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Law > Business and Financial

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Cover IMF Staff Country Reports
India: Financial Sector Assessment Program-Financial System Stability Assessment
International Monetary Fund. Monetary and Capital Markets Department
India’s financial system has withstood the pandemic well and has become more resilient since the 2017 FSAP. Nonbank financial institutions (NBFIs)—especially nonbank financial companies (NBFCs) providing credit with wholesale financing—and market financing have grown, making the financial system more diverse and interconnected. The role of the state has diminished, yet it remains significant, including in using the financial system to pursue social and public finance goals.
Keywords:
market financing; coverage ratio; NBFC liquidity stress test result; policy option; liquidity support; FSAP finding; Financial sector stability; Nonbank financial institutions; Credit; Mutual funds; Anti-money laundering and combating the financing of terrorism (AML/CFT); Global
Cover Technical Assistance Reports
Papua New Guinea: Technical Assistance Report-Financial Sector Stability Review
International Monetary Fund. Monetary and Capital Markets Department
The main objective of the FSSR diagnostic mission was to help the PNG authorities build a roadmap of technical assistance (TA) to address identified financial sector needs and gaps, with a view to strengthen resilience of financial institutions and to enhance the policy framework. The PNG FSSR diagnostic covered six areas: (i) macroprudential policy; (ii) regulation and supervision of banks and other deposit-taking financial institutions; (iii) regulation and supervision of insurance companies and pension funds; (iv) financial safety net and crisis preparedness framework; (v) financial market infrastructure; and (vi) financial sector statistics.
Keywords:
Financial sector stability; IMF MCM; Macro-financial risk; PNG FSSR TA roadmap.; IMF's Monetary; FSSF phase; FSSR recommendation; payment system oversight function department; IMF executive directors; BPNG's management; investment strategy; bridge bank authority; Macroprudential policy; Insurance; Payment systems; Global
Cover High-Level Summary Technical Assistance Reports
Grenada: Systemic Risk Monitoring
Petr Jakubik
The technical assistance aimed to build capacity to monitor and assess systemic risk for non-bank financial institutions in the Grenada Authority for the Regulation of Financial Institutions (GARFIN). The mission underlined the need to clarify the macroprudential mandate and cooperation with the ECCB to conduct the macroprudential work accordingly. A potential extension of the existing Annual Report and Accounts covering key financial stability indicators and their assessment could be considered. It further highlighted the need to revise the existing reporting templates to reflect systemic risk better. Finally, the important role of the data management system was underlined.
Keywords:
contagion risk; pension balance sheets; IMF capacity development recipient; Systemic risk assessment; Financial sector stability; Financial sector risk; Stress testing; Caribbean
Cover Departmental Papers
Navigating External Shocks in Southeast Asia's Emerging Markets: Key Lessons and Challenges in Applying the IMF’s Integrated Policy Framework
Corinne C Delechat
,
Umang Rawat
, and
Ara Stepanyan
As relatively small open economies, South-East Asian emerging markets (Indonesia, Malaysia, Philippines and Thailand or ASEAN-4) are highly susceptible to external shocks—both financial and real—that could induce large capital flows and exchange rate volatility that could lead to foreign exchange market dysfunction. With the exception of Bank Negara Malaysia, ASEAN-4 central banks mostly have flexible inflation-targeting frameworks for monetary policy implementation. Their main policy objectives include medium-term price stability, sustainable economic growth, and financial stability. Central Banks in ASEAN-4 economies have been early pilots in the operationalization of the IMF’s Integrated Policy Framework (IPF) in 2022-23, given their experience in using multiple policy tools besides the monetary policy rate, including macroprudential measures, foreign exchange intervention (FXI), and capital flow management measures, to achieve their multiple objectives. They have welcomed the IPF as a systematic, frictions-based approach to analyze the use of these multiple tools to manage trade-offs across policy objectives. This paper takes stock of the experience from these pilots, both from the perspective of country authorities and of IMF country teams. It aims at distilling key lessons, which could be used to inform broader IPF operationalization. The IPF conceptual framework and a related quantitative model were used to assess policy trade-offs in ASEAN-4 in the event of adverse external shocks. These applications reaffirmed the importance of using monetary policy to address persistent inflationary pressures stemming from real shocks and allowing the exchange rate to act as a shock absorber. However, a complementary use of FXI could improve trade-offs between price, financial, and output stability when economies are faced with large and financial shocks that result in abrupt spikes in uncovered interest rate parity premia resulting in inefficiently tight financial conditions that could hurt growth or risking to de-anchor inflation expectations. The IPF pilots also highlighted some challenges faced when operationalizing IPF principles, notably regarding the assessment of frictions and shocks that might justify the use of FXI. In particular, country teams at times lacked sufficient information to adequately assess the extent of frictions. Moreover, the time-varying nature of IPF frictions and the non-linear effects of shocks make it difficult to assess situations when benefits of a complementary use of FXI would overweigh its costs.
Keywords:
ASEAN; foreign- exchange intervention; Inflation targeting; Integrated policy framework; capital flows; IPF pilot; market dysfunction; IMF country team; IPF model; Policy mix; IMF seminar participant; Currency markets; Exchange rates; Inflation; Southeast Asia; Global
Cover IMF Staff Country Reports
Saudi Arabia: Financial Sector Assessment Program-Financial System Stability Assessment
International Monetary Fund. Monetary and Capital Markets Department
This paper highlights Saudi Arabia’s Financial System Stability Assessment as part of Financial Sector Assessment Program (FSAP). The FSAP took place against the backdrop of a robust economy driven by an ambitious state-led transformation agenda to accelerate Saudi Arabia’s economic diversification (Vision 2030). The Kingdom’s sovereign wealth fund plays a key role in implementing and funding the economic transformation. At present, financial sector risks from the rapid economic transformation appear contained. Banks are well-capitalized, profitable and appear resilient to severe macroeconomic shocks. Banks’ capacity to manage liquidity stress scenarios is generally good, although funding concentration is sizable. The authorities have made commendable efforts to mitigate risks from the rapidly growing credit and real estate market, but significant data gaps create challenges for systemic risk monitoring. The time is right to strengthen systemic risk monitoring and the legal, institutional, and operational frameworks in support of financial stability going forward.
Keywords:
B. bank stress tests; liquidity stress scenario; liquidation framework; coverage ratio; mission chief World Bank; World Bank FSAP team member; Financial sector stability; Anti-money laundering and combating the financing of terrorism (AML/CFT); Macroprudential policy; Commercial banks; Global
Cover Selected Decisions and Selected Documents of the International Monetary Fund
Selected Decisions and Selected Documents of the International Monetary Fund
Forty-Third Issue Supplement
International Monetary Fund. Legal Dept.

Abstract

A supplement to the Forty-Third Issue of Selected Decisions and Selected Documents of the International Monetary Fund, incorporating items posted after January 1, 2023.

Keywords:
MCP decision; Review of the Fund's Policy; payments policy; adequacy assessment framework; fund surveillance; Balance of payments need; Anti-money laundering and combating the financing of terrorism (AML/CFT); Liquidity; Lines of credit; Global
Cover IMF Staff Country Reports
Libya: Selected Issues
International Monetary Fund. Middle East and Central Asia Dept.
This Selected Issues paper identifies the sources and quantifies the exchange market pressures on the Libyan dinar. The paper highlights that: (1) the cumulative pressure on the exchange rate has been negative; and (2) despite the alternating appreciation and depreciation pressures, foreign exchange reserves have remained relatively stable. The authorities’ toolkit is limited: they strive to maintain the stock of reserves at a high level and to keep the exchange rate peg intact, all without the use of fiscal policy or of conventional monetary policy instruments. Therefore, developing conventional monetary policy tools and making sure that fiscal policy is consistent with the overall macroeconomic objectives would help the authorities achieve their goals without resorting to capital flow measures. While Libya had periods of both depreciation and appreciation pressures, overall, it faced substantial depreciation pressure. In other words, Libya’s policies over the medium term were not in line with the three-pronged macroeconomic objective of maintaining high foreign reserves, a pegged official exchange rate, and a narrow gap between the parallel and the official exchange rates. The findings suggest that additional monetary tools and the use of fiscal policy can help contain the parallel market premium and avoid the use of capital flow measures.
Keywords:
exchange market pressure; EMP index; copyright page; weakening exchange rate; market rate; Currency markets; Exchange rates; International reserves; Depreciation; Eastern Europe; Global
Cover IMF Staff Country Reports
Ecuador: Request for an Extended Arrangement Under the Extended Fund Facility-Press Release; Staff Report; and Statement by the Executive Director for Ecuador
International Monetary Fund. Western Hemisphere Dept.
This paper highlights Ecuador’s Request for an Extended Arrangement under the Extended Fund Facility (EFF). The authorities implemented swift and bold measures in early 2024 to address the fiscal and liquidity challenges and requested a 48-month EFF arrangement of SDR 3 billion to support their policy plans and advance an ambitious structural reform agenda. IMF estimates that IMF resources are needed to close a financing gap of about US$4 billion during the program period, after factoring in an ambitious and large fiscal plan, financial support from international financial institutions and official bilateral partners, and renewed access to international capital markets. The baseline scenario under the program is, however, subject to substantive risks, stemming from both external and domestic factors. IMF assesses that the policy program provides a reasonably strong prospect of success, amid broad support to the main objectives of the EFF arrangement, and strong commitment and capacity by the authorities to take measures to ensure its successful implementation.
Keywords:
EFF arrangement; financing strategy; reform agenda; reform sequencing; peak fund exposure; Anti-money laundering and combating the financing of terrorism (AML/CFT); Caribbean; Global
Cover IMF Staff Country Reports
Japan: Financial Sector Assessment Program-Technical Note on Financial Supervision and Regulation of Climate Related Issues
International Monetary Fund. Monetary and Capital Markets Department
This paper presents a technical note on Financial Supervision and Regulation of Climate Related issues in Japan. Japan's transition to a net zero economy requires the decarbonization of high-greenhouse gas intensive industrial sectors such as steel. The Japanese authorities have been working on a number of climate-related activities relevant to banks and insurers. Banks and insurers have identified transition and physical risks as potential sources of increasing credit risk, market risk, liquidity risk, operational risk, and reputational risk. Discussions with Financial Services Agency (FSA) supervisory staff revealed that there is yet to be a systematic approach to addressing climate issues in regular supervisory interactions with banks and insurers. The Climate Guidance sets out the FSA’s expectations for financial institutions to support clients’ and investees’ responses to climate change in order to manage financial institutions’ climate-related risks. Japan is leading the way in the implementation of climate-related disclosures.
Keywords:
scenario analysis; Japan FSAP; BOJ initiative; TCFD disclosure; FSAP finding; Climate change; Insurance companies; Climate finance; Financial stability assessment; Global
Cover Technical Assistance Reports
Kingdom of Eswatini: Technical Assistance Report-Financial Sector Stability Review
International Monetary Fund. Monetary and Capital Markets Department
and
International Monetary Fund. Statistics Dept.
The IMF conducted a diagnostic review of the financial system of the Kingdom of Eswatini and proposed a Technical Assistance Roadmap to support the authorities’ detection of risks and vulnerabilities and to enhance capacity in financial sector oversight. The financial stability module focused on areas agreed with the country authorities: financial stability and systemic risk monitoring, macroprudential frameworks and tools; crisis management and financial safety net; and supervision and regulation of banks, nonbank deposit-taking institutions, insurance, and retirement funds. The financial sector statistics module focused on key gaps in monetary and financial statistics and financial soundness indicators that hamper financial stability analysis.
Keywords:
Kingdom of Eswatini; Eswatini; CBE; FSRA; FSSR; financial stability; systemic risk; macroprudential frameworks; stress testing; crisis management; financial safety net; banking supervision and regulation; nonbanking supervision and regulation; deposit-taking institutions; insurance; and retirement funds.; IMF MCM; IMF Financial Sector Stability Review; IMF's MCM department; CBE governor; financial institutions Act; Eswatini building societies; Financial sector stability; Nonbank financial institutions; Retirement; Insurance companies; Africa; Southern Africa; East Africa