Hi I’m Pabsy Pabalan here at the World Bank headquarters in Washington DC. Are you familiar with the term trade-offs? For instance I have a holiday budget, so should I buy expensive gifts for a few people? Or should I buy more affordable items so I could include more relatives and friends? That’s a trade-off. Countries and governments have to make the same choices too, but of course it’s a bit more complicated. I’m meeting with David Gould to discuss a new flagship report on the financial development of the emerging Europe and Central Asia. Right here. The title of the report is “Risks and Returns in Emerging Europe and Central Asia.” Why is that? Well, we titled it “Risks and Returns” because rarely is there a free ride when it comes to financial sector development. We divide financial development into four parts as you mentioned. Stability which would include the lack of banking crisis obviously but also the volatility and credit and deposits in a country. Efficiency, how efficient the banking and capital markets are in transferring savings into actual investment. Depth which would include bank as well as non-bank assets and the size of the financial sector as a whole. And inclusion, how firms and individuals participate in the financial sector. Stability and inclusion are particularly important because inclusion is one of the most key and critical factors for influencing growth of the bottom 40%. But having too much inclusion might actually decrease stability as we saw during the US subprime crisis we have a lot of mortgages you get instability. Also in Europe with the foreign denominated mortgages, a lot of those mortgages went belly-up when the Swiss franc appreciated. So inclusion is really important but you have to balance that out with stability as well. Can other countries use this tool kit and how? When a country looks at these four different aspects of financial sector development they want to map out where they are on stability where they are on inclusion so they might be right here on inclusion, they might be relatively high on depth, maybe somewhere in the middle on efficiency and they can see exactly how they rate, relative to a benchmark. And we have a benchmark of the top countries and it may be that this country is relatively good on stability perhaps they’re some what moderate on depth. That can pair the benchmark relatively in line with efficiency, maybe a little bit underneath what the benchmark would say. And they can say okay what we want to do is we want to improve efficiency we want to get to the benchmark or the best performers in that regard but we need to maybe focus most on inclusion. And that by looking at where they are looking how each of these aspects influence growth they can come up with a strategy for financial sector development. And in that way they can improve their growth bottom 40 as well as overall growth. Thanks so much David. I learned a lot. And for you guys, to learn more how countries manage trade-offs check out our website. Again thank you for your time. It was a pleasure Pabsy, thank you. I hope you liked that video. For more videos you can check these out. And don’t forget to subscribe to our YouTube channel. Do it now. Do it.