- a. Other OECD countries include only OECD countries outside the World Bank regions.

- _b._ Only 12 of these countries have an objective or plan for the financial sector development in the NDP.

In our postulation, a well-formulated strategy sets development targets that take into account the associated risks and communicates the country’s systemic financial risk appetite (tolerance). In our assessment of strategies—that is, the document or set of documents that represents a national strategy for the financial sector—we asked the yes/no questions listed in the first column of table 6. We have assessed the national strategies for those questions using 0/1 values for no/yes, respectively.

## **[Table 6 about here]**

The evidence from our review of strategies indicates that only 65 percent of countries have financial sector strategies with clearly identified goals and that only 27 percent of our sample countries have a quantifiable indicator included in their statement of objectives. In addition, only 56 percent of strategies identify policy tools to support achievement of their goals, while the remaining 44 percent lack any credible policy support. Although most strategies refer to systemic risk in general terms (88 percent), fewer (38 percent) refer to specific indicators of systemic risk, and only about half the strategies (51 percent) identify policy tools for maintaining systemic risk in the financial systems at an acceptable level.

We further investigate whether the national financial sector strategy clearly assigns the implementation of the targeted financial development at the (identified) acceptable level of systemic risk to individual government agencies in accord with their mandate. For instance, the ministry of finance (or economy) could be responsible for financial development and the central bank for systemic risk supervision (as in Kazakhstan or Moldova). In their financial sector strategies (table 6), the majority of countries (85 percent) broadly identify the implementing government agencies based on their overall mandates. However, less often countries clearly assign responsibility to specific government agencies for implementation of measures to achieve development goals (53 percent) and to maintain systemic risk at an acceptable level (54 percent) in their financial sector strategy.

Only 26 percent of countries have financial sector strategies that discussed specific trade-offs between their financial development goals and management of systemic risk in the financial sector, despite the commitment of many countries to both financial development and systemic risk management (54 percent) within the same strategy document. Overall, 42 percent of countries committed to both advancing financial development and managing systemic risk but did not consider any trade-offs between the two goals. While the strategies involved rich numerical analysis of recent developments in the sector, in general, there was a weak use of quantifiable data in their forward-looking objectives.

# **4. Stylized Facts Based on Country Characteristics**

Table 7 shows summary statistics of our survey data based on country characteristics: the level of development (average gross national income per capita over 2007–11), public governance (regulatory quality of public governance in 2011), financial depth (average credit-to-GDP ratio over 2007–11), financial structure (average share of bank assets in total financial sector assets), financial inclusion (index of access to financial services in 2005 by Honohan 2008), and crisis experience (based on Laeven and

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