In July 2005 the World Bank and Italy joined in a partnership to promote financial sector modernization in South-East European (SEE) countries through micro-regulatory reforms designed in partnership by authorities and market participants, under the aegis of the newly-established “Convergence” Program (Convergence).
The "Convergence" concept was first floated publicly at the May 2003 meeting of the Governors' Club of the Balkans, Black Sea and Central Asia, hosted by the National Bank of Romania. It was mentioned in the keynote speech at the SUERF 2003 Colloquium in Tallinn (Estonia). Follow-up discussions with country delegations took place during the 2003 WB-IMF Annual Meeting in Dubai.
Encouraged by strong committment by regional Governors, Italy pledged support to Convergence during the October 31, 2003 meeting with South-East Europe Ministers of Finance held in Venice in the context of Italy's EU Presidency.
The 6th Supervisory Board meeting of the Center of Excellence in Finance, held in May 2004 in Brdo (Slovenia), with the participation of senior Ministry of Finance and Central Bank officials, offered another important public venue to discuss the pre-launch arrangements of the Convergence Program, in the context of a proposed partnership with CEF.
The Convergence Program’s policy focus is informed by a recent statement by an ECB Executive Board member:
“Financial modernization refers to the process of financial innovation and organisational improvements in the financial system that reduces asymmetric information, increases the completeness of markets, increases opportunities for agents to engage in financial transactions through (explicit or implicit) contracts, reduces transaction costs and increases competition”.
Financial modernization requires a set of sophisticated analytical, organizational and consultation skills as found in high-performing societies. Convergence has reviewed the organizational features and analytical capabilities of the Italian Banking Association (ABI), as an example of a market participant organization engaged in close dialogue with authorities. Prof. Francesco Cesarini discussed his Report in a roadshow in the region, with presentations to the banking communities in Croatia and Romania in February 2006 and Albania in April 2006.
In an address at the "Armenia: Financial Sector Development - Directions and Challenges" conference held in Tsakhkdzor on May 29, 2005, the Head of Convergence articulated the case for the need also for authorities in transition and emerging countries to engage with market participants in policy design.
Initially defined in a brochure prepared in February 2006, Convergence fulfils its mandate by operating at two levels:
it promotes the establishment and supports the activities of a high level public-private country steering committee that sponsors analyses of micro-regulatory changes as an input into official regulatory action decisions
it supports these analyses done by public-private working groups through a local technical secretariat, with the support of outside experts if needed.
Through its activities, Convergence aims to foster both an analytical culture on financial policy matters in SEE countries and a collaborative approach between authorities and market participants.
Convergence is active in Albania, Bulgaria, Croatia, Romania and regionally.
After outlining the business plan approach in October 2004, the Convergence Program management team had a first meeting in January 2005. The management set out high-level objectives, identified issues and challenges, and set out the rules of engagement with authorities and market participants.Its honest-broker vision connecting various constituencies is mapped in this Table. In March 2005, it prepared the Launch Brochure ahead of discussions during the WB-IMF Spring Meetings in April 2005. In June 2005, the Convergence management team undertook a study tour of major European Banking Associations (visit report).
Convergence’s effectiveness is based on four pillars:
strong implementation orientation (success measure is regulatory changes enacted - not studies);
practical focus (targeting regulatory changes that make a measurable difference on financial intermediation, via extensive RIA);
market-friendliness (sourcing micro-regulatory reform issues from both authorities and market participants)and
flexible cooperation arrangements with several technical partners
Its short-term success is measured by the volume of regulatory changes enacted through this public-private consultation mechanism. Its medium-term success is measured by the progressive build-up of analytical activities within the market participant community.
Convergence’s mandate is accomplished when local public and private stakeholders have developed the analytical, organizational and consultation skills that will sustain continuous financial sector fine-tuning reforms under local ownership, as practiced in the EU context.
Convergence Program has released a Handbook on "How to Launch and Run an SPI Platform". The Handbook contains a rich collection of practical documents on the Romanian and Albanian experience. It is intended to serve as a guideline to promote and operate similar sustainable financial sector modernization programs in other regions of the world. The financial crisis response note, released in January 2009, sets the context and provides the rationale for a wider roll-out of the SPI Platform.
Luigi Passamonti - Is the Founder and Head of the Convergence Program. He worked hard to build this
program because he realized that authorities and bankers could achieve a great
deal in terms of modernizing financial systems in many emerging and transition
economies by joining forces with the help of an “honest broker” with a gift for
analysis and compromise.
Riccardo Brogi- Riccardo brings to Convergence his pioneering experience in designing Regulatory Impact Assessment analyses at the Italian Banking Association where he applied Law and Economics methodology to all policy interventions he worked on. His main fields were as follows: insolvency law, real estate enforcement procedures, positive information sharing and credit bureau with privacy implications, corporate governance.
Rumyana Uzunova -is the Office Manager in Rome. She was responsible for the control of smooth handovers and concordance of activities with the bank regulations both in Rome and in the countries where Convergence is active.
Convergence Contact Details:
c/o World Bank Rome Office
via Labicana 110 - 00184 Rome, Italy
phone +39 06 77710 201