to get into shape to successfully comply with these new rules is a demanding task. so, if we take a panoramic picture of the sector in europe, what does it look like? well, first of all, we see how the landscape has been cleaned up and dangerous areas secured. the european banking sector has made progress in improving both its solvency and its governance. yet, when we zoom into the picture, we see that the landscape is still dotted with contaminated spots. obviously, the reform progress is not over. a politician would probably stop now – thereby dodging the question on everyone ’ s mind : what on earth does that mean? unfortunately, i have too much time left to stop just now. 3 what to do? what to do, then, to complete the reforms in the european banking sector? what should banks do? what should policymakers do? for one thing – many, if not most institutions must retool their business models. until the financial crisis of 2008, the credit bubble allowed banks to inflate their income to unsustainable levels. this led them to build up capacities which, from the perspective of the real economy, were not fully needed. moreover, bubble - driven profits spared them from making their organisations lean and efficient. a study recently found for the us financial market that productivity gains in the financial sector from 1900 onwards were mostly concentrated in the area of secondary trading – while the productivity of primary market activities stagnated. 1 in other words, banks need to fundamentally rethink their business models. their goal should be to achieve, over the long run, a steady stream of sustainable profits with a minimum of volatility. for this, banks need to compete with fintech companies for customers with different demand patterns on the one hand, and open up new sources of income on the other hand. at the same time, they need to increase their operational efficiency considerably. these changes to business models and operational efficiency are likely to bring about further cuts in the sector. we have seen this trend in europe for some years now. moreover, recent data and news releases on banks ’ plans to cut resources and reshape strategies indicate that this trend is ongoing. thus, the sector is on a path towards a size and structure that will be sustainable in terms of the real economy ’ s needs. yet to be clear, this can take many forms. we should not reduce this debate to a simple “ we need fewer small banks ” – more market

and the world bank – to introduce a credit reference bureau in uganda. our development partners have helped to subsidize the credit reference bureau system in its initial phase of operation. although the services of the credit reference bureau are provided to private enterprises, driven by the profit motive, a subsidy in this case was warranted because of the social benefits which a well functioning credit reference service can generate, which exceed the private benefits accruing to individual financial institutions. nevertheless, now that the institutional framework for the credit reference service has been established, the costs of providing credit reference services will fall and hence there will be much less of a need for ongoing subsidy. in the three and a half years since compuscan commenced credit reference bureau operations in uganda, in may 2008, great progress has been achieved. all supervised financial institutions – commercial banks, credit institutions and deposit taking microfinance institutions – are participating. a total of 640, 000 financial cards have been issued to the customers of financial institutions ; these are all borrowers or prospective borrowers. nearly bis central bankers ’ speeches 50, 000 credit enquiries are made to the credit reference bureau every month. furthermore, strong safeguards have been built into the system, stipulated through regulations issued by the bank of uganda, to protect the accuracy and confidentiality of information given to the credit reference bureau and to ensure that it is only used for the purposes for which it is intended. to remain competitive, credit reference bureaux worldwide must not stand on their laurels ; they must introduce innovative services to meet the evolving needs of their clients. compuscan is currently introducing a credit scoring system which is intended to facilitate quicker and better decision making by the participating financial institutions. we are now nearing the end of the first major phase of credit reference bureau operations in uganda. looking ahead, we hope to expand the scope of coverage of the credit reference bureau to include credit providers which are not supervised financial institutions ; for example utility companies, mobile phone companies and saccos. we will also open up the market for credit reference services to competition after september 2012, when the rights of compuscan to be the sole credit reference bureau expire. competition should benefit customers of the credit reference services because of the incentives it will give service providers to reduce costs and introduce new products. i would like to commend compuscan for its achievements over the last three and a half years in successfully launching the credit reference bureau in uganda and for now introducing the credit scoring system.