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IMF to review its assessment of world’s largest financial systems’ condition

WASHINGTON, January 16. /TASS/. Experts of the International Monetary Fund (IMF) will in 2016 draft an assessment of the financial systems of Russia and other countries holding important positions in the global economy or in their region, the IMF reported.

"Some of the world’s largest and most connected financial systems will undergo their mandatory five-year financial stability review by the International Monetary Fund in 2016," the IMF said in a statement on its website.

"Under the aegis of the Financial Sector Assessment Program (FSAP), the IMF is assessing big, systemically important countries such as Germany and the United Kingdom, as well as medium-sized, and in some cases regionally important financial systems such as Russia and Mexico," it said.

"In the wake of the global economic crisis, the IMF has strengthened its surveillance of systemic countries’ financial systems. In September 2010, the IMF’s Executive Board agreed the world’s top 25 financial sectors would undergo a mandatory financial check-up every five years. In 2014, the IMF expanded the list to 29 countries, based on updated criteria," the statement said.

"The IMF program assesses three key components of financial stability in all countries: the soundness of banks and other major financial institutions, including through stress tests; the quality of financial system oversight, including banking, securities, and insurance where the sectors are systemically important, the macroprudential framework; and the ability of policymakers, and financial safety nets to withstand and respond effectively in case of deep financial stress," it said.

"The IMF tailors country assessments to analyze issues of particular interest or concern in each country. In 2016, the IMF teams will focus their analysis on systemic risks and macroprudential policies," the IMF said.

Some highlights for this year’s FSAP assessments include China, Germany, Ireland, Lebanon, Russia, Sweden, Turkey and United Kingdom, it said.

In Russia, "the FSAP will assess the impact on the Russian financial sector of weak potential growth, low oil prices, and exchange rate volatility against the background of continuing Western sanctions," the statement said.

"The FSAP will also examine the ability of the financial sector to support sustainable growth, which will require comprehensive reforms to safeguard the sector’s stability and efficiency," it said.

In China, "the FSAP will look into how the financial system's structure and performance have evolved in recent years. The FSAP will assess the resilience of the financial sector to shocks emanating from abroad, and China's ongoing financial liberalization and macroeconomic rebalancing. The FSAP will also evaluate the significant changes in the regulatory and supervisory framework in response to the evolution of financial sector," the IMF said.

In Germany, "the FSAP will be the first review of a euro area country since the establishment of the Single Supervisory Mechanism and the Single Resolution Mechanism," it said.

"The assessment will tackle the complexity of the new institutional set up and systemic risk implications across multiple financial sectors, and focus on the effectiveness of the new mechanisms in addressing the fault lines that have emerged in the recent crisis in Europe," the statement said.

In Ireland, "the first assessment since the global crisis will look at the condition of, and prospects for, a much-transformed financial system: banks have shed debt and raised capital, and become more retail focused, but still bear a legacy of nonperforming loans," it said.

"Meanwhile, the internationally oriented investment funds management industry has grown enormously. Since Ireland is a member of the European banking union, work on this FSAP is closely coordinated with the FSAP assessment of other euro area countries, and addresses the roles of relevant European institutions," the statement said.

In Lebanon, "the large banking sector dominates the financial sector and has been critical to macro-financial stability in a volatile economy. The FSAP will explore vulnerabilities and policies to increase resilience of the sector in the face of challenging domestic and regional economic circumstances. The relatively new set of policies designed to keep the financial system as a whole safe will be explored, as will issues in financial development."

In Sweden, "against the background of a rapid housing market growth, the FSAP team will focus on macroprudential arrangements and policies. Also, given the high interconnectedness of the financial system with the rest of the region, the team will examine practical ways to enhance regional cooperation on financial stability, crisis preparedness, and resolution," the IMF said.

Turkey has "a large, systemically important, emerging market economy with a high external financing requirement. Systemic risks and macroprudential policies and arrangements will constitute a key focus of this FSAP."

And in the United Kingdom, "in the world’s most complex, diversified, and globally interconnected financial system, the FSAP will assess the extent to which the regulatory overhaul that was implemented after the crisis has reduced systemic risk and the possibility of adverse spillovers to the rest of the world," the statement said.

"The Financial Sector Assessment Program underwent its most recent review in 2014 to adapt the program to the post-crisis era. In 2015, the IMF concluded assessments of the financial sectors in Azerbaijan, Bosnia and Herzegovina, the Central African Economic and Monetary Community, Mauritania, Morocco, Norway, Samoa, Tajikistan, and the United States," it said.