Many government-owned and managed financial institutions have been reformed and others have been privatized. Interest rates and the allocation of scarce investment resources, previously set by administrative fiat, are now determined by market forces. Outside of the banking sector, the role of the government is increasingly becoming the provision of an enabling environment to support private sector activity. The management of pension fund assets has been moved to the private sector. Markets for longer term debt and equity securities are beginning to emerge in some countries.
Financial innovation is on the rise.
Asset-backed securities for mortgages and other financial instruments are being developed to enhance liquidity. The private sector is actively involved in developing the financial innovations that can build upon earlier progress. This is being supported by a public sector that is moving forward to provide an adequate regulatory structure. Legal reforms have strengthened financial market regulators and their oversight of bank, insurance, pension and securities markets. Supervisory standards and practices are moving toward international levels, including a greater emphasis on the adoption of the Core Principles of Bank Supervision prepared by the Basle Committee.