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International Monetary Fund
This paper presents the first set of Poverty Reduction and Growth Trust (PRGT) borrowing agreements that have been signed to respond to the unprecedented demand for concessional financing during the COVID-19 pandemic. A fast-track loan mobilization round has been instrumental to allow the Fund to raise access limits and scale up emergency financing to low-income countries (LICs). The new agreements and augmentations of existing agreements that have been finalized are from Belgium, Brazil, France, Japan, the Netherlands, Norway, Spain, Sweden and the United Kingdom. Together, these agreements provide a total of SDR 10.6 billion in new PRGT loan resources for LICs.
International Monetary Fund. Monetary and Capital Markets Department
This technical note presents risk analysis of banking and insurance sector in France. The assessment is based on stress tests, which simulate the health of banks, insurers under severe yet plausible (counterfactual) adverse scenarios. The stress tests reveal that banks and insurers would be resilient against simulated shocks, although some challenges remain. French banks have improved their capitalization and asset quality; however, profitability remains challenged. The report also highlights that profitability is pressured on both the income and expense sides. Banks’ ability to generate higher interest income is constrained by persistently low interest rates, and market businesses including trading activities have contracted in recent years. Growth-at-risk (GaR) analysis shows that the biggest contributing factors to the risk of growth are cost of funding and stock market prices. Financial conditions continue to tighten gradually since mid-2017; though the overall conditions remain accommodative. Risks stemming from loans to households seem to be contained over the short- to medium-term horizon, given relatively strong households’ balance sheets, no evidence of significant misalignment in house prices, social safety nets, and fixed interest rates.
Eric Monnet and Mr. Damien Puy
Why did monetary authorities hold large gold reserves under Bretton Woods (1944–1971) when only the US had to? We argue that gold holdings were driven by institutional memory and persistent habits of central bankers. Countries continued to back currency in circulation with gold reserves, following rules of the pre-WWII gold standard. The longer an institution spent in the gold standard (and the older the policymakers), the stronger the correlation between gold reserves and currency. Since dollars and gold were not perfect substitutes, the Bretton Woods system never worked as expected. Even after radical institutional change, history still shapes the decisions of policymakers.
International Monetary Fund. Monetary and Capital Markets Department
This Technical Note analyzes the key aspects of the regulatory and supervisory regime of banks, insurance companies and financial conglomerates (FCs) in Belgium. The regulatory framework for Belgian financial institutions has been strengthened substantially since the 2013 Financial Sector Assessment Program. Notably, new national banking and insurance laws have been issued, the Bank Recovery and Resolution Directive and amendments to Financial Conglomerate Directive have been transposed, Solvency II has been implemented, and the National Bank of Belgium has been designated as the macroprudential authority. This has improved significantly the regulatory framework and broadened its scope to better address the challenges posed by FCs. Financial sector supervision has also been upgraded markedly.