17 The changes in the Transition countries, where substantial privatization occurred, suggest that this process often did not occur, however. In both the Czech Republic and Russia, bank credit to public sector enterprises fell sharply from 1993 to 2000, but credit to the private sector enterprises stagnated, reflecting rises in government and central bank debt. Only in Poland among the Transition countries in this sub-sample, did credit to the private sector rise, while credit to the public sector enterprises fell. Among the other countries in the sample, in Argentina, Egypt and Peru credit to private enterprises did rise as a percent of GDP at the same time as credit to public enterprises fell. However, in Argentina and Peru, this pattern was largely due to the rise in deposits; the initial credit to the public enterprises was relatively low, compared to GDP, because of the small size of the banking system after their hyperinflations. The privatizations were accompanied by a decline of only about 1-1.5 percent of GDP in credit to public sector enterprises.

# **E.   Bank Credit to Non-bank Financial Intermediaries (NBFIs)**

Net credit from banks to NBFIs was only 1.1 percent of GDP in 2000, on average for the 25 countries (Table 3). This figure represented a rise from a negligible 0.1 percent of GDP in 1990. These average figures reflect the netting of credit from banks to nonmonetary financial institutions and loans to banks from development banks (and joint venture banks) in the IFS data.

The average numbers conceal substantial differences between regions and countries, however (Table 3). These differences are related to differences in the interaction of three broad types of financial institutions over the 1990s: development banks, other NBFIs, and universal commercial banks For the seven Latin American countries, net borrowing of the banks from nonbank intermediaries averaged about 1 percent of assets in both 1990 and 2000. However, this relatively constant figure conceals a number of different country patterns, in large part reflecting differences in the changing role of development banks.<sup>39</sup>

> 39 In Latin America, development banks were traditionally important and often much of their lending was through banks.  Reflecting this pattern, the banks in Brazil, Chile, Colombia, Mexico and Venezuela started the decade as net debtors to non-banks, i.e., net credit of banks to non-monetary financial institutions was negative, because of the importance of on-lending by development banks.  However, in Colombia, Mexico, and Venezuela during the 1990s, the banks’ holding of instruments from non-monetary financial institutions grew faster than the credit they received from development banks, in part reflecting restructurings of the financial system and the growth of NBFIs.  By 2000, banks in these three countries had become net creditors of the non-bank sector.  Only in Brazil and Chile did the net borrowing from development banks (and joint venture banks) grow relative to GDP.  Finally, in Argentina and Peru, development banks had been closed or were closing in the early 1990s and universal banking was taking hold, including the effective conversion of some development banks to universal banks.  By the end of the decade, reported net credit of banks to non-banks was zero in these two countries.