSPs are not yet organized to deal specifically with
remittance issues, and no new products, marketing campaigns, and
interactions with other business lines have been planned.
• Interviewed commercial banks, except one single case, seem not to be
particularly aware of the CPSS-World Bank General Principles for
Remittance Services and in general of the potentialities of the market
of remittances.
• In the Czech Republic, remittance recipients are not generally
considered to be attractive customers of banking and financial
services.
TO SUM UP: The role of public authorities to enhance the efficiency in the
remittance market in the Czech Republic
CURRENT STATUS:
• The MoF and the CNB are at the center of the debate on improving
remittance services and in the country, as regulators of the market and
payment system overseer, respectively. Great interest has been shown
in improving market efficiency and in increasing awareness about the
GPs.
• The CNB and the Czech Statistical Office have innovated the
methodologies applied to the estimation of the migrants and
remittances flows. In doing so they have involved the Ministries of
Labor, Commerce and Trade, Foreign Affairs, Education and Interior.
• The Ministry of Interior has increased its cooperation with foreign
counterparts in the analysis of the migration processes and in the
reduction of the criminal activities linked to it. Same work has been
done by the Financial Analytical Unit of Ministry of Finance in the field
of AML and CFT international cooperation.
TO SUM UP: The role of public authorities to enhance the efficiency in the
remittance market in the Czech Republic
CURRENT STATUS:
• The CBN has oversight powers on the payments system of the country.
The central bank might not have all the tools at the moment to oversee
fully this segment of the National Payments System
• An unstructured and sporadic cooperation has been noticed among
national authorities and international organizations, NGOs and foreign
counterparts (e.g. foreign Embassies and Consulates in Czech
Republic) to carry out systematic educational and awareness
campaigns with migrants and with their families abroad on the
opportunities offered by the market of remittances.
• The dialogue with the private sector does not seem sufficiently active.
For example, there are no cooperative bodies for this segment of the
payments system.
NEXT STEPS
SURVEY ON THE FEATURES OF THE MARKET FOR
REMITTANCES:
• Starting next spring the WB will begin collecting data among the
most important communities of migrants in the country, about
the ways in which the money is sent abroad
• The project will involve foreign embassies and consulates in the
country and will be undertaken through a specific training of
Czech residents, creating an opportunity for transfer of technical
and theoretical background on the issue
• The results of the survey will be analyzed and a detailed report
with specific statistical information and figures will be published
in autumn 2009
NEXT STEPS
NATIONAL REMITTANCES PRICE DATABASE:
•
•
•
•
•
The Ministry of Finance of the Czech Republic has agreed on creating a
national database on the cost of sending money abroad, in line with the
decision already taken by other national governments and under the
unifying methodology of the World Bank
The WB, during the next summer of 2009, will oversee the process to select
the company in charge of the data gathering, paying particular attention to
the frequency of the updates
By the end of the following autumn, the WB will oversee the collection of
new data to populate the database according to a specific methodology,
already applied to the Remittances Price Worldwide database, launched in
September, 2008, making possible the full integration of the Czech
Database with those already existing and in process of being created
The WB will also give support in the online publication, by selecting and
overseeing the companies to be appointed to this specific task
The database will be online not later than the spring of 2010. Specific
workshops will be organized at the end of the activities in order to raise
awareness by targeting migrants and their families
Thank you
Donald F. Terry
Special Advisor
Payment Systems Development Group
[email protected]