February 2009 prem 4 Africa Region
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- The Human Resources System
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The Assets SystemDGPE will be the central structure of the Assets System, which will have as its main objective the administration of state assets. The System will cover, among other elements, the incorporation, maintenance, inspection, and alienation of property, and DGPE will have the following main responsibilities: Administer state holdings and see to their maintenance. Adopt the necessary measures to promote regulation of state assets. Promote control, inspection, and maintenance of such State property as is used to promote public service. Establish norms for utilization and rationalization of state property used to promote public service. Incorporate holdings into state assets. Promote, directly or through third parties, evaluation of state holdings. Promote alienation of state property that is not used to promote public service, in accordance with current legislation. See to the rental and leasing of state holdings. Authorize the occupation of state property as established by law, promoting the respective registration. Establish the guidelines that authorize use of State property. Undertake the steps needed to promote the acquisition of property beneficial to the state. Adopt the necessary administrative procedures to discriminate, reclaim, and reintegrate state property. Oversee the use of common-use public goods by adopting the necessary inspection procedures. Promote the donation or free cessation of state property when in the public interest. Undertake the demarcation and identification of state property; formulate a policy relative to registration of state property, elaborating the plan and incorporating generic values. Formulate the policy of administrative and patrimonial collection by executing, in accordance with the law, the necessary actions to optimize its collection. Maintain under its control and responsibility the legal documents, titles, and other processes linked to state property under the domain of or owned by the state. The Human Resources SystemThe main objective of the Human Resources System will be to propose the formulation of policies and guidelines for the administration of human resources. In the Cape Verde administrative structure, it would be important to have a specific entity in charge of: Exercising normative responsibility insofar as the public human resources are concerned. Proposing formulation of policies and guidelines for administration of human resources, including such elements as social security, benefits, labor relations, career trajectory, remuneration, size of labor force, and implementation of public competition. Planning, supervising, and providing orientation regarding activities related to human resources in the state. Proposing and implementing actions with providers, insofar as the administration of human resources is concerned. Implementing human resources auditing activities, as well as data analysis, monitoring, and supervision aiming at identifying irregularities in the implementation of the legislation on human resources management. Annex 3: The Risks of a Payment System To better evaluate the need of the Treasury to participate in the clearinghouse, it is necessary to understand the internationally accepted standards regarding payment systems. A payment system can be considered as the group of rules, procedures, instruments, and operational systems that act in an integrated way to transfer resources from the payer to the recipient, with the objective of closing a specific obligation existent among the parties. Such systems act by linking the payment orders issued by the nonbanking agents, the banking institutions, and the Central Bank.124 Note should be taken that, with the exception of payments made in kind, the majority of the other financial transactions—done through checks, credit cards, electronic transfers, or credit documents—are transformed into a few interbank transfers of high value against the account holding the banking reserves that each bank keeps at the Central Bank. Every payment system must be constructed to minimize risks. The biggest source of risk in the payment process is the difference between what is established in the contract and settlement of the operation. That difference generates the possibility of the other party becoming insolvent before the settlement occurs. This means that the debtor party becomes a defaulter before repayment of commitments. This is what constitutes the so-called credit risk. When this happens with a financial institution, beyond the credit risk there also is the image risk toward its clients and the market. It can happen that the owing entity will pay with a small delay, which forces the crediting institution to finance its temporary imbalance (liquidity risk). Such fact can cause instability in the bank’s Treasury, forcing it to look for funding in the market. The risk of liquidity together with credit risk can result in a third risk: the systemic risk. This occurs when an unstable situation leads to a domino effect, causing the institution that is supposed to receive a payment to refrain from paying its own commitments and so on in the same chain. For banking institutions that could have an effect on several or all of the financial institutions linked to the payments system, which means that even these banks that are not directly linked to the initial problem could suffer the consequences of a chain reaction. Another source of risk is created when the design of the legal basis sustaining the payments system does not guarantee the conclusion of payments as established in the contracts, according to the principle of irrevocability and non-conditionality of transactions. This is the so-called legal risk. In reality, international literature indicates other risks for the participants in the payments systems. However, in general, risks can be classified into three different categories: operational, legal, and financial, as shown in Table 1. Table 1: Main Risks of Payments Systems
Selection of the payments system must have the objective of creating a structure that resists the noncompliance of one or more participants. It is crucial not to transform the monetary authority (in this case, the Central Bank) into the hostage of a systemic risk. To that end, it is necessary to monitor, administer, and minimize the risks. Therefore, as a general rule, the setup of a good payments system aims at minimizing the risks of non-settlement of the contracted transactions. The first element to take into consideration is the period from contracting to settlement, which should be the shortest possible. In summary, reducing the possibility of losses while the payment hasn’t become final, before the effective transfer of resources between the banks involved, and on the other side, the transfer of goods, service, or negotiated asset is the key rule of a good payment system. Keeping in mind that the environment in which the transactions in the financial system occur is a potential source of disturbances, these guarantees are essential for the stability of financial markets. The main risk control mechanisms currently adopted in a system of settlements originate in the experiences of countries that constitute the G-10 and the recommendations of international organizations that operate in that area (the World Bank, IMF, and BIS). It begins with the creation of a system for interbank transfers of large amounts (Large-Value Transfer Systems, or LVTS), taking a robust system to a higher degree of protection, so that it is responsible for these payments that are associated with a high potential for systemic risk. In these systems, choice of the settlement form is conditioned by the choice of reducing the difference between settlement and minimal cost, represented by the lower demand for reserves. The option will lie between systems that settle imbalances through the multilateral net value (Deferred Net Settlement, or DNS) and systems that settle for the gross value in real time (Real-Time Gross Settlement, or RTGS). Management of the systemic risk associated with financial transfers between institutions can be facilitated by introduction of transfer systems for large amounts that segregate transactions involving large amounts. There are several types of such systems; they differ in the way that the values to be settled are computed, as well as the time at which this settlement occurs, as indicated in table 2. Table 2: Types of Transfer Systems for Large Amounts
n.a. = Not applicable The System of Deferred Settlement through the Net Multilateral Value (Chamber) reduces the opportunity cost of maintaining idle rabbets by the participants, decreasing the liquidity risk. Payment instructions are settled at the end of the period with the transfer of the net multilateral value of these instructions. The main advantage of the LDL systems is the so-called low demand for banking reserves because the multilateral compensation of the values among participants reduces the volume of resources to be transferred. If the differed settlement through the net value decreases the liquidity risk, the difference in settlement times creates an implicit credit concession from the receiving to the paying institution, which exposes the participants to credit risk. One way to solve that problem is to implement mechanisms that facilitate the conclusion of payment even before the transfer of resources to the Banking Reserves account. Some examples of such mechanisms include the bilateral and multilateral limits for risk exposure, the establishment of guarantees, and rules for spreading the losses in situations of noncompliance of one or more participants. The guarantees play the role of covering the exposure of a participant to credit risk. Usually the minimum guarantee is calculated as a percentage over the total of the highest bilateral limit open to the participant. The rules for spreading losses are concerned with the way the value owned by the participant declared insolvent by the chamber is divided. In the Settlement System by Gross Value in Real Time (RTGS), the liquidity risk is high because for the settlement of operations, the banking reserves accounts are immediately affected. Because the payments concern large amounts and are settled in gross, this type of settlement requires greater banking reserves. The liquidity risk can still occur when, at the time established as per contract for the settlement, the entity responsible for the payment does not release the funds, either in the form of idle rabbets or in the form of credit granted by the Central Bank. However, it is possible to eliminate the settlement mismatch, together with the credit risk, by ensuring the conclusion of payments throughout the day, thus reducing the potential for systemic risk. It is fundamental to create mechanisms to respond to the need for higher liquidity to prevent checking problems in which the lack of resources to comply with a payment prevents a substantial number of other instructions from being discharged, increasing the possibility of liquidity risk. Annex 4: Evolution of Formula Based Transfer per Municipality Size S  ee first series of figures with amounts
Another consequence of the change in the formula seems to be that largest municipalities receive a higher share of the total amounts transferred. (see second series of figures). Annex 5: Revenues for Five Municipalities The following Figure shows, in volume, the composition of revenues for five municipalities, broken down into own resources, central government transfers and loans. 
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