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Europe > Ireland

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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 Technical Notes and Manuals
Special Purpose Entities: Guidelines for a Data Template
Mr. Carlos Sanchez-Munoz
,
Artak Harutyunyan
, and
Ms. Padma S Hurree Gobin
The Note is meant to assist compilers in the practical application of the agreed defini¬tion to identify resident Special Purpose Entities (SPE) in their jurisdictions and in collecting and reporting SPE-related cross-border data. To this end, these guidelines provide practical advice on the (1) implementa¬tion of the definition of SPEs, (2) possible data sources and processes for collecting and compiling SPE-related statistics, and (3) reporting within the agreed Data Template.
Keywords:
Globalization; multinationals; host jurisdictions; institutional units; control; cross-border flows and positions; SPE definition; SPE data collection; company B; SPE flow; SPE statistics; Special purpose vehicle; Data collection; External sector statistics; Foreign direct investment; International investment position; Global
Cover Technical Notes and Manuals
How to Assess Country Risk: The Vulnerability Exercise Approach Using Machine Learning
International Monetary Fund. Strategy, Policy, & Review Department
The IMF’s Vulnerability Exercise (VE) is a cross-country exercise that identifies country-specific near-term macroeconomic risks. As a key element of the Fund’s broader risk architecture, the VE is a bottom-up, multi-sectoral approach to risk assessments for all IMF member countries. The VE modeling toolkit is regularly updated in response to global economic developments and the latest modeling innovations. The new generation of VE models presented here leverages machine-learning algorithms. The models can better capture interactions between different parts of the economy and non-linear relationships that are not well measured in ”normal times.” The performance of machine-learning-based models is evaluated against more conventional models in a horse-race format. The paper also presents direct, transparent methods for communicating model results.
Keywords:
Risk Assessment; Supervised Machine Learning; Prediction; Sudden Stop; Exchange Market Pressure; Fiscal Crisis; Debt; Financial Crisis; Economic Crisis; Economic Growth; VE modeling toolkit; ML technique; Vulnerability Exercise approach using machine learning; IMF's Vulnerability Exercise; ML tool; crisis risk indices; Early warning systems; Global financial crisis of 2008-2009; Sudden stops; Banking crises; Global