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National development banks (NDBs) have an impressive calling card: they can drive inclusive economic growth, support both innovation and infrastructure essential to sustainable development, and catalyze transformative solutions for addressing market failures.

But fully realizing their potential requires strong governance, clear mandates ¨C and more.

At a May 26 workshop hosted by the Vienna Development Knowledge Center, policymakers and financial regulators from Europe and Central Asia ¨C as well as World Bank experts ¨C came together to share insights and best practices related to NDBs and competition policies in the financial sector.

The goal: to support regional authorities in their efforts to establish effectively run NDBs by fostering knowledge-exchange and collaboration across borders.

Participants included countries in the Western Balkans, as well as Armenia, Georgia, Moldova, Ukraine and Uzbekistan, who engaged in lively Q&A¡¯s following a series of panel discussions.

Mostly government-owned or controlled financial institutions with a policy-driven mandate, NDBs can play a key role in promoting inclusive economic growth, driving innovation and financing essential investment projects that support sustainable development. While lending is their primary function, they also offer a range of financial instruments, such as guarantees and equity investments, alongside advisory services.

Not all countries in Europe and Central Asia (ECA) have a national development bank, and among those that do, their mandates, governance and capacity vary widely.

During the workshop, participants, some of whom were in the process of setting up or developing their country¡¯s NDBs, heard firsthand from both long-established and much younger counterparts, making connections to continue conversations and cooperation.

¡°It is beneficial to hear different perspectives from other countries to find the best solutions for us,¡± said Nata?a Rai?evi? of Montenegro¡¯s Central Bank. ¡°We use this opportunity to communicate bilaterally and make contacts. It's the kind of communication that can't be substituted by a phone call or an email.¡±

Ownership and regulation

An initial interactive panel discussion on NDBs from an ownership perspective ¨C including mandates and their continuous evolution ¨C kicked off with a presentation from the Word Bank global team on NDBs¡¯ good international practices.

It featured insight from representatives of Germany¡¯s and T¨¹rkiye¡¯s long established development banks, KfW and TSKB, as well as a senior official from Romania¡¯s Ministry of Finance who recounted his country¡¯s recent decade-long experience setting up such an institution.

A second panel explored regulatory and supervisory frameworks applicable to NDBs, with the World Bank regional team setting the stage for discussion with a presentation on the regulatory practices of NDBs in Europe.  

Panelists from the National Bank of Romania, the Czech National Bank and, appearing via live video link, the Central Bank of Malaysia, then shared their respective takes on the topic. In the Czech case, for example, this included a presentation about the transformation and redesign of the NDB¡¯s business model and regulatory approach.

Policymakers and regulators in dialogue

Participants then joined competition authorities from the Western Balkans for a session on Competition and Financial Stability.

Among the issues discussed: How competition authorities and financial regulators can ensure a level playing field between traditional banks and new financial market actors such as digital platforms. Cooperation and knowledge-sharing was a central theme throughout, with countries outlining their experiences openly.

"I really enjoyed the event dedicated to the design of national development banks and the interaction between competition and financial regulators,¡± said Klodion Shehu, who heads the Financial Stability Department at the Bank of Albania.

¡°It highlighted the importance for public authorities to have clear objectives, flexible tools to meet them, and strong incentives to cooperate for overcoming challenges and maintaining financial stability.¡±

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 by Finance in Common