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International Monetary Fund. European Dept.
Context. The global financial crisis and international efforts to address preferential tax regimes exposed the vulnerabilities of San Marino’s oversized financial sector servicing nonresidents. While the banking system entered a deep crisis in 2008 and continues to struggle, the nonfinancial sector has experienced a recovery underpinned by cost-competitiveness and strong corporate balance sheets. More recently, prudent fiscal policies, access to international capital markets and favorable external conditions improved the public finances and boosted confidence. As a result, the economy has been remarkably resilient throughout the pandemic and Russia’s invasion of Ukraine. Despite volatile financial conditions, the government was able to rollover the Eurobond maturing next year. However, San Marino is a microstate subject to very high volatility and financial sector vulnerabilities remain, suggesting that larger-than-usual fiscal buffers are needed.
International Monetary Fund. European Dept.

1. The global financial crisis (GFC) and international efforts to address preferential tax regimes triggered a major crisis that ended San Marino’s banking business model. This was based on an oversized financial sector servicing nonresident. The banking crisis had major spillovers on the nonfinancial sector that were magnified by the blacklisting of San Marino as a jurisdiction with a preferential tax regime during 2010–14. The crisis lasted from 2008 to 2014 when the financial sector lost 80 percent and the nonfinancial sector lost 15 percent of the value added.

International Monetary Fund. European Dept.

The authorities of the Republic of San Marino express their appreciation for the cooperative discussions held with Fund staff during the Article IV consultation. They broadly concur with the staff’s analysis and will continue to rely on the Fund’s recommendations to strengthen economic growth, safeguard financial stability and maintain sound public finances. The authorities welcome the staff’s recognition that their policy efforts have been instrumental to boosting long-term growth perspectives and increasing the resilience of the economy to shocks.

Brian Kwok Chung Yee and Darja Milic
This paper presents the report on the financial soundness indicators (FSI) and monetary and financial statistics (MFS) technical assistance mission in San Marino. The mission reviewed and updated the bridge tables that are used to compile the FSIs for transmission to the statistics department (STA). Source data for compiling FSIs for commercial banks are adequate and generally meet the criteria established by the 2019 FSIs Guide for publication in the IMF’s FSI data portal. The mission also recommends updating the metadata accompanying the publication of revised FSIs. Because of the mission, the Central Bank of San Marino should be able to implement the new FSI Standardized Reports, FSI Institutional Coverage and FSI Metadata. The mission also reviewed the treatment of banks in liquidation in the compilation of MFS, particularly the recent case of banks in suspension of payments. A timeframe for reporting new FSI report forms and revised MFS data to STA has also been discussed and agreed on with the authorities.
International Monetary Fund. Western Hemisphere Dept.

Measuring reserves and assessing international reserves adequacy in fully dollarized