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Law > Business and Financial

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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 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 Technical Assistance Reports
Jordan: Technical Assistance Report-Developing Supervisory Review and Evaluation Process SRP Framework
International Monetary Fund. Middle East and Central Asia Dept.
The International Monetary Fund (IMF)’s Middle East Regional Technical Assistance Center (METAC) is currently assisting the Central Bank of Jordan (CBJ) in enhancing its risk-based supervision through the development of a Supervisory Review and Evaluation SRP framework inspired from European Central Bank (ECB) methodology. The Technical Assistance TA mission is part of a multi-step medium-term project. The TA mission aimed to design, in coordination with CBJ, a progressive multi-step roadmap defining the major milestones for a full implementation of SRP. The mission noted that several dimensions should be taken into consideration when implementing the SRP, most notably bridging the data gap by building a fully-fledged supervisory risk database through a dedicated IT project, assessing whether the current organization of the Banking Supervisory Department should be adjusted, and progressively cover all material sources of risks in the SRP.
Keywords:
evaluation process SRP framework; SRP framework; CBJ's supervision staff; SRP approach; IMF's Monetary; Bank supervision; Commercial banks; Risk-based supervision; Credit risk; Global
Cover IMF Staff Country Reports
Republic of Kazakhstan: Financial System Stability Assessment
International Monetary Fund. Monetary and Capital Markets Department
This paper presents Republic of Kazakhstan’s Financial System Stability Assessment report. In 2024, Kazakhstan’s economic growth is expected to slow to 3.1 percent, mostly due to delays in expanding the Tengiz oil field, while inflation, which is still well above the authorities’ target, would continue to decline. The authorities have continued their efforts to secure macroeconomic stability. The National Bank of Kazakhstan maintained tight monetary policy throughout 2023. The authorities remain committed to medium-term fiscal consolidation and have undertaken significant efforts to increase trade diversification and address governance and corruption vulnerabilities. According to the recently completed Financial Sector Assessment Program, the banking system appears well capitalized in aggregate. Kazakhstan is exposed to transition risk from domestic and global climate policies. Banking supervision has become more risk-based, but related party transactions remain challenging to monitor and consolidated supervision is still incomplete. Finally, there remain gaps in the financial safety nets and crisis management arrangements.
Keywords:
FSAP finding; Tier 1; kazakhstani tenge; FX assets; Kazakhstan stock exchange; NBK policy rate; consumer lending; instability episode; nonfinancial corporate; headline inflation; asset concentration risk; liquidity shock; ARDFM power; liquidity forbearance measure; Kazakhstan financial system; loan portfolio; cash flow; Financial Sector Assessment Program; Financial sector stability; Loans; Commercial banks; Global
Cover Technical Notes and Manuals
Resolving Opaque Bank Ownership and Related-Party Exposures
Edda R Karlsdóttir
,
Rachid Awad
,
Ender Emre
,
Alessandro Gullo
,
Aldona Jociene
, and
Constant Verkoren
This note intends to provide advice to bank supervision and resolution authorities and policymakers seeking to deal with opaque bank ownership or significant overhang of related-party exposures.
Keywords:
bank Ownership structures; bank Ownership transparency; IMF Library; bank owner; related-party transaction; Basel Core Principles; Anti-money laundering and combating the financing of terrorism (AML/CFT); Bank resolution; State-owned banks; Global
Cover IMF Staff Country Reports
Maldives: Financial System Stability Assessment; and Press Release
International Monetary Fund. Monetary and Capital Markets Department
This paper presents financial system stability assessment (FSSA) report for Maldives. Maldives is a tourism dependent economy with a small financial sector dominated by state-owned banks. Systemic risks stem largely from a growing sovereign-bank nexus, high dollarization, and a shortage of foreign exchange. The Financial Sector Assessment Program concluded that further strengthening of financial sector policies is needed to improve the resilience of the financial system. The authorities should adopt regulation to address frictions in the foreign exchange market, resume liquidity management operations and develop systemic risk indicators. Priority should also be given to establishing a macroprudential framework along with instruments, publishing a financial stability report, and ensuring full reporting of non-bank payment obligations. The financial safety net and crisis management arrangements should be enhanced by improving early intervention mechanisms, introducing recovery and resolution planning, and enhancing the deposit insurance system. In addition, an effective liquidity assistance framework should be established.
Keywords:
World Bank FSAP mission; risk analysis; IMF FSAP stress test result; MMA central government debt holding; FSAP finding; bank capitalization; Financial Sector Assessment Program; Stress testing; Financial sector stability; Global; Asia and Pacific
Cover IMF Staff Country Reports
Belgium: Financial Sector Assessment Program-Financial System Stability Assessment
International Monetary Fund. Monetary and Capital Markets Department
This paper focuses on the report on Belgium’s Financial Sector Assessment Program. Economic activity has slowed, core inflation remains high, and the fiscal outlook is challenging. The financial sector has remained resilient despite a series of shocks. Key financial stability risks emanate from the large, concentrated, and interconnected banking sector, private sector indebtedness, and high exposure to real estate. Bank solvency stress tests indicate that the financial sector is resilient under severe macroeconomic shocks. Although there is some heterogeneity across financial institutions, all banks would satisfy the minimum capital criteria. The authorities should enhance the National Bank of Belgium’s powers to set macroprudential policy in line with its financial stability mandate. In the near term, the extension/ setting of capital requirements should be streamlined, without the requirement for government approval. There is scope to strengthen the corporate governance framework and expectations for banks, and boost prudential supervisory staffing, especially given upcoming regulatory developments.
Keywords:
bank solvency stress tests; insurance solvency stress test; NBB coordination; corporate governance framework; cash flow; B. bank Oversight; market share; Stress testing; Financial sector stability; Insurance companies; Financial Sector Assessment Program; Global; Europe
Cover Shocks and Capital Flows
Shocks and Capital Flows
Policy Responses in a Volatile World

Abstract

The high exposure of open economies to shocks makes them particularly vulnerable to volatile capital flows and advanced economy monetary policy spillovers. How should and do domestic policymakers respond? The traditional answer has been to use flexible exchange rates as a shock absorber. But flexible exchange rates may not offer full insulation when financial markets are imperfect. This book brings together recent empirical studies at the International Monetary Fund (IMF) on the effectiveness of different tools in responding to such shocks. The 18 chapters in this volume provide a rich background to the recently launched Integrated Policy Framework by the IMF. They comprise assessments of countries’ actual use of different tools, as well as in-depth evaluations of their effectiveness and side effects, covering macroprudential policies, monetary policy, foreign-exchange intervention, and capital flow management policies. Many of the studies involve new data and methods to tackle the inherently difficult problems in identifying and comparing the effects of policies under different circumstances. As a result, the volume offers the reader a comprehensive, in-depth coverage of the policy-oriented empirical research that has informed the development of a new way of thinking about open-economy macroeconomics at the IMF.

Keywords:
Capital flows; monetary policy; exchange rate policy; foreign exchange intervention; macroprudential policy; capital controls; FX debt; account restrictiveness; exchange rate intervention; IT regime; Exchange rates; Macroprudential policy instruments; Global; Asia and Pacific; Caribbean; Central America; Europe
Cover IMF Staff Country Reports
Ecuador: Financial System Stability Assessment
International Monetary Fund. Monetary and Capital Markets Department
This paper discusses financial system stability assessment (FSSA) in Ecuador. Banks and credit cooperatives dominate Ecuador’s financial system. While dollarization provides an important anchor for the Ecuadorean economy, systemic liquidity risks are high due to the limited capacity of the central bank to provide liquidity. The financial sector is overall resilient to adverse macrofinancial shocks but some institutions have meaningful solvency and liquidity vulnerabilities. To preserve confidence it is key to enhance capitalization, promptly recognize loan losses, and address unviable institutions. The FSSA concluded that institutional framework for financial sector oversight is complex, uncoordinated, and prone to political intervention. Reforms are needed to enhance supervisory independence, prioritize safety and soundness; separate prudential supervision from other functions, and substantially strengthen the supervisory approach. The macroprudential framework needs further progress by developing stronger financial sector-wide analytical capacity, improving information sharing and coordination, and clarifying the roles between multiple agencies.
Keywords:
B. bank solvency stress tests; liquidity fund; World Bank FSAP mission; emergency liquidity assistance facility; lender-of-last resort function; liquidity vulnerability; liquidity condition; liquidity analysis; Credit; Financial Sector Assessment Program; State-owned banks; Loans; Global; Caribbean
Cover IMF Staff Country Reports
Botswana: Financial System Stability Assessment
International Monetary Fund. Monetary and Capital Markets Department
This paper discusses financial system stability assessment in Botswana. Botswana’s financial sector, which exhibits high integration between banks and non-bank financial institutions, withstood the pandemic well. The economic recovery continues to be strong, but inflation remains high with risks tilted to the upside. The financial sector appears broadly stable, sound, and resilient. Main risks relate to banks’ high concentration of lumpy short-term deposits from retirement funds and insurance companies, volatility in diamond prices, geo-political developments, and the tightening of global financial conditions. The challenging risk environment underscores the need to address the existing gaps in the financial stability framework and the supervisory regime that could impede Bank of Botswana’s operational independence in supervisory matters. The banking supervision approach should be more risk-based and forward-looking, with more skilled staff who can identify emerging risks in the more complex banking sector. Specific regulations for material risks should be issued and Pillar 2 supervisory assessments developed for more risk-sensitive capital requirements. Data gaps should be addressed to enable the implementation of stress tests on a globally consolidated basis, perform more granular analyses of household and corporate sector vulnerabilities, and activate macroprudential tools.
Keywords:
B. bank solvency stress tests; risk analysis; bank rating methodology; bank risk analysis; bank solvency stress tests; Nonbank financial institutions; Commercial banks; Financial sector stability; Credit; Global