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As Prepared for Delivery
WASHINGTON - Good morning and thanks so much to Standard & Poor's for inviting me here today. I am especially pleased to participate in the launch of this report because accelerating financial inclusion and financial literacy -- in both the United States and in developing markets -- is such a high priority for the U.S. Treasury Department. At Treasury, and across the Administration, we are focused on a simple equation: financial inclusion plus financial literacy results in financial capability. Together, these two parts of the equation – inclusion and literacy – are key to helping more people join our global financial system in ways that add strength and vibrancy to the broader economy.
While we have made good progress in advancing financial capability in recent years, today's study points to the enormous amount of work that is still to be done. Treasury remains committed to using all of the tools at our disposal - domestic, bilateral, and multilateral - to promote financial capability both at home and abroad. Indeed, we feel so strongly about the matter that in two weeks, Treasury Secretary Jack Lew will be welcoming high level representatives of governments and industries from around the world to join us here in Washington for the U.S. Government Financial Inclusion Forum at the Treasury building [and streaming online via the Treasury website, www.treasury.gov.] So today’s discussion is both welcome and timely.
Let me start by discussing what we are doing domestically, since financial capability is an issue that we grapple with in the United States. We know that far too many Americans are ill-prepared to make informed financial decisions – a problem that is compounded by the complexity of our financial system. We also know that young people are more likely to operate outside of the traditional financial system, and less likely to possess the knowledge and experience that they need to make informed financial decisions. Recognizing this reality, and the awareness that the challenge of financial capability is easier to address while young, President Obama created the President’s Advisory Council on Financial Capability of Young Americans.
The President's Council explored ways to equip all American youth with the knowledge, skills, and tools necessary to make sound financial decisions. It made a series of recommendations that Treasury and its partners across the government are now working to implement through the Treasury-chaired Financial Literacy and Education Commission.
In just the past year, Commission members have developed financial education curricula for social service and youth employment programs, worked with regulators to encourage banks and credit unions to provide children’s savings programs, and partnered with the Department of Education to help young people make smart decisions about student loans. The Commission is also exploring financial education in the workplace by assessing ways to help federal employees understand and use their retirement savings options. I recommend checking out the Commission's website, www.mymoney.gov.
Turning from the domestic to the international sphere, Treasury is committed to improving financial capability beyond our borders, by using a variety of tools that we have at our disposal.
First, Treasury’s Office of Technical Assistance, or OTA, places advisors at finance ministries, central banks, and financial regulatory agencies of developing and transition countries around the world. This 25-year old program provides advice on core public financial management - areas such as tax policy, budgeting, debt management, and anti-money laundering. Additionally, in recent years OTA has begun to work with partner developing countries to strengthen financial education and literacy, as part of a broader effort to promote access to financial services for underserved populations. To date, OTA has helped develop financial literacy programs in Central and South America, and is now set to expand to countries in Africa and South East Asia as well.
Treasury also works closely with the multilateral development banks in promoting financial literacy through both their research and their lending. As just one example, over the past decade, the World Bank has conducted diagnostic reviews in 30 countries of the legal, policy and institutional framework for financial consumer protection and financial literacy. This in-depth data helps to guide the efforts of low- and middle-income countries as they work to strengthen their financial consumer protection and financial literacy frameworks.
The multilateral development banks also incorporate financial literacy directly into the loans that they make to their client countries. For example, the World Bank frequently includes financial literacy components in its education, finance, and social protection projects. For example, in Uganda, the World Bank (through its private sector lending arm, the International Finance Corporation) supported a line of credit at a local bank for lending to small- and medium-sized enterprises, and included a tailor-made education program for bank staff and the female entrepreneurs who were the project's main beneficiaries. The training covered basic financial concepts as well as specific banking requirements, separation of business and personal accounts, and peer mentoring. The European Bank for Reconstruction and Development has trained more than 160,000 people in six countries in Central Asia in basic financial literacy. And, the Inter-American Development Bank has made financial literacy for small- and medium-sized enterprises a priority in its lending that is focused on enhancing the business climate within Latin America and the Caribbean. Treasury strongly supports these activities, especially when coupled with robust evaluations to determine which projects and programs are most effective in improving financial literacy.
At Treasury, we also look to leverage the power of multilateral bodies to advance our financial literacy agenda. At the G-20 Summit that was held this past weekend, the leaders of the world’s largest economies reaffirmed their commitment to improving access to financial services for the poor, including by promoting successful regulatory and policy approaches to financial access, financial literacy, and consumer protection.
A particular area of regulatory focus is the new technologies that are rapidly changing the face of financial services across the globe. We all know that digital technology and new business models allow the financial sector to reach more people, in more remote places, and at a lower delivery cost, than ever before. But, as governments, it is incumbent on us to ensure that our regulators have the right tools to oversee technologically sophisticated instantaneous transactions, new non-bank payments providers, new digital business models such as crowdfunding, and the growing use of pooled funds accounts that alter our traditional approach to deposit insurance. Consumer protection in this fluid environment will require smarter government oversight and greater transparency around fees, consumer rights, and recourse. And, getting back to today's theme, it will require that citizens also understand their rights in this new financial landscape.
In closing, I want to again thank Standard & Poor's, and your partners at Gallup, the World Bank, and George Washington University, for the report that you have released today – and also for your commitment to financial literacy. At Treasury, we look forward to working with all of our partners – consumers, financial service providers, regulators, foreign governments, and the multilateral development banks – to continue to strengthen financial literacy worldwide in the years to come.
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