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Law > Business and Financial

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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
Cover IMF Staff Country Reports
People’s Republic of China—Hong Kong Special Administrative Region: 2023 Article IV Consultation Discussions-Press Release; and Staff Report
International Monetary Fund. Asia and Pacific Dept
This 2023 Article IV Consultation discusses that the economic recovery in Hong Kong Special Administrative Region (SAR) stalled in 2022 following a major coronavirus disease 2019 outbreak and U.S. monetary policy tightening. However, in 2023, real gross domestic product is projected to grow by 3.5 percent. The financial system remains resilient and continues to serve as an international financial center, supported by strong institutional frameworks and substantial capital and liquidity buffers. The Linked Exchange Rate System continues to function smoothly, providing a solid anchor to the economy and the financial system, allowing the latter to perform its role as an international financial center. Housing prices, which declined by about 16 percent by end-2022 from the peak in September 2021, have started to recover in early 2023. Near-term risks to the growth outlook are balanced, with systemic risk in the financial sector manageable given significant buffers. A sharper-than-expected global growth slowdown as well as escalation of regional conflicts and resulting disruptions in trade could derail the recovery. A sharp rise in global risk premia amid renewed stress in the global banking system and further tightening of monetary policy in major advanced economies could have adverse spillovers through financial channels.
Keywords:
Hong Kong SAR economy; exchange rate system; rate of HK; GDP compilation; transparency policy; household expenditure survey; Hong Kong SAR authority; Hong Kong SAR official; return on equity; expenditure measure; Housing; External sector statistics; Housing prices; Credit; Global
Cover IMF Staff Country Reports
Finland: Financial System Stability Assessment
International Monetary Fund. European Dept.
This paper presents Finland’s Financial System Stability Assessment report. Finland has further improved the regulation and supervision of its financial sector since the 2016 Financial Sector Assessment Program, in part driven by European legislation and institutions. The size of the banking sector increased significantly in 2018 with the redomicilation of Nordea. Finland weathered the coronavirus disease 2019 pandemic well relative to other economies, with fiscal support and interventions from the authorities. However, Finland is now navigating a weaker economic outlook given the war in Ukraine and ensuing energy crisis, despite limited direct financial exposures to Russia. Risks to financial stability come from a large banking sector, which is highly concentrated and dominated by a few institutions, and is interconnected with other financial systems in the Nordic region. Stress tests indicate that the banking system appears resilient to severe macro-financial shocks but remains vulnerable to liquidity shocks. Resolution and crisis management should be supported by greater coordination of authorities’ preparation and management of future crises.
Keywords:
MoSAH FIN-FSA; PIC solvency regulation; independence of the FIN-FSA; SREP assessment; FIN-FSA's independence; B. banking sector resilience; Financial Sector Assessment Program; Macroprudential policy; Credit; Financial sector stability; Baltics; Global
Cover IMF Staff Country Reports
West African Economic and Monetary Union: Financial Sector Assessment Program–Financial System Stability Assessment
International Monetary Fund. Monetary and Capital Markets Department
The Financial Sector Assessment Program (FSAP) was conducted amid an economic rebound two years into the COVID-19 pandemic that had a limited impact on the financial sector. Several member states have experienced political instability, with coups in Burkina Faso and Mali leading to economic sanctions for the latter, and an attempted coup in Guinea-Bissau. Yet, short of further political deterioration, economic recovery is expected to persist. The last FSAP was conducted in 2008.
Keywords:
World Bank FSAP; Basel III liquidity requirement; FSAP finding; liquidity support; liquidity stress test scenario; Financial Sector Assessment Program; Stress testing; Financial sector stability; Market risk; West Africa
Cover IMF Staff Country Reports
The Bahamas: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for The Bahamas
International Monetary Fund. Western Hemisphere Dept.
The Bahamas is experiencing a tourism-led rebound. Real GDP growth in 2021 was close to 14 percent, as stayover tourist arrivals doubled relative to 2020. The economy is projected to expand by 8 percent in 2022. Nonetheless, it will likely take until 2024 to return to the 2019 level of GDP and the pandemic has given rise to significant human and social costs. The country’s medium-term growth challenges are likely worse than before, and public finances are in a more precarious state. Risks are skewed downwards given a difficult near-term financing situation, rising inflationary—and potentially BOP—pressures because of the war in Ukraine, an ongoing threat from the evolving pandemic, and the country’s high vulnerability to natural disasters.
Keywords:
Bahamian authorities; authorities project; government administration; foreign currency borrowing; IMF's transparency policy; COVID-19; Credit; Global; Caribbean
Cover IMF Staff Country Reports
Australia: Financial System Stability Assessment
International Monetary Fund. Monetary and Capital Markets Department
This paper presents Financial System Stability Assessment of Australian financial systems. The report highlights that financial supervision and systemic risk oversight have been enhanced. And the authorities have taken successful policy action to calm rapid growth in riskier segments of the mortgage market. Restrictions on the growth of investor loans and the share of interest-only mortgages, as well as the introduction of stronger lending standards, appear to have led to a slowdown in mortgage credit growth, and the housing market is now cooling. Financial supervision shows generally high conformity to international best practices, although there are opportunities to close identified gaps and strengthen arrangements. Steps are recommended to bolster the independence and resourcing of the regulatory agencies, by removing constraints on their policy making powers and providing additional budgetary autonomy and flexibility. The paper explains that greater formalization and transparency of the work of the Council of Financial Regulators would further buttress the financial stability framework.
Keywords:
ISCR; CR; financial system; banking sector; housing market; monetary policy; financial condition; capital requirement; mid-sized bank; resolution modality; asset quality; loan portfolio; bank exposure; Systemic risk; Financial sector stability; Credit; Housing prices; Global
Cover IMF Staff Country Reports
Chile: 2016 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Chile
International Monetary Fund. Western Hemisphere Dept.
This 2016 Article IV Consultation highlights that GDP growth in Chile has been weak, with activity slowing in October. However, conditions are in place for the economy to recover. After expanding by a moderate 1.7 percent in 2016, growth is forecast to increase to 2 percent in 2017. Faster growth in main regional partners and more stable copper prices are expected to lift exports and investment. The recovery is, however, projected to be gradual, held back by slow wage and job growth and still low business confidence. The financial sector appears healthy. Banks’ profitability is declining, but capital buffers are adequate and nonperforming loan rates are low.
Keywords:
ISCR; CR; expectations survey; expectation; monetary policy rate; November survey; staff appraisal; liability positions vis-à-vis nonresident; Pension spending; Credit; Global
Cover IMF Staff Country Reports
Mauritius: 2015 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Mauritius