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Europe > Iceland

You are looking at 1 - 10 of 35 items for :

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Cover IMF Staff Country Reports
Iceland: Financial Sector Assessment Program-Technical Note on Anti-Money Laundering/Combating the Financing of Terrorism
International Monetary Fund. European Dept.
This technical note analyses anti-money laundering/combating the financing of terrorism (AML/CFT) in Iceland. Iceland’s banking sector is comparatively small, and the geographical reach of cross-border payments activity is limited. The AML/CFT supervisory understanding and assessment of ML and terrorism financing (TF) risks in the banking sector has improved in recent years. Further refinements to the supervisory risk assessment tools and increased data collection will enhance the accuracy of the authorities’ focus for AML/CFT risk-based supervision of banks. Iceland has taken significant steps to establish a registration regime for virtual asset service providers (VASP) established in or operating in the country, however, efforts should continue to detect unlicensed activities. Going forward, a continued focus on thematic inspections would be a welcome. In some instances, the pace of completion of inspections has been slow. To drive meaningful change in the levels of AML/CFT compliance and the effectiveness of AML/CFT controls in banks (in particular, enterprise ML/TF risk assessment, customer due diligence, and suspicious transaction reporting), an enhanced supervisory presence through more frequent onsite activities and an increased pace in the completion of inspections would be beneficial.
Keywords:
TF risk assessment model; FSAP's finding; TF risk assessment; swift data; supervision of bank; Anti-money laundering and combating the financing of terrorism (AML/CFT); Financial Sector Assessment Program; Terrorism financing; Commercial banks; Correspondent banking; Baltics; Global
Cover IMF Staff Country Reports
Republic of Uzbekistan: 2021 Article IV Consultation-Press Release; and Staff Report
International Monetary Fund. Middle East and Central Asia Dept.
Uzbekistan embarked on an ambitious reform path in 2017, starting to liberalize its economy after years of state control. Incomes are still relatively low compared to other emerging economies. Uzbekistan entered the COVID-19 crisis with relatively strong macro-economic fundamentals.
Keywords:
Policy discussion; government transparency; Policy recommendation; IMF's transparency policy; macro-economic policies; Budget planning and preparation; Public and publicly-guaranteed external debt; COVID-19; Global
Cover IMF Staff Country Reports
Uruguay: Technical Assistance Report-Monetary and Financial Statistics Mission
International Monetary Fund. Statistics Dept.
At the request of the Central Bank of Uruguay (BCU), and with the support of the International Monetary Fund’s (IMF’s) Western Hemisphere Department (WHD), a monetary and financial statistics (MFS) technical assistance (TA) mission from the IMF’s Statistics Department (STA) visited Montevideo during February 3-14, 2020. The main objectives of the mission were to: (i) review available source data for other financial corporations (OFC); in particular, insurance corporations (IC), pension funds (PF), and credit administration companies (CAC); and (ii) compile standardized monetary statistics for OFC (report form SRF 4SR) in line with the 2016 Monetary and Financial Statistics Manual and Compilation Guide (MFSMCG). The officials met during the mission are listed in Appendix I.
Keywords:
IMF's Statistics Department; administration company; staff team of the International Monetary Fund; Statistics Department of the IMF; CAC assets; Nonbank financial institutions; Offshore financial centers; Financial statements; Financial soundness indicators; Collective action clauses; Global
Cover IMF Working Papers
External Financing Risks: How Important is the Composition of the International Investment Position?
Mr. Luis M. Cubeddu
,
Mrs. Swarnali A Hannan
, and
Mr. Pau Rabanal
Building on the vast literature, this paper focuses on the role of the structure of the international investment position (IIP) in affecting countries’ external vulnerabilities. Using a sample of 73 advanced and emerging economies and new database on the IIP’s currency composition, we find that the size and structure of external liabilities and assets, especially with regards to currency denomination, matter in understanding balance-of-payments pressures. Specifically, and beyond the standard macroeconomic factors highlighted in other studies, higher levels of gross external debt increase the likelihood of an external crisis, while higher levels of foreign-currency-denominated external debt increase the likelihood of sudden stops. Foreign reserve assets play a mitigating role, although with diminishing returns, and the combination of flow and stock imbalances amplifies external risks, especially during periods of heightened global risk aversion. The results are especially strong for emerging economies, where the impact of flow and stock imbalances and foreign currency mismatches are larger and more robust across specifications.
Keywords:
international investment positions; current account; foreign reserves; sudden stops with large output loss; external crises.; WP; debt liability; foreign currency; debt liabilities increase; liability position; debt assets
Cover IMF Staff Country Reports
Iceland: 2019 Article IV Consultation-Press Release and Staff Report
International Monetary Fund. European Dept.
This 2019 Article IV Consultation with Iceland discusses that after years of robust growth, economic activity has significantly weakened. Supply disruptions in tourism, the engine of recent growth, and the associated uncertainty have triggered a drop in domestic demand and an increase in unemployment. A swift policy response, with fiscal relaxation and monetary easing, has stabilized expectations and cushioned the effects. A moderate but fragile growth recovery is expected in 2020. Macroprudential measures are helping to preserve buffers for managing financial stability risks. Macroprudential policies are adequate, given still elevated household debt and real-estate prices and benign external financing conditions. Looking forward, the macroprudential toolkit could be expanded to contain potential risks in the loan portfolio over the medium term. Ongoing education reforms would boost human capital and productivity, greater transparency of large unlisted companies would preserve the business environment, and strategic policies in tourism and fisheries would protect the sustainability of traditional economic sectors.
Keywords:
ISCR; CR; IMF staff country; inflation expectation; policy; Policy space; gross domestic product; policy accountability; Anti-money laundering and combating the financing of terrorism (AML/CFT); Income; Global
Cover IMF Working Papers
Cross-Border Credit Intermediation and Domestic Liquidity Provision in a Small Open Economy
Mr. Thorvardur Tjoervi Olafsson
This paper develops a small open economy model where global and domestic liquidity is intermediated to the corporate sector through two financial processes. Investment banks intermediate cross-border credit through interlinked debt contracts to entrepreneurs and commercial banks intermediate domestic savings to liquidity constrained final good producers. Both processes are needed to facilitate development of key production inputs. The model captures procyclical investment bank leverage dynamics, global liquidity spillovers, domestic money market pressures, and macrofinancial linkages through which shocks propagate across the two processes, affecting spreads and balance sheets, as well as the real economy through investment and working capital channels.
Keywords:
WP; interest rate; money market; central bank; financial frictions; cross-border banking flows; macrofinancial linkages; financial intermediation; working capital; credit contracts; investment banking; credit market; liquidity shock; depreciation rate; funding rate reaction; capital producer; idiosyncratic productivity; cost of funds; commercial bank funding; monopolistic investment banks; Investment banking; Domestic credit; Credit; Commercial banks; Self-employment; Global; East Asia
Cover IMF Working Papers
Fiscal Crises
Mrs. Kerstin Gerling
,
Mr. Paulo A Medas
,
Mr. Tigran Poghosyan
,
Juan Farah-Yacoub
, and
Yizhi Xu
A key objective of fiscal policy is to maintain the sustainability of public finances and avoid crises. Remarkably, there is very limited analysis on fiscal crises. This paper presents a new database of fiscal crises covering different country groups, including low-income developing countries (LIDCs) that have been mostly ignored in the past. Countries faced on average two crises since 1970, with the highest frequency in LIDCs and lowest in advanced economies. The data sheds some light on policies and economic dynamics around crises. LIDCs, which are usually seen as more vulnerable to shocks, appear to suffer the least in crisis periods. Surprisingly, advanced economies face greater turbulence (growth declines sharply in the first two years of the crisis), with half of them experiencing economic contractions. Fiscal policy is usually procyclical as countries curtail expenditure growth when economic activity weakens. We also find that the decline in economic growth is magnified if accompanied by a financial crisis.
Keywords:
WP; fiscal crisis; crisis episode; banking crisis dummy; real GDP; sovereign debt default; economic growth; twin crises; public debt debt ratio; crisis run-up; crisis onset; Debt default; Fiscal consolidation; Credit; Global
Cover IMF Working Papers
Crisis Transmission in the Global Banking Network
Galina Hale
,
Mr. Tümer Kapan
, and
Ms. Camelia Minoiu
We study the transmission of financial sector shocks across borders through international bank connections. For this purpose, we use data on long-term interbank loans among more than 6,000 banks during 1997-2012 to construct a yearly global network of interbank exposures. We estimate the effect of direct (first-degree) and indirect (second-degree) exposures to countries experiencing systemic banking crises on bank profitability and loan supply. We find that direct exposures to crisis countries squeeze banks' profit margins, thereby reducing their returns. Indirect exposures to crisis countries enhance this effect, while indirect exposures to non-crisis countries mitigate it. Furthermore, crisis exposures have real effects in that they reduce banks' supply of domestic and cross-border loans. Our results, based on a large global sample, support the notion that interconnected financial systems facilitate shock transmission.
Keywords:
WP; syndicated loan; commercial bank; balance sheet; return on assets; shock transmission; long-term interbank exposures; systemic banking crises; financial networks; syndicated loans; crisis exposure; bank type; bank performance; bank level; Loans; Foreign currency exposure; Banking crises; Systemic crises; Global
Cover IMF Working Papers
Capital Controls or Macroprudential Regulation?
Mr. Anton Korinek
and
Mr. Damiano Sandri
International capital flows can create significant financial instability in emerging economies because of pecuniary externalities associated with exchange rate movements. Does this make it optimal to impose capital controls or should policymakers rely on domestic macroprudential regulation? This paper presents a tractable model to show that it is desirable to employ both types of instruments: Macroprudential regulation reduces overborrowing, while capital controls increase the aggregate net worth of the economy as a whole by also stimulating savings. The two policy measures should be set higher the greater an economy's debt burden and the higher domestic inequality. In our baseline calibration based on the East Asian crisis countries, we find optimal capital controls and macroprudential regulation in the magnitude of 2 percent. In advanced countries where the risk of sharp exchange rate depreciations is more limited, the role for capital controls subsides. However, macroprudential regulation remains essential to mitigate booms and busts in asset prices.
Keywords:
WP; exchange rate; Financial stability; pecuniary externalities; capital controls; macroprudential regulation; inequality; exchange rate depreciation; covariance term; wedge terms; marginal utility; asset price externality; exchange rate fluctuation; exchange rate effect; simplifying terms; resource constraint; asset purchase; price change; Exchange rates; Real exchange rates; Asset prices; Consumption; East Asia
Cover IMF Working Papers
Resolving Residential Mortgage Distress: Time to Modify?
Mr. Jochen R. Andritzky
In housing crises, high mortgage debt can feed a vicious circle of falling housing prices and declining consumption and incomes, leading to higher mortgage defaults and deeper recessions. In such situations, resolution policies may need to be adapted to help contain negative feedback loops while minimizing overall loan losses and moral hazard. Drawing on recent experiences from Iceland, Ireland, Spain, and the United States, this paper discusses how economic trade-offs affecting mortgage resolution differ in crises. Depending on country circumstances, the economic benefits of temporary forbearance and loan modifications for struggling households could outweigh their costs.
Keywords:
WP; loan modification; unsecured debt; foreclosure procedure; negative equity; central bank; Debt overhang; foreclosure; housing crisis; mortgage distress; loan restructuring; foreclosure moratorium; loan renegotiation; due diligence; foreclosure process; foreclosure alternative; mortgage workout; loan counseling; Mortgages; Loans; Housing prices; Debt relief; Debt service; Global