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Business and Economics > Banks and Banking

You are looking at 1 - 10 of 200 items for :

  • Type: Journal Issue x
  • Insurance; Insurance Companies; Actuarial Studies x
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Cover IMF Working Papers
Implementing Risk-Based Solvency for Insurers—Lessons from Kenya, Mexico, and South Africa
Peter Windsor
,
Suzette J Vogelsang
,
Christiaan Henning
,
Kerwin Martin
,
Elias Omondi
,
Gerardo Rubio
, and
Jooste Steynberg
International standards and best practice supports the implementation of a risk-based solvency regime in the regulation and supervision of insurers. Several emerging market and developing economies are transitioning to such a solvency regime or planning to do so. This paper discusses Kenya, Mexico, and South Africa’s journey to putting in place a risk-based solvency regime which had several common elements notwithstanding significantly different insurance sectors. The transition was a multi-year project requiring dedicated additional resources; restructuring of the regulator, including redesigning supervisory processes and tools and upgrading information technology systems; and significantly greater coordination between the regulator and the insurance industry.
Keywords:
Insurance; Risk-based Solvency; Risk-based supervision; solvency regime; Penetration rate; RBS project; solvency assessment; RBS implementation; supervision of insurer; Insurance companies; Solvency; Financial statements; Africa; Global
Cover High-Level Summary Technical Assistance Reports
India: Review and Evaluation of the Reserve Bank of India’s Stress Test Model Framework
Marco Gross
and
Wei Sun
This report provides a brief summary of the purpose and findings of a technical assistance (TA) mission that was intended to review and evaluate the Reserve Bank of India (RBI)’s stress test model suite, which took place in April 2023. The RBI’s model suite was found to be strong and well developed in numerous respects. The most noteworthy recommendations pertain to credit risk, market risk, and macro-financial scenario design. A detailed list of 28 recommendations spanning all areas was left with the RBI. A detailed TA report accompanies this brief summary report.
Keywords:
Bank solvency risk analysis; liquidity risk analysis; contagion analysis; stress test model framework; IMF team; RBI's model suite; TA mission; summary report; Stress testing; Market risk
Cover IMF Working Papers
Macro-Prudential Stress Test Models: A Survey
David Aikman
,
Daniel Beale
,
Adam Brinley-Codd
,
Anne-Caroline Hüser
,
Giovanni Covi
, and
Caterina Lepore
In this paper, we survey the rapidly developing literature on macroprudential stress-testing models. The scope of the survey includes models of contagion between banks, models of contagion within the wider financial system including non-bank financial institutions such as investment funds, and models that emphasise the two-way interaction between the financial sector and the real economy. Our aim is two-fold: first, to provide a reference guide of the state-of-the-art for those developing such models; second, to distil insights from this endeavour for policy-makers using these models. In our view, the modelling frontier faces three main challenges: (a) our understanding of the potential for amplification in sectors of the non-bank financial system during periods of stress, (b) multi-sectoral models of the non-bank financial system to analyse the behaviour of the overall demand and supply of liquidity under stress and (c) stress testing models that incorporate comprehensive two-way interactions between the financial system and the real economy. Emerging lessons for policy-makers are that, for a given-sized shock hitting the system, its eventual impact will depend on (a) the size of financial institutions' capital and liquidity buffers, (b) the liquidation strategies financial institutions adopt when they need to raise cash, and (c) the topology of the financial network.
Keywords:
Stress testing; system-wide models; contagion; systemic risk; market-based finance; real-financial linkages; macro-prudential policy.; bank resilience channel; modelling frontier; bank financial system; models of contagion; variation margin; Asset liquidity; Commercial banks; Liquidity; Solvency; Global
Cover IMF Staff Country Reports
Republic of Korea: Financial Sector Assessment Program-Technical Note-Systemic Risk Analysis, Financial Sector Stress Testing, and an Assessment of Demographic Shift in Korea
International Monetary Fund. Monetary and Capital Markets Department
This note presents the systemic risk analysis conducted for the Republic of Korea in the course of the 2019 Korea FSAP. It comprises a forward-looking solvency analysis for banks, insurers, and pension funds, a liquidity stress test for banks, and an assessment of network and interconnectedness for a wide range of financial sector entities and their ties to the real economy. Various structural characteristics of Korea’s economy and its financial system informed the features and focus for its forward-looking risk analysis. They include Korea’s strong export orientation, limited diversification, and its key role as a node in regional and international supply chains. Korea’s financial system has grown by 40 percentage points of GDP since 2013, enhancing the importance of a deep financial sector analysis as conducted through the FSAP. Mortgage insurance schemes are widely used—which was reflected in the way the risk assessment for banks was conducted. Korea’s life and non-life insurance sector is large, highly concentrated and saturated. Fintech developments keep accelerating, in terms of its Open Banking system and e-money providers. Demographic developments in Korea are among the most adverse world-wide, implying a continuous drag on demand, downward pressure on interest rates, financial firms’ income, and hence their capitalization unless they will be altering their business models.
Keywords:
ISCR; CR; financial system; sensitivity analysis; balance sheet; banking system; central bank; credit risk; housing market; return on assets; sovereign bond; bond yield; real GDP; market structure; solvency analysis; Insurance; Loans; Stress testing; Commercial banks; Insurance companies; Global
Cover IMF Staff Country Reports
Republic of Korea: Financial System Stability Assessment and Press Release for the Republic of Korea
International Monetary Fund. Monetary and Capital Markets Department
This paper presents Financial System Stability Assessment (FSSA) with the Republic of Korea. The Korean authorities have continued their efforts at upgrading the prudential, legal, and supervisory framework for the financial sector, and keeping up with international standards and practices in other G20 jurisdictions. The authorities have been strengthening the system with micro and macroprudential measures against vulnerabilities, strengthening the crisis management framework, and upgrading the prudential and legal framework. The FSSA suggests moving toward a more forward-looking monitoring and systemic risk identification mechanism. The reliability of various stress tests could be augmented with advanced methods, system-wide monitoring, and testing the overall leverage related to residential properties, households’ resilience to adverse shocks, and sovereign contingent liabilities. Stronger focus is required on systemic risks emanating from securities market activities that can amplify contagion, including sudden redemption and liquidity pressures in the funds and asset management industry.
Keywords:
ISCR; CR; Korea's financial system; bank; holding company; onshore financial markets; exchange rate; central bank; Commercial banks; Financial sector stability; Insurance; Loans; Liquidity; Global; Asia and Pacific
Cover IMF Staff Country Reports
Austria: Publication of Financial Sector Assessment Program Documentation-Technical Note on Insurance Sector—Regulation, Supervision, Recovery, and Resolution Regime Prospects
International Monetary Fund. Monetary and Capital Markets Department
This review provides an update on the Austrian insurance sector and an analysis of certain key aspects of the regulatory and supervisory regime. The note analyzes regulation and supervision in relation to key issues identified in previous Financial Sector Assessment Programs (FSAP), as well as material changes since the last FSAP. This note also covers the current situation and potential changes in the crisis management and early intervention framework of the insurance sector. It focuses on issues relevant to a long-standing policyholder protection mechanism, early intervention powers—existing and under discussion—and crisis management and resolution arrangements for insurance companies and groups. The analysis recommends that proper implementation of Solvency II needs ongoing validation and scrutiny by regulators, which could be at risk if supervisory resources with skills and expertise are not retained. Higher legal, reputational, and conduct risks are posing additional pressures to the life insurance sector. Market conduct supervision should be enhanced, with active use of enforcement powers in addition to the insights that studies launched by the government will provide.
Keywords:
ISCR; CR; risk assessment; coverage ratio; FMA resource; enforcement case; FMA discussion; FMA staff; FMA supervisor; information exchange template; insurance assets; FMA stress test; FMA contribution; FMA calculation; FMA enforcement case; FMA official; conduct risk; Insurance companies; Insurance; Solvency; Stress testing; Bank resolution framework; Global
Cover IMF Working Papers
Cyber Risk Surveillance: A Case Study of Singapore
Joseph Goh
,
Mr. Heedon Kang
,
Zhi Xing Koh
,
Jin Way Lim
,
Cheng Wei Ng
,
Galen Sher
, and
Chris Yao
Cyber risk is an emerging source of systemic risk in the financial sector, and possibly a macro-critical risk too. It is therefore important to integrate it into financial sector surveillance. This paper offers a range of analytical approaches to assess and monitor cyber risk to the financial sector, including various approaches to stress testing. The paper illustrates these techniques by applying them to Singapore. As an advanced economy with a complex financial system and rapid adoption of fintech, Singapore serves as a good case study. We place our results in the context of recent cybersecurity developments in the public and private sectors, which can be a reference for surveillance work.
Keywords:
WP; third-party cyberattack scenario; IT environment; financial system; outsourcing relationship; cybersecurity strategy; cyber risk; financial innovation; financial institutions; systemic risk; stress test.; WannaCry ransomware attack; Stress testing; Financial sector risk; Insurance companies; Global
Cover IMF Staff Country Reports
France: Financial Sector Assessment Program-Technical Note-Issues in Insurance Supervision and Regulation
International Monetary Fund. Monetary and Capital Markets Department
This technical note focuses on issues in insurance supervision and regulation on France. France has a very high level of insurance penetration, particularly for life insurance. For each insurance company, a risk assessment is undertaken on at least an annual basis and is recorded in a supervisory review process tool. French insurance companies are significant users of the Volatility Adjustment (VA), with companies representing more than 90 percent of the technical provisions in the French insurance industry using the VA. The report discusses that French authorities should advocate to the relevant EU authorities to introduce a minimum number of independent members of the Administrative Management or Supervisory Boards, at least one-third. Autorité de Contrôle Prudentiel et de Résolution should review the intensity and frequency of on-site supervision and its relationship to off-site supervision. With several other meetings with insurance companies possible, some of these meetings may be close to be called as focused on-site inspections.
Keywords:
ISCR; CR; insurer; France; life insurance; insurance premium; life insurance insurance company; insurance market; industry representative; Solvency II; life insurer; parent bank; twenty-five solo insurance companies; SCR Ratios; Insurance companies; Insurance; Solvency; Liquidity risk; Financial conglomerates; Europe
Cover IMF Staff Country Reports
France: Financial Sector Assessment Program-Technical Note-Risk Analysis of Banking and Insurance Sector
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.
Keywords:
ISCR; CR; BNP Paribas; Crédit Agricole; risk tolerance; cash flow; central bank; balance sheet; interest rate; Stress testing; Insurance companies; Liquidity risk; Insurance; Liquidity; Global
Cover IMF Staff Country Reports
France: Financial Sector Assessment Program-Technical Note-Key Attributes of Effective Resolution Regimes for Insurance Companies
International Monetary Fund. Monetary and Capital Markets Department
This technical note explores key attributes of effective resolution regimes (KA) for insurance companies on France. The safety net in the sector is composed by two policyholder protection schemes, which can provide support in liquidation proceedings. The report highlights that there is consensus with the authorities that the new framework reflects many, however, not all elements needed for full compliance with the KAs, and the areas where further progress is needed. Alignment of the framework with KAs in terms of the institutional organization and infrastructure is high. The scope and responsibilities of the Prudential Supervision and Resolution Authority are clearly established in the law, as well as the cases when those are applicable, and its interaction with other relevant policy-making entities. The new framework targets all institutions considered systemic, given their size and other relevant features. Its’ current implementation is guided solely by the threshold in terms of total assets; any holding company, group, mutual, or foreign subsidiary above this level is subject to Recovery and Resolution Planning requirements.
Keywords:
ISCR; CR; resolution authority; resolution framework; home authority; home authorities; resolution college; resolution plan; holding company; resolution measure; insurance resolution; Bank resolution framework; Insurance companies; Legal support in revenue administration; Insurance; Bridge bank; Global