Statement at the Conclusion of the IMF and World Bank Financial Sector Assessment Program Mission to Brazil

Press Release No 12/97
March 21, 2012

An International Monetary Fund (IMF) and World Bank (WB) mission, headed by Dimitri Demekas (IMF) and Augusto de la Torre (WB), visited Brazil during March 6-21, to conduct an assessment under the IMF and WB Financial Sector Assessment Program (FSAP). The mission met with Central Bank of Brazil (BCB) Governor Tombini, senior officials from the central bank and ministry of finance, the heads and senior officials from financial sector regulatory agencies, representatives of financial institutions and professional bodies, and market participants.

The FSAP mission found the Brazilian financial system to be stable, with low levels of systemic risk and sizable buffers. High capital buffers in combination with high levels of international reserves and a flexible exchange rate have helped the economy withstand the recent large external shocks. While coping with volatile capital inflows and fast credit growth remains a challenge, the Brazilian authorities have effectively used macroprudential measures to contain systemic risks.

Brazil´s strong financial markets infrastructure and strong regulation and supervision have been an important factor in maintaining financial stability, although there a few areas that could be strengthened further. Banking supervision is risk based and robust, which is reflected in a high degree of compliance with the Basel Core Principles for Effective Banking Supervision. Regulation and supervision of insurance and capital markets have been materially strengthened since the initial FSAP in 2002. In capital markets, transparency, and disclosure standards have been raised and risk-based supervision implemented. In insurance, solvency requirements are more risk-sensitive and public disclosure extensive. Going forward, supervision of brokers and groups should be enhanced. Areas that could be strengthened include enhancing the operational independence of SUSEP and PREVIC. A cross-cutting challenge for all supervisors is the need to keep pace with an evolving system, given constraints on budgets and human resources. Also, it would be important to enhance further legal protection to supervisory agencies.

The Brazilian authorities handing of the impact of the global financial crisis was swift, flexible, and successful; some reforms would further strengthen this framework to prepare it for future crises. The authorities should be congratulated for their important role in maintaining financial stability. Besides the strict regulation of the banking sector and strong consolidated supervision, a range of measures to restore market stability and preserve confidence were used. Nonetheless, the FSAP considers that certain aspects of the resolution and liquidity regime could be strengthened to ensure the full range of resolution tools are readily available in accordance with evolving international standards. Some of these measures are already under consideration.

Brazil is uniquely positioned to move financial sector development forward in a vigorous way, particularly to deepen long-term private finance. This is a challenging agenda. Capital market development is still impeded by high interest rates and the short-duration of most financial instruments but, aided by stronger public finances and a credible monetary policy in place for over a decade, the economy has started moving away from this equilibrium. This movement will continue, provided inflation continues to decline and domestic savings (both public and private) increase. In addition, certain targeted financial sector reforms could reinforce this process, particularly in strengthening the role of institutional investors. As interest rates fall further and spur mutual funds´ demand for longer-duration, well-articulated actions to enhance the supply of private securities are also needed to take advantage of the increased demand.

  • The Financial Sector Assessment Program (FSAP), established in 1999, is an in-depth analysis of a country’s financial sector. The Financial Sector Assessment Program (FSAP) provides in-depth examinations of countries’ financial sectors. FSAPs are done jointly by World Bank and IMF staff in developing and emerging market countries (IBRD countries) and by the IMF alone in advanced economies. FSAPs have two main components: the financial stability assessment and—in developing and emerging market countries—the financial development assessment. These components may be assessed at the same time during a joint IMF-World Bank mission or at different times in separate stability and development “modules” conducted by the Fund and the Bank, respectively.

    The stability assessment under the FSAP is the main responsibility of then Fund and covers an evaluation of three components: (1) the source, probability, and potential impact of the main risks to macro-financial stability in the near-term; (2) the country’s financial stability policy framework; and (3) the authorities’ capacity to manage and resolve a financial crisis should the risks materialize. While FSAPs do not evaluate the health of individual financial institutions and cannot predict or prevent financial crises, they identify the main vulnerabilities that could trigger one.

    The development assessment under the FSAP is the main responsibility of the World Bank, which participates in FSAPs conducted in developing and emerging market countries, and focuses on medium- to long-term needs for the deepening and strengthening of the financial sector, and measures for addressing major weaknesses affecting the sector’s efficiency, soundness, and contribution to long-term growth and social development.

    In September 2010, the IMF made stability assessments under the FSAP a mandatory part of IMF surveillance every five years for 25 jurisdictions with systemically important financial sectors (including Brazil), based on their size and global interconnectedness. For more information, visit


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