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Business and Economics > Banks and Banking

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Cover High-Level Summary Technical Assistance Reports
Bhutan: Development of an Interest Rate Corridor Framework
Oleg Churiy
and
Bernard J Laurens
At the request of the Royal Monetary Authority of Bhutan (RMA), an IMF South Asia Regional Training and Technical Assistance Center (SARTTAC) visited Thimphu during August 20-29, 2024. The mission’s objectives were to assist the authorities in setting up interest rate corridor (IRC) and operationalizing the related instruments, operations, liquidity forecasting, and collateral frameworks.
Keywords:
Monetary policy; International organization; IMF South Asia Regional Training and Technical Assistance Center; capacity development recipient; staff capacity; high-level summary; money market development; Interest rate corridor; Open market operations; Liquidity forecasting; Liquidity management
Cover Technical Assistance Reports
Bhutan: Technical Assistance Report-Development of an Interest Rate Corridor Framework
International Monetary Fund. Asia and Pacific Dept
and
International Monetary Fund. Monetary and Capital Markets Department
In August 2024, at the request of the Royal Monetary Authority of Bhutan (RMA), the IMF South Asia Regional Training and Technical Assistance Center (SARTTAC) conducted a Technical Assistance (TA) mission in Thimphu. The mission aimed to assist the RMA in establishing an interest rate corridor (IRC) and operationalizing related instruments, liquidity forecasting, and collateral frameworks. The mission identified that the RMA lacks necessary monetary policy instruments to effectively address changing systemic liquidity conditions and financial stability challenges. It emphasized the need to move away from reliance on administrative controls, as the absence of appropriate price incentives reinforces the preference for foreign exchange among Bhutanese residents, increasing pressures on the peg. To tackle these issues, the mission proposed a phased approach to introduce the IRC. Initially, relevant external and internal documents should be finalized, followed by mock operations. The first phase involves introducing a one-week main Open Market Operation (OMO), conducted weekly at the policy rate with full allotment. Automatic access to the IRC's standing facilities should be ensured. Later, fixed-quantity, variable-rate OMOs should be utilized, relying on liquidity forecasting to calibrate operations. Additionally, the mission recommended reinstating sweeping arrangements for government accounts and enhancing coordination with the Treasury to improve liquidity forecasting. These measures aim to strengthen the RMA's operational framework and enhance the effectiveness of monetary policy.
Keywords:
Monetary policy; International organization; Bhutan.; RMA money market contact group; IMF South Asia Regional Training and Technical Assistance Center; IMF's Monetary; expert of the IMF Monetary; interest rate corridor framework; Liquidity management; Interest rate corridor; Liquidity; Commercial banks; Central bank policy rate
Cover IMF Staff Country Reports
Indonesia: Financial Sector Assessment Program-Technical Note on Stress Testing and Systemic Risk Analysis
International Monetary Fund. Monetary and Capital Markets Department
The FSAP team undertook a thorough top-down corporate and bank solvency, bank liquidity stress tests as well as analysis of interconnectedness using mid-2023 data. This note covers the methodology and results of the scenario-based solvency test, the single factor sensitivity analysis, the liquidity test, and interconnectedness analysis. The stress test exercise was carried out on a sample of 105 commercial banks. The analysis is heavily dependent on supervisory data on individual banks’ positions shared by the OJK and BI as well as publicly available information on corporate sector. While FSAP results are not directly comparable to the authorities’ own stress testing results due to differences in scenarios, methodologies, and objectives, they provide an assessment of the system-wide resilience of the Indonesian banking sector at the current juncture.
Keywords:
banking sector characteristic; coverage ratio; interconnectedness ANALYSIS; capital markets department; bank credit risk; liquidity sensitivity analysis; FX LIQUIDITY ANALYSIS; Stress testing; Commercial banks; Liquidity; Loans; Securities; Global
Cover IMF Staff Country Reports
Indonesia: Financial Sector Assessment Program-Technical Note on Macroprudential Policy
International Monetary Fund. Monetary and Capital Markets Department
The 2017 FSAP focused its recommendations around strengthening and clarifying the mandates of the authorities. The FSAP noted that the multiple objectives of the organizations, together with the fact that there was no defined framework for cooperation and the separate control over prudential tools, created the risk that policies implemented by both agencies might come into conflict or have undesirable consequences and blur accountability lines.
Keywords:
IMF-World Bank Financial Sector Assessment Program; Macroprudential liquidity incentive; Indonesia FSAP; Macroprudential intermediation ratio; financing ratio; Financial sector stability; Macroprudential policy; Systemic risk; Stress testing; Global
Cover FinTech Notes
Estimating the Impact of Digital Money on Cross-Border Flows: Scenario Analysis Covering the Intensive Margin
Eugenio M Cerutti
,
Melih Firat
, and
Hector Perez-Saiz
Digital money and digital payments innovations have the potential for improving cross-border payments by reducing costs, enhancing speed, and improving transparency. This note performs an empirical analysis of the potential impact of digital money on the volume and transaction costs of cross-border payments, with a focus on the short-term intensive margin. The market of cross-border payments is very large, with retail transactions having a low share of the total but the highest transaction costs, particularly for remittances. Our illustrative scenarios assume an estimated 60 percent reduction in transaction costs and short-term elasticities to changes in costs estimated from remittances data. The results show two outcomes. First, the cross-border volume increases could be sizable for countries that are large remittance recipients and face expensive transaction costs. Second, even with a large drop in transaction costs, the short-term rise in global cross-border transaction volumes could be limited as a result of the low transaction costs of the wholesale segment. Moving outside the short-term intensive margin, the impact could potentially be much larger as digital currencies and other digital payments innovations—together with tokenization of assets on programmable platforms—could move the financial system into a transformative new era by fostering financial development and promoting further inclusion across borders.
Keywords:
Digital money; cross-border payments; transaction costs; digital payments; payments innovation; cross-border payment; scenario analysis; IMF Fintech Brownbag Seminar; IMF seminar; Remittances; Central Bank digital currencies; Anti-money laundering and combating the financing of terrorism (AML/CFT); Correspondent banking; Global
Cover IMF Staff Country Reports
Nicaragua: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Nicaragua
International Monetary Fund. Western Hemisphere Dept.
The Nicaraguan economy is experiencing robust growth. Real GDP growth accelerated to around 4½ percent in 2023 and the first half of 2024, from about 3.8 percent in 2022, on the back of robust domestic demand, while inflation is moderating. Prudent macroeconomic policies and record-high remittances sustained this performance, a decrease in the estimated poverty ratio, and also led to twin surpluses, a steady decline in debt, and the accumulation of strong buffers. Gross international reserves reached US$5.7 billion, or 7.2 months of imports, by end-October 2024. The economy remains open and resilient, after confronting multiple large shocks, and on a backdrop of transfers of private property to the state, international sanctions, and reorientation of official financing. Going forward, domestic and international political developments may impact economic performance, by potentially increasing the cost of doing business and impacting other cross-border flows.
Keywords:
update safeguard assessment; transmission mechanism; Policy coordination; safeguards recommendation; tax audit procedure; exports threshold; authority of the BCN; headline inflation; Public sector; Financial sector stability; Global; Central America; Caribbean
Cover IMF Staff Country Reports
Czech Republic: Selected Issues
International Monetary Fund. European Dept.
2024 Selected Issues
Keywords:
macro News; macroeconomics news; ECB monetary policy surprise; EU TFP frontier; inflation expectation; Automobile industry; Total factor productivity; Productivity; Asset prices; Global; Europe; Eastern Europe
Cover IMF Staff Country Reports
Bolivia: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Bolivia
International Monetary Fund. Western Hemisphere Dept.
Economic activity has slowed reflecting falling natural gas production, lower public investment execution, financial volatility, and disruptions due to socio-political tensions. Bolivia’s inflation rate remains one of the lowest in the region, sustained by price controls and costly subsidies. The combination of sizable fiscal imbalances, declining natural gas exports, a loss of access to international markets, and the ongoing monetization of the deficit in the context of an exchange rate peg have eroded competitiveness, depleted reserves, and left Bolivia in a precarious position.
Keywords:
market exchange rate volatility; authorities' action; U.S. dollar; Bolivian authorities; government's measure; Public sector; International reserves; Inflation; Global; Caribbean
Cover IMF Staff Country Reports
Samoa: 2024 Article IV Consultation-Press Release; and Staff Report
International Monetary Fund. Asia and Pacific Dept
The Samoan economy has bounced back strongly over the last two years, supported by a recovery in tourism. Fiscal surpluses, in part due to high grant flows, have helped the country emerge from the pandemic with enhanced buffers. At the same time, several longstanding and emerging factors—including lack of economies of scale, climate vulnerabilities, ML/TF concerns, delays in the implementation of public investment due to capacity constraints, and rising outward migration—pose challenges to the economic outlook in the medium term.
Keywords:
APG plenary; basket of currencies; TF risk; follow-up process; burden indicator; inflation risk; help of IMF TA; Anti-money laundering and combating the financing of terrorism (AML/CFT); Credit; Global; Pacific Islands; Australia and New Zealand
Cover IMF Staff Country Reports
Samoa: Selected Issues
International Monetary Fund. Asia and Pacific Dept
2024 Selected Issues
Keywords:
money transfer operator; sectoral risk assessment; Australia labour mobility; transaction report; remittance corridor; risk remittance product; Remittances; Anti-money laundering and combating the financing of terrorism (AML/CFT); Medium taxpayer office; Correspondent banking; Financial sector; Australia and New Zealand; Pacific Islands; Global