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Swiss Sign Agreement To Help Developing Financial Centres

by Ulrika Lomas,, Brussels

24 October 2007

Swiss Secretary of State Jean-Daniel Gerber, with the State Secretariat for Economic Affairs (SECO), has signed an agreement that will result in the Swiss government contributing to a World Bank International Finance Corporation project to strengthen the financial systems of developing countries.

Under the agreement, signed jointly on Tuesday by Gerber and World Bank Vice-President Michael Klein, who is also Chief Economist of the IFC, Switzerland will contribute US$10 million to the global Financial Sector Reform and Strengthening (FIRST) Initiative.

The aim of the multilateral FIRST Initiative is to help the financial sectors of emerging, transitional and developing countries to improve their performance and stability. Advocates of the scheme believe that the creation of stable financial systems is important for strengthening economic growth potential, and for sustaining efforts to combat poverty.

The FIRST Initiative offers countries with low-to-medium income levels the technical assistance needed to monitor and regulate their financial markets. Furthermore, its global coverage and cross sector focus is meant to address interdependent problems within financial sectors, and draw upon solutions adopted in one country for use or adaptation in others, saving funds and exploiting transfer of knowledge and experience across projects.

Low income countries with underdeveloped financial sectors tend to export savings to rich countries, a trend which supporters of the FIRST scheme say is unsustainable in the long-term. One way of addressing these imbalances is to strengthen efforts in developing the Middle Income Countries' (MIC) and Low Income Countries' (LIC) financial sectors, which is a key aim of the FIRST Initiative.

SECO has also been supportive of FIRST Initiative activities in emerging markets, and noted that there are potentially strong positive spillovers from emerging markets' to low income countries' financial sector development.

The World Bank will be a prominent player, with the support of donors such as SECO, in addressing the global financial sector development agenda. A major challenge will be to strengthen further the linkages between FIRST Initiative projects and the Financial Sector Assessment Program (FSAP) jointly managed by the World Bank and the International Monetary Fund (IMF).

"As a major creditor nation with an internationally active financial sector, it is clearly in Switzerland's interest to promote stable, efficient and effective framework conditions, notably in the emerging, transitional and developing countries," SECO stated.

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