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Business and Economics > Finance: General

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Cover IMF Working Papers
Rising Temperature, Nuanced Effects: Evidence from Seasonal and Sectoral Data
Ha Nguyen
and
Samuel Pienknagura
Using quarterly temperature and sectoral value-added data for a large sample of advanced economies (AEs) and emerging markets and developing economies (EMDEs), this paper uncovers nuanced effects of temperature on economic activity. For EMDEs, hotter spring and summer temperatures reduce growth in real value-added of manufacturing, and most significantly, of agriculture, while a warmer winter boosts it. For advanced countries (AEs), a hotter spring hurts growth in real value-added of all considered sectors: services, manufacturing and agriculture. For both country groups, the negative effect of a hotter spring is larger and more persistent than the positive effect of a warmer winter. Furthermore, the adverse impacts of hotter temperatures in advanced economies have accentuated in recent decades. This result suggests increased vulnerability to rising temperatures.
Keywords:
climate change; temperature; economic growth; agriculture; summer temperature; emerging markets and developing economies; IMF working paper 24/202; quarterly temperature; seasonal temperature; Agricultural sector; Manufacturing; Emerging and frontier financial markets; Global
Cover IMF Staff Country Reports
Spain: Financial Sector Assessment Program-Technical Note on Regulation and Supervision of Less Significant Institutions
International Monetary Fund. Monetary and Capital Markets Department
This paper presents a technical note on regulation and supervision of less significant institutions (LSI) as part of Financial Sector Assessment Program in Spain. The Banco de España’s (BdE) extensive efforts to improve corporate governance of cooperative LSIs are commendable, and in this context, it is recommended that work continue with additional focus on onsite activities. The BdE should further increase its supervisory scrutiny of LSIs’ management of liquidity risk and interest rate risk in the banking book (IRRBB), building on its existing monitoring of LSIs’ capital and liquidity levels and exposures to IRRBB. The extensive regulatory requirements and supervisory activities of LSIs’ credit risk have been instrumental to cover this key priority, but reform is needed to enhance the related-parties framework and address gaps relative to international standards. The BdE’s joint work with Sepblac should be an opportunity to enhance the risk-based aspects of oversight of anti-money laundering and countering the financing of terrorism (AML/CFT).
Keywords:
Banco de España; Dirección general de Seguros y Fondos de Pensiones; executive Resolution authority; Instituto de Crédito Oficial; money laundering; autonomous communities; Anti-money laundering and combating the financing of terrorism (AML/CFT); Credit risk; Liquidity risk; Operational risk; Global
Cover IMF Staff Country Reports
Spain: Financial Sector Assessment Program-Technical Note on Cyber Risk and Financial Stability
International Monetary Fund. Monetary and Capital Markets Department
This paper explores a technical note on cyber risk and financial stability as part of Financial Sector Assessment Program (FSAP) in Spain. Technology risk and cyber resilience of the financial sector has become a focus area of the authorities, within the broader context of operational risk and resilience. This intensified focus by authorities is timely and important from the perspective of the continuity of financial service provision and the stability of the Spanish financial system. The FSAP found cyber risk supervisory practices of the authorities with regard to less significant institutions and financial market infrastructures in scope to be materially in line with applicable regulations and guidance and prevailing international good practice. Resource constraints are the most prominent challenge that the authorities are confronted with. A number of further weaknesses have a negative impact notwithstanding the overall strength of cyber risk supervision.
Keywords:
infrastructure regulation; banco de España; banking institution; Bolsas y Mercados Españoles; staff team of the International Monetary Fund; Cyber risk; PFM information systems; Payment systems; Financial Sector Assessment Program; External balance assessment (EBA); Global
Cover IMF Staff Country Reports
Spain: Financial Sector Assessment Program-Technical Note on Regulation, Supervision, Oversight, and Crisis Management of Financial Market Infrastructures
International Monetary Fund. Monetary and Capital Markets Department
This paper presents a technical note on regulation, supervision, oversight, and crisis management of financial market infrastructures in Spain. The Comisión Nacional del Mercado de Valores (CNMV) lacks, and should be provided, full autonomy over its recruitment of staff, including in key specialist areas. The CNMV’s effective cooperation with the Banco de España (BdE) and authorities from other jurisdictions to ensure adequate supervision of Bolsas y Mercados Españoles Clearing (BMEC) and Iberclear (IC) could be further strengthened by formalizing current arrangements with the BdE. The Financial Sector Assessment Program (FSAP) identified some enhancements to the supervision of margin practices that would make it even more robust. The CNMV should ensure that its recommendations to BMEC are implemented in timely fashion and, to the extent possible, that improvements made in one segment also benefit the others. The FSAP recommends strengthening of some aspects of IC’s recovery plan.
Keywords:
commission Delegated Regulation; infrastructure regulation; markets authority; financial instruments regulation; resolution regulation; Central counterparty clearing house; Central securities depositories; Stress testing; PFM information systems; Securities; Europe
Cover IMF Staff Country Reports
Spain: Financial Sector Assessment Program-Technical Note on Fintech Developments and Oversight
International Monetary Fund. Monetary and Capital Markets Department
This paper presents a technical note on fintech developments and oversight as part of Financial Sector Assessment Program (FSAP) in Spain. The scope of this assessment covered fintech developments in Spain, including digitalization of the banking sector, and the supervisory oversight of fintech activity. This technical note covers the impact of fintech on regulated firms, mainly banks; the interaction between new market entrants and existing firms; the approach toward industry monitoring; and the institutional arrangements for regulation and supervision of fintech, including overall supervisory cooperation. Banks play a dominant role in Spain’s fintech landscape. A better balance between the benefits of the sandbox and its significant supervisory costs could be achieved by considering some targeted changes to its operational arrangements. The FSAP recommends granting full autonomy to the Comisión Nacional del Mercado de Valores (CNMV), which it currently lacks, over its recruitment process and ensuring alignment of resources at the Banco de España and CNMV to current and expected workloads.
Keywords:
financial instruments directive; Banco de España; executive service; FINTECH development; payments services directive; supervisory authority; data protection authority; Fintech; Digital financial services; Digitalization; Caribbean; Europe; Global
Cover IMF Staff Country Reports
Spain: Financial Sector Assessment Program-Technical Note on Macroprudential Policy Framework and Tools
International Monetary Fund. Monetary and Capital Markets Department
This paper discusses a technical note on macroprudential policy framework and tools as part of Financial Sector Assessment Program in Spain. The macroprudential policy framework in Spain has been significantly reinforced in recent years. While Macroprudential Authority Financial Stability Council (AMCESFI) has successfully strengthened high-level coordination, and bolstered the institutional framework supporting financial stability, there is scope to reinforce the framework further. The role, credibility, transparency, and accountability of the new authority would be strengthened by more frequent meetings and enhanced communication. Active consideration of the case for adding external expert members to the AMCESFI Council is recommended. Systemic risk identification in Spain uses advanced methods and approaches. The policy toolkit available to the Spanish authorities is broad by international standards. The introduction of a positive neutral countercyclical capital buffer for credit institutions in Spain is recommended. The current neutral macroprudential policy stance is appropriate.
Keywords:
IMF STX staff; stress indicator; banco de España; directorate general; executive Resolution authority; Financial sector stability; Systemic risk; Macroprudential policy; Macroprudential policy instruments; Systemic risk assessment; Global
Cover IMF Staff Country Reports
Spain: Financial Sector Assessment Program-Technical Note on Systemic Risk Analysis
International Monetary Fund. Monetary and Capital Markets Department
This paper focuses on a technical note on systemic risk analysis as part of Financial Sector Assessment Program (FSAP) in Spain. Spain’s economy and its well-developed, bank-dominated financial system have shown resilience through the pandemic, rising global geo-political tensions and tighter financial conditions. The Spanish banking sector has a global imprint, operates a traditional business model, and is strongly profitable. Downside risks are prominent and existing vulnerabilities could amplify the impact of exogenous shocks on financial stability. The Spanish banking and real sectors’ resilience was assessed against a severe but plausible adverse scenario that reflects these risks. The FSAP analysis suggests a moderate rise in the debt-at-risk of the nonfinancial corporates sector in the adverse scenario. Liquidity stress tests show that Significant banking institutions can cope comfortably with market valuation shocks and would face cash flow challenges under large withdrawals of retail deposits. Interconnectedness analysis does not reveal significant vulnerabilities of Spanish banks to of cross-border contagion of foreign banking distress.
Keywords:
solvency stress test result; NFC liquidity; D. liquidity-solvency interaction; banking sector asset quality; banking sector asset composition; IMF approach; Stress testing; Loans; Credit; Liquidity requirements; Income; Global; Caribbean
Cover IMF Staff Country Reports
Spain: Financial Sector Assessment Program-Technical Note on Financial Safety Net and Crisis Management
International Monetary Fund. Monetary and Capital Markets Department
This paper examines a technical note on financial safety net and crisis management as part of Financial Sector Assessment Program in Spain. Spanish authorities have made good progress in establishing an effective crisis management and resolution regime. The Spanish authorities should integrate bank resolution authority for planning and execution in one institution. Integration would ensure that the national resolution authority responsible for implementing orderly resolution actions has control over the primary levers necessary to achieve its objectives. The Spanish authorities need to establish a framework for addressing liquidity needs in resolution. Spanish authorities should continue to enhance cross-authority crisis coordination arrangements. This should include formalizing its existing crisis management practices and prioritizing by agreeing a cross-authority crisis simulation exercise strategy. Spain’s Executive Resolution Authority should also have the flexibility, where possible, under national procurement legislation to depart from procurement rules in a crisis scenario to appoint external advisory support including independent valuers at short notice.
Keywords:
bank Resolution planning; Banco de España; IMF STX staff; resolution execution; directorate General insurance; authority crisis coordination; Bank resolution; Crisis management; Bank resolution framework; Crisis resolution; Financial sector stability; Global
Cover Technical Notes and Manuals
The Case for (and Against) Asset Management Companies in Banking Crises
Miguel A Otero Fernandez
,
Jaime Ponce
,
Marc C Dobler
, and
Tomoaki Hayashi
This technical note explores the advantages and disadvantages of establishing state-sponsored centralized asset management companies (AMCs) to address high levels of bank asset distress during financial crises. AMCs may offer potential benefits like mitigating downward price spirals or achieving efficiency gains by consolidating creditor claims and scarce expertise. However, significant risks and costs warrant careful consideration. These include extreme uncertainties in asset valuation and substantial operational and financial risks. Past international experiences highlight the dangers of underestimating these risks, potentially turning the AMC into a mechanism for deferring losses to taxpayers, rather than minimizing them, and ultimately increasing long-term public costs and moral hazard. This technical note emphasizes these trade-offs and discusses crucial design elements for effective AMCs: a clear mandate, transfer pricing that prudently reflects asset values and disposal costs, strong governance with independent management, and efficient operational processes promoting transparency and accountability.
Keywords:
Asset Management Company (AMC); Bank resolution; Financial Crisis; Financial regulation and supervision; Problem Asset Resolution; Non-performing Loans; Bank restructuring.; asset price spiral; centralized asset management companies; give borrower; AMC need; AMC debt; bank asset distress; resolution strategy; recovery value; asset characteristic; Asset management companies; Distressed assets; Nonperforming loans; Asset valuation; Loans; Global
Cover IMF Working Papers
Aging Gracefully: Steering the Banking Sector through Demographic Shifts
Patrick A. Imam
and
Christian Schmieder
We analyze how aging populations might affect the stability of banking systems through changes in the balance sheets and risk preferences of banks over the period 2000-2022. While the anticipated decline in maturity transformation due to aging hints at a possible reduction in risk exposure, an older population may propel banks towards yield-seeking behaviors, offsetting the diminishing prominence of conventional lending operations. Through a comprehensive examination of advanced economies over the past two decades, our findings reveal a general enhancement in bank stability correlating with the aging of populations. However, the adaptive responses of banks to these demographic changes are potentially introducing tail risks. Given the rapid global shift towards aging societies, our analysis highlights the critical need for policymakers to be proactive and vigilant. This is particularly pertinent considering historical precedents where periods of relative stability have often been harbingers of emerging risks.
Keywords:
Aging; Demographics; Bank risk-taking; Financial Stability; IMF working paper No. 24/118; tail risk; risk preference; stability risk; solvency profile; bank assets; Commercial banks; Bank soundness; Loans; Global