## 1mdvea2023003

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### Mission scope and dates
- Technical assistance (TA) mission by IMF’s Statistics Department (STA) to the Maldives Monetary Authority (MMA): March 12–21, 2023.
- Remote participation: Ms. Allkurti, Senior Economist, STA’s Financial Institutions Division.
- Principal objectives:
  - Review source data, institutional coverage, and accounting/regulatory frameworks used in the compilation of FSIs for deposit takers (DTs) with the goal of increasing reporting periodicity to monthly.
  - Assist MMA in mapping source data for other financial corporations (OFCs) to the 2019 FSIs Guide reporting templates.
  - Check data availability to compile FSIs for nonfinancial corporations (NFCs) and households.
  - Update FSIs metadata and agree a workplan to compile and report new FSIs to STA.

### Key participants met
- MMA: Mr. Ali Hashim (Governor), Mr. Ahmed Imad (Deputy Governor), Ms. Idham Hussain (Assistant Governor), Ms. Mariyam Shifa (Assistant Governor), and other staff.
- CMDA: Fatimath Abdulla Kamaaluddheen (Deputy CEO), Abdullah Zakariyya (Director General).
- Maldives Bureau of Statistics (MBS): Aishath Hassan (Chief Statistician), Sajida Ahmed (Statistician).

### Current FSI reporting status and coverage
- DTs: 14 core and 9 additional FSIs related to DTs compiled and timely reported to STA.
- Additional indicators: 2 additional FSIs on real estate markets.
- Coverage basis: domestic location (DL).
- DTs sector composition: eight DTs comprising two domestically controlled and six foreign controlled banks.
- Insurance sector: five nonlife insurance corporations (NLICs).
- OFCs: three non-MMF investment funds, one pension fund (PF), and three other OFCs.
- Mission outputs: updated bridge tables for DTs; new bridge tables for ICs, OFCs, and households; compiled FSIs on the size of OFCs; mapped income/expense, balance sheet and memorandum/supervisory series to new FSI templates; compiled one additional FSI on households; assisted MMA to complete FSIC and FSM report forms.

### Financial system structure and notable statistics (as of December 2022)
- DTs total assets: 88.5 billion MVR.
- DTs share of financial sector assets (excluding the MMA): 76.8 percent.
- Pension fund share: 17 percent of the financial system.
- Insurance companies share: 2.4 percent of the financial system.
- Deposit insurance coverage: individual and corporate deposits covered up to 30 thousand MVR.
- Islamic financial activities: Maldives Islamic Bank; Islamic windows at Bank of Maldives and insurance providers; Islamic housing finance by Amna HDFC.

### Accounting and regulatory frameworks — findings and deviations
- All commercial banks have adopted International Financial Reporting Standard 9 (IFRS 9).
- Maldives Banking Act No 3/2015 requires conformity with International Accounting Standards (IAS).
- Capital adequacy ratios follow mainly the Basel I framework, with MMA-implemented adjustments.
- Observed reporting inconsistencies with IFRS 9:
  - Debt securities categorized as “Trading” or “Other Than Trading.”
  - “Other Than Trading” debt securities reported at amortized cost.
  - Investments without readily determinable fair values reported under Miscellaneous items.
  - Shares categorized as “Other Than Trading” reported at cost.
  - Net unrealized gains (losses) on “Trading” securities and fair value gains/losses on derivatives excluded from income and expense statement reporting.
- Recommendation: update definitions of NPLs and liquid assets to align with the 2019 FSIs Guide and IFRS 9.

### Valuation of debt securities and market liquidity
- A significant portion of debt securities held by the commercial banks are valued at amortized cost since they are held to maturity to collect interest and principal payments.
- Deposit takers report a small share of debt securities as "trading"; there is currently no local secondary market and MMA’s repo facility is no longer active.
- As of December 2022, around one-third of the securities investments of the DTs constitute foreign exchange (FX) denominated debt securities issued by the Government of the Maldives, with the ratio varying significantly across DTs.
- Mission advice: because of secondary market illiquidity, include only securities with remaining maturity of 3-months or less in liquid assets until liquidity improves.

### Capital adequacy framework, RWAs, and Basel implementation gaps
- Regulatory capital composition:
  - Tier 1 capital: permanent shareholders' equity, disclosed reserves and minority interests in the equity of consolidated subsidiaries.
  - Tier 2 capital: year-to-date earnings (or losses), undisclosed reserves, asset revaluation reserves, general loan loss provisions (limited to 1.25 percent of risk-weighted assets), subordinated term debt (limited to 50 percent of Tier 1 capital), and hybrid debt-equity capital instruments.
  - Total regulatory capital: sum of Tier 1 and Tier 2 capital (net of deductions).
  - For branches of foreign banks assigned capital is taken into account as Tier 1 capital and net amounts due from head office and branches are excluded from capital.
- Adjusted RWAs (Basel I with specific deviations):
  - Foreign currency claims on Government of the Maldives: zero percent risk weight (vs. 100 percent under Basel I).
  - Claims on banks: 20 percent risk weight, without considering maturity.
  - Loans secured by residential property: 100 percent risk weight (vs. 50 percent under Basel I).
  - Capital adequacy framework does not require capital for market risk and operational risk.
- Regulatory requirements:
  - MMA requires DTs to maintain a 6 percent Tier 1 capital and 12 percent total regulatory capital (vs. 8 percent total regulatory capital requirement under the Basel-I framework).
- Basel III gaps and unavailable FSIs:
  - MMA has not implemented Basel III definition of capital (common equity Tier 1), liquidity standards (LCR and NSFR), or Basel III leverage ratio (total exposure measure).
  - Consequently, the following core FSIs could not be compiled: (i) Common equity Tier 1 capital to risk weighted assets; (ii) liquidity coverage ratio (LCR); (iii) net stable funding ratio (NSFR); and (iv) Basel III leverage ratio.
  - MMA plans to implement the LCR and NSFR liquidity standards by the end of the year.
- Metadata requirement: disclose any major deviation from the Basel framework in the FSIs metadata.

### Loan classification, NPLs, provisioning — findings and minimum requirements
- National NPL definition (RACLLP No. 2015/R-168):
  - NPLs when (i) any portion of principal or interest is due and unpaid for 90 days or more; or (ii) interest payments for 90 days or more have been capitalized, refinanced, or rolled-over into a new loan.
- 2019 FSIs Guide additionally requires loans to be categorized as NPL when evidence exists to reclassify them as nonperforming even without 90 days past due.
- For mission’s FSI compilation, substandard, doubtful and loss categories were considered as NPLs, providing broader coverage than MMA’s NPL definition.
- Accrued interest and non-accrual: MMA requires loans to be placed on non-accrual status when classified as NPLs; narrow NPL definition may allow some substandard loans to continue accruing interest.
- IFRS 9 implementation:
  - DTs started implementing IFRS 9; Article 6 of the RACLLP requires banks to set aside higher provisions when IFRS 9 provisioning requirements are higher.
  - MMA has not started data collection dedicated to IFRS 9 implementation.
  - Mission identified inconsistencies in reporting of specific provisions in Schedule #4 (in some cases provisioning amounts exceeding loan amounts).
  - Recommendation: MMA should start collecting data to closely monitor provisions set aside for IFRS 9 implementation.
- Minimum provisioning requirements (Table 2: Loans Classification and Minimum Provisioning Requirements):
  - Pass: Secured portion 0.5% ; Unsecured portion 0.5%
  - Special Mention: Secured portion 3% ; Unsecured portion 3% ; Provisioning if loan is classified based on subjective factors 3%
  - Substandard: Secured portion 20% ; Unsecured portion 20% ; Provisioning if loan is classified based on subjective factors 10–20%
  - Doubtful: Secured portion 25% ; Unsecured portion 50% ; Provisioning if loan is classified based on subjective factors 50%
  - Loss – < 720 days past due: Secured portion 50% ; Unsecured portion 100% ; Provisioning if loan is classified based on subjective factors 100%
  - Loss – >= 720 days past due: Secured portion 100% ; Unsecured portion 100%
- Regulatory note: forbearance measures implemented starting in March 2020 (reduced minimum reserve requirements and provisioning requirements, and moratorium for borrowers), likely affected FSIs such as NPLs and profitability ratios.

### Recommendations on NPLs and provisions
- Document discrepancies between national regulatory/supervisory framework and the Basel I framework, and any methodological deviations from the 2019 FSIs Guide in metadata.
- Update the definition of NPLs in the Regulation on Asset Classification, Provisioning and Suspension of Interest to broaden coverage in line with the 2019 FSIs Guide.
- Align reporting instructions with IFRS 9 asset classification and measurement requirements.
- Start collecting data to closely monitor provisions set aside for IFRS 9 implementation.

### Source data, reporting practices, and supervisory data coverage
- Source data adequacy:
  - Source data for DTs and ICs are broadly adequate to compile the FSIs.
  - For NFCs and households (HHs), the MMA does not collect data directly from the corresponding sectors.
- Reporting coverage and frequency:
  - Income and expense statements, balance sheets and memorandum series collected from regulated entities on a monthly basis for DTs; income and expense statements for ICs are quarterly.
  - Supervisory data for DTs and other financial intermediaries collected by Banks and Other Financial Institutions Division; supervisory data for ICs collected by Insurance Division.
- Reporting instructions and timeliness:
  - MMA provides comprehensive reporting instructions for DTs (capital adequacy, asset quality, loans by sectors, maturity gap, net open positions in FX).
  - Reporting instructions for ICs are not readily available; work ongoing to prepare these.
  - Supervisory reporting timeliness: report forms for DTs, ICs, PF and other financial intermediaries are reported to the MMA within 10 days after the end of the period.
- Recommendation: develop detailed reporting instructions for ICs report forms to reduce misreporting.

### Compilation framework, automation, and bridge tables
- Compilation tools: MMA staff compile FSIs using automated Python programming language codes; codes should be revisited to reflect 2019 FSIs Guide mapping.
- Mission outcomes:
  - Updated bridge tables for DTs.
  - New bridge tables to compile additional FSIs for ICs, two FSIs on the size of the OFCs sector, and one additional FSI for households.
  - Bridge tables map income and expense statement, balance sheet and memorandum series items to FSI-SRs template tables (5.1 DT, 5.3 ICs, 5.3.2 ICs – nonlife insurance corporations, 5.6 HHs, and 5.7 OFCs).
- Expanded FSI reporting:
  - New FSIs compiled during the mission: one additional FSI for DTs (spread between reference lending and deposit rates), two additional FSIs on size of OFCs (with disaggregation for insurance, pension fund, and OFCs other subsectors), three additional FSIs for ICs, and one additional FSI on HHs.
  - FSIs for DTs to be compiled and reported monthly; FSIs for ICs, OFCs and HHs to be reported quarterly.
- Differences between existing MMA FSIs and mission-developed FSIs based on 2019 FSIs Guide are explained in Annex IV (not reproduced here).

### Sectoral financial statements and specific compilation adjustments
- Income and expense statements: MMA aggregates flows cumulatively from beginning of year to reporting period; adjustments made to align with 2019 FSIs Guide.
- Mapping revisions:
  - Noninterest income lines revised; fees and commissions receivable and gains and losses on financial instruments identified using reporting instructions.
  - Extraordinary profits/losses reclassified to other income/expenses consistent with 2019 FSIs Guide and IAS1.
  - MMA currently does not collect Other Comprehensive Income (OCI); mission recommended collecting OCI in line with IFRS 9 implementation.
- Ratios and formulae:
  - ROA: annualized net income before tax divided by average total assets. 2019 FSIs Guide recommends net profit before tax for ROA.
  - ROE: annualized net income after tax divided by total equity. 2019 FSIs Guide recommends net income after tax for ROE.
  - Mission provided preferred methods for annualization and averaging of monthly data.
- Accrued interest mapping: mapped to corresponding financial instruments; source data sufficiently granular though inconsistencies identified.
- Interbank vs. customer deposits:
  - Deposits with domestic and foreign banks mapped to interbank loans (claims of one DT on another treated as interbank loans).
  - Customer deposits revised: deposits from other financial corporations, and central and local government excluded from customer deposits and mapped to other currency and deposits.
- Specific provisions: specific provisions based on subjective factors moved from general and other provisions to specific provisions on the asset side as a contra item.
- Large exposures and net open position in FX:
  - National large exposures definition (Regulation No 2015/R150): exposures >= 10% of a bank’s total regulatory capital (diverges from 2019 FSIs Guide which uses Tier 1 capital). Divergence and exemptions should be disclosed in metadata.
  - Net open position in FX methodology broadly aligns with 2019 FSIs Guide shorthand method; excludes net open position in gold. Two banks currently deduct structural USD positions from open position calculation.
- Liquid assets and short-term liabilities:
  - Liquid assets: cash, balances at depository institutions, and debt securities with remaining maturity of 3-months or less. MMA excludes required reserves (both in MVR and USD).
  - Short-term liabilities: all liabilities maturing within three months based on maturity gap schedule.
- New FSI compiled: spread between reference lending and deposit rates recalculated using average lending and deposit rates of the commercial banks; Islamic bank data excluded. Weighted average lending rate based on loans issued to private nonfinancial corporations and households.
- Loan concentration by economic activity:
  - 2019 FSIs Guide: ratio of DTs’ lending to the largest three economic activities as a proportion of total gross loans to NFCs, using ISIC Rev.4 classification at highest aggregation.
  - MMA’s Schedule #2 does not follow ISIC Rev4; provides nine sectors (Agriculture, Fishing, Manufacturing, Construction, Real Estate, Tourism, Commerce, Transport and Communication, Electricity, Gas, Water and Sanitary Services).
  - As of mission date, Tourism, Commerce, Transport and Communication constitute the three largest exposures.
  - Recommendation: further align with ISIC Rev4 or document national classification differences in metadata.

### Credit to private sector FSI and real estate loan identification (paras 41–43)
- Findings:
  - Credit to private sector data provided by MMA is consistent with 2019 FSIs Guide: includes gross loans by DTs to private nonfinancial corporations, HHs and NPISHs and debt securities exposures issued by private nonfinancial corporations.
  - MMA’s reporting templates do not allow broad coverage of residential real estate loans and commercial real estate loans.
  - Residential real estate loans collected based on loans where the primary purpose is housing; thus identification of all loans collateralized by residential real estate not possible.
  - Commercial real estate loans where proceeds used for other purposes excluded from commercial real estate reporting line and categorized according to actual use of proceeds.
  - Construction loans added to mapping for commercial real estate loans.
  - MMA does not collect data to compile FSI on geographic distribution of loans; claims attributed based on residency of entity.
- Recommendations:
  - Collect data on OCI in line with IFRS 9 implementation.
  - Collect additional data to identify residential and commercial real estate loans per 2019 FSIs Guide.
  - Consider collecting data on geographical distribution of loans if DTs’ operations expand abroad.

### Insurance corporations (paras 44–47) — findings and FSIs compiled
- Findings:
  - Bridge table developed to generate FSIs for ICs for quarterly reporting to STA.
  - ICs cover five NLICs; only one offers both life and non-life insurance. No LICs reported; life activities of NLICs negligible; MMA agreed not to report separate FSIs for LICs unless life activities become significant.
  - Income and expense statements and sectoral balance sheets of NLICs mapped to Table 5.3.2 OFC_NLIC of FSI-SRs.
  - Classifications of financial instruments and economic sectors broadly adequate for sectoral balance sheet for ICs.
  - Accrued interest receivables/payables classified to respective instruments and sectors effective from September 2015.
  - Nonfinancial assets include both property for own use and property held for investment; current balance sheet lacks disaggregation.
  - Income and expense statements for ICs are quarterly; monthly balance sheets collected for monetary statistics.
  - Reinsurance recoverable and reinsurance claims reported interchangeably, reducing data quality.
- FSIs compiled for NLICs (three indicators):
  - Shareholder equity to total invested assets:
    - Numerator: capital and reserves; denominator: sum of ICs’ holdings of currency and deposits, loans, debt securities, equity and investment fund shares, other financial assets, financial derivatives and nonfinancial assets held for investment purposes.
  - Return on equity (ROE):
    - Annualized net profit after tax divided by average capital and reserves of ICs.
  - Combined ratio:
    - (Net incurred losses + underwriting expenses) / net earned premiums, expressed as a percentage. For healthy nonlife insurers, ratio should be less than 100 percent.
- Recommendations:
  - Collect additional data to identify property for own use vs. property for investment under nonfinancial assets for ICs.
  - Ensure consistency and accuracy of reporting of reinsurance claims for ICs.

### Pension funds (paras 48–49)
- Findings:
  - Maldives Retirement Pension Scheme (MRPS) classified as OFCs in financial corporations’ survey in IFS publication. MRPS is a defined-contribution scheme under the Maldives Pension Act 2009; assets administered by Maldives Pension Administration Office (MPAO). MPAO has own revenues and does not depend on budget grants. No privately owned pension funds operate in Maldives.
  - MMA collects monthly balance sheet data from MRPS; income and expense statement data not readily available.
  - Source data broadly adequate to compile sectoral balance sheet (5.4 OFC_PF template) for MRPS.
  - Pending collaboration between MMA and CMDA, MRPS’s total assets used in reporting templates to produce comprehensive coverage of OFCs indicators (OFCs assets to financial system assets and OFCs assets to GDP).
- Recommendation:
  - Report MRPS’s total assets under 5.4 OFC-PF template until complete financial statements and memorandum series become available to MMA.

### Other Financial Corporations (paras 50–51)
- Findings:
  - Two additional FSIs on size of OFCs sector compiled for quarterly reporting to STA:
    - OFCs’ financial assets to total financial system assets.
    - OFCs’ financial assets to gross domestic product (GDP), disaggregated for ICs and PFs.
  - No MMFs operating in Maldives.
  - Total financial system assets comprise total assets of DTs (Table 5.1), ICs (Table 5.3), PF (Table 5.4) and remaining OFCs-subsectors (Table 5.7 line ii.iv).
  - GDP figures derived from IMF’s WEO database.
  - MMA does not receive periodic financial information from CMDA for non-MMF investment funds, financial auxiliaries and the pension fund, limiting coverage.
  - MMA and CMDA signed MoU in 2014; scope can be broadened for data sharing for MFS and FSIs.
- Recommendation:
  - MMA and CMDA collaborate to close data gaps on non-MMF investment funds, financial auxiliaries and PFs.

### Nonfinancial corporations (NFCs) and Households (paras 52–53)
- Findings:
  - Data available to MMA do not allow compilation of complete sectoral financial statements and memorandum items for NFCs and households.
  - MMA has data on financial sectors’ exposure to NFCs and households covering significant part of NFCs debt (excluding external debt) and most of households’ debt.
  - Mission suggested compiling debt to GDP indicator for households sourced from monetary statistics; data source to be explained in metadata. Mapping provided in bridge tables.
  - MBS collects certain income/expense and balance sheet components for NFCs from MIRA’s tax statements; MIRA’s data could help mapping needs.
  - List of state-owned entities with annual and quarterly financial statements published on MoF website; MMA encouraged to collaborate with MoF to collect data on public nonfinancial corporations.
- Recommendations:
  - Sign MoU with MBS on data sharing for NFCs and households for FSIs compilation.
  - Expand FSIs to include indicators for NFCs and households.

### Real estate markets (para 54)
- Findings:
  - Residential and commercial real estate prices not readily available.
  - MMA staff started monitoring housing market developments focusing on rental market.
  - Commercial real estate prices unavailable; commercial real estate used as collateral for tourism loans during development phase (significant share in DTs loan book).
- Recommendation:
  - Coordinate with relevant authorities to develop residential real estate price index to compile core FSI on residential real estate prices.

### FSIs data and metadata reporting (paras 55–58)
- Findings:
  - Metadata reporting essential for interpreting FSIs and cross-country comparisons; should include content and coverage, accounting conventions, national guidelines, and deviations from the FSIs Guide.
  - Metadata should be updated when changes occur (e.g., IFRS-9, Basel-III, call report changes).
  - Mission prepared FSIs metadata Excel files for reporting to STA together with FSIs data for posting on IMF’s FSIs data portal.
  - Concentration and Distribution Measures (CDMs) require at least 28 deposit takers to report weighted quartiles; current number of DTs does not satisfy this criterion.
  - MMA calculated the Herfindahl Index during the mission and will report it under the CDM sheet.
  - MMA can compile and report 14 core and 10 additional FSIs for DTs; 2 additional FSIs on OFCs size; 3 FSIs for ICs; 1 FSI for households; 2 additional FSIs on real estate markets. FSIs for ICs, OFCs and households available quarterly.
  - Underlying data available at MMA start from September 2015.
  - Mission provided workbook mapping MMA data to FSI-SR template and introduced FSIC template to be reported to IMF. FSIC template should include:
    - (i) number of reporting DTs and their branches, split by ownership, and their respective total assets;
    - (ii) number of the ICs, split by ownership and their respective total assets; and
    - (iii) number of other OFCs split by ownership, and their respective total assets.
- Recommendations:
  - Compile FSIs using mission-provided workbook mapping.
  - Report the Herfindahl Index.
  - Finalize and report to STA for review the new FSI sectoral financial statements (FSI-SR template) with monthly data for DTs and quarterly data for ICs, OFCs beginning from September 2015, the new FSI institutional coverage (FSIC template) with annual data starting from 2015, and the new FSI metadata (FSM template).
  - Start regular reporting to STA for dissemination on IMF’s FSI data portal of the new FSI-SR template with monthly and quarterly data beginning from September 2015, and the new FSIC template with annual data starting from 2015. Also report the new FSM template and update as necessary.
- Footnote on distribution measures (exact wording preserved):
  - Distribution measures are computed for seven key FSIs, namely Tier 1 Capital to Risk-Weighted Assets, NPLs to Gross Loans, NPLs Net of Provisions to Capital, Provisions to NPLs, Return on Assets, Return on Equity, and Tier 1 Capital to Total Assets. Aggregation for the DTs sector is obtained by using either by the denominator of the respective FSIs or by the total assets as weights, and include quartiles, standard deviation, skewness, and kurtosis.

### Resources, training, and technical cooperation (paras 59–60)
- Findings:
  - Mission recommended MMA staff attend regional and HQ training courses on financial sector statistics.
  - Presentations during mission covered the 2019 FSIs Guide, reporting templates, IFRS 9 standard, FSIs for OFCs, NFCs, HHs and real estate markets.
  - STA delivers courses on MFS and FSIs at IMF headquarters (each course once every two years); after COVID-19, STA started delivering remote courses.
  - MMA requested a follow up mission once progress is made with implementing recommendations.
- Suggested follow-up tasks:
  - Review updated DTs and ICs templates and instructions.
  - Update mapping for ICs and develop mapping for PFs.
  - Further help MMA develop additional FSIs for NFCs and HHs.
- Recommendation: participate in IMF training courses on FSIs.

### Other issues (para 61)
- Findings and actions:
  - Mission discussed the Financial Access Survey (FAS) and MFS reporting; MMA encouraged to improve FAS data regarding SMEs.
  - Inconsistencies in historical gender disaggregated data were discussed.
  - MMA reports MFS to STA for the central bank, other depository corporations, and other financial corporations using STA’s standardized report forms and is a timely reporter of MFS and FAS data.
  - Classification of prepayments of ICs for MFS reporting clarified: only prepayments related to reinsurance (with insurance corporations and nonresident ICs as counterparts) are to be classified as technical reserve assets in the 4SR; all other prepayments should be reported as other accounts receivable with corresponding sectors.
  - Mission reiterated importance of updating the 4SR reporting with non-MMF investment funds and financial auxiliaries identified during the mission.
- Recommendation:
  - Review and update mapping so only reinsurance-related prepayments are classified as technical reserve assets in the 4SR; report others as other accounts receivable with corresponding sectors.

### Priority recommendations and action plan highlights (selected dates and responsibilities)
- 7/31/2023 — Finalize and report to STA for review:
  - New FSI sectoral financial statements (FSI-SR template) with monthly data for DTs and quarterly data for ICs and OFCs beginning from September 2015.
  - New FSI institutional coverage (FSIC template) with annual data starting from 2015.
  - New FSI metadata (FSM template).
  - Responsible institution: MMA.
- 8/31/2023 — Start regular reporting to STA for dissemination on IMF’s FSI data portal:
  - New FSI-SR with data beginning from September 2015.
  - New FSIC with annual data starting from 2015.
  - New FSM template and updates as necessary.
  - Responsible institution: MMA.
- Selected action plan milestones (priority flags preserved):
  - Document deviations from Basel I and methodological deviations from the 2019 FSIs Guide in metadata — 7/31/2023 (H).
  - Report the Herfindahl Index — 7/31/2023 (M).
  - Report MRPS’s total assets under OFC-PF template until complete PF data are available — 7/31/2023 (H).
  - MMA and CMDA to collaborate to close data gaps on non-MMF investment funds, financial auxiliaries and PFs — 3/31/2024 (H).
  - Sign MoU with MBS on data sharing for NFCs and households for FSIs compilation — 12/31/2023 (H).
  - Expand FSIs to include indicators for NFCs and households — 12/31/2024 (H).
  - Compile FSIs using the workbook mapping developed by the mission — 7/31/2023 (H).
  - Update NPL definition in Regulation on Asset Classification, Provisioning and Suspension of Interest — 3/31/2024 (H).
  - Align reporting instructions with IFRS 9 asset classification and measurement — 3/31/2024 (H).
  - Collect data to identify residential and commercial real estate loans — 3/31/2024 (M).
  - Develop detailed reporting instructions for ICs report forms — 12/31/2023 (M).
  - Collect data to identify property for own use vs. investment for ICs — 12/31/2023 (M).
  - Ensure consistency and accuracy of reinsurance claims for ICs — 12/31/2023 (M).
  - Develop residential real estate price index to compile core FSI on residential real estate prices — 7/31/2024 (M).

### Outputs and next steps agreed
- Updated bridge tables for DTs; new bridge tables for ICs, OFCs, and households.
- MMA will finalize metadata (FSM) and institutional coverage (FSIC) forms and report the new templates to STA by agreed deadlines for STA review and subsequent publication on IMF’s FSIs data portal.

### Annex 1 — Officials met during the mission (selected listing)
- Maldives Monetary Authority: Ali Hashim; Ahmed Imad; Idham Hussain; Mariyam Shifa; Mariyam Najeela; Hamida Shakeela; Mansoor Zubair; Fathimath Faisha; Ahamed Saruvash Hameed; Mohamed Amdhan; Mariyam Jailam Mujuthaba; Hawwa Yusra; Mariyam Azmath; Ibrahim Sameeu; Hashma Ahmed; Fathmath Jeena; Mohamed Imthinan Saudulla.
- Maldives Bureau of Statistics: Aishath Hassan; Sajida Ahmed.
- Capital Market Development Authority: Fatimath Abdula Kamaaluddheen; Abdullah Zakariyya.

*Source: IMF | Technical Report — Preface and Summary of Mission Outcomes and Priority Recommendations (1mdvea2023003).*

### Preface ____________________________________________________________________________ 5

### 1mdvea2023003 - Preface

### Mission scope and dates
- Technical assistance (TA) mission by IMF’s Statistics Department (STA) to the Maldives Monetary Authority (MMA): March 12–21, 2023.
- Remote participation: Ms. Allkurti, Senior Economist, STA’s Financial Institutions Division.
- Principal objectives:
  - Review source data, institutional coverage, and accounting/regulatory frameworks used in the compilation of FSIs for deposit takers (DTs) with the goal of increasing reporting periodicity to monthly.
  - Assist MMA in mapping source data for other financial corporations (OFCs) to the 2019 FSIs Guide reporting templates.
  - Check data availability to compile FSIs for nonfinancial corporations (NFCs) and households.
  - Update FSIs metadata and agree a workplan to compile and report new FSIs to STA.

### Key participants met
- MMA: Mr. Ali Hashim (Governor), Mr. Ahmed Imad (Deputy Governor), Ms. Idham Hussain (Assistant Governor), Ms. Mariyam Shifa (Assistant Governor), and other staff.
- CMDA: Fatimath Abdulla Kamaaluddheen (Deputy CEO), Abdullah Zakariyya (Director General).
- Maldives Bureau of Statistics (MBS): Aishath Hassan (Chief Statistician), Sajida Ahmed (Statistician).

### Current FSI reporting status and coverage
- MMA currently compiles and timely reports to STA:
  - 14 core and 9 additional FSIs related to DTs.
  - 2 additional FSIs on real estate markets.
- Coverage basis: domestic location (DL) basis.
- DTs sector: eight DTs comprising two domestically controlled and six foreign controlled banks.
- Insurance sector: five nonlife insurance corporations (NLICs).
- OFCs: three non-MMF investment funds, one pension fund (PF), and three other OFCs.
- Mission activity: updated bridge tables for DTs and developed new bridge tables for ICs, OFCs, and households; compiled FSIs on the size of OFCs; mapped income/expense, balance sheet and memorandum/supervisory series to new FSI templates; compiled one additional FSI on households; assisted MMA to complete FSIC and FSM report forms.

### Financial system structure and notable statistics (as of December 2022)
- DTs total assets: 88.5 billion MVR.
- DTs share of financial sector assets (excluding the MMA): 76.8 percent.
- Pension fund share: 17 percent of the financial system.
- Insurance companies share: 2.4 percent of the financial system.
- Deposit insurance coverage: individual and corporate deposits covered up to 30 thousand MVR.
- Islamic financial activities: Maldives Islamic Bank; Islamic windows at Bank of Maldives and insurance providers; Islamic housing finance by Amna HDFC.

### Accounting and regulatory frameworks
- All commercial banks have adopted International Financial Reporting Standard 9 (IFRS 9).
- Maldives Banking Act No 3/2015 requires conformity with International Accounting Standards (IAS).
- Capital adequacy ratios of banks follow mainly the Basel I framework.
- Observed reporting inconsistencies with IFRS 9:
  - Debt securities categorized as “Trading” or “Other Than Trading.”
  - “Other Than Trading” debt securities reported at amortized cost.
  - Investments without readily determinable fair values reported under Miscellaneous items.
  - Shares categorized as “Other Than Trading” reported at cost.
  - Net unrealized gains (losses) on “Trading” securities and fair value gains/losses on derivatives excluded from income and expense statement reporting.
- Recommendations were made to update definitions of nonperforming loans (NPLs) and liquid assets to align with the 2019 FSIs Guide and IFRS 9.

### Major findings and data adequacy
- Source data for compiling FSIs for DTs and ICs are broadly adequate and generally meet criteria in the 2019 FSIs Guide for publication on the FSIs data portal.
- Areas identified for improvement:
  - Remap accrued interest receivable and payable to appropriate financial instruments and institutional sectors.
  - Realign definition of customer deposits with the 2019 FSIs Guide.
  - Update NPL coverage to the 2019 FSIs Guide definition.
  - Update DT reporting templates to reflect IFRS 9 implementation.
  - Develop reporting instructions for ICs to reduce misreporting.
  - Improve collection of data to identify residential vs. commercial real estate loans and property for own use vs. investment for ICs.
  - Ensure consistency and accuracy of reinsurance claims reporting for ICs.

### Priority recommendations (Table 1 highlights)
- 7/31/2023 — Finalize and report to STA for review:
  - New FSI sectoral financial statements (FSI-SR template) with monthly data for DTs and quarterly data for ICs and OFCs beginning from September 2015.
  - New FSI institutional coverage (FSIC template) with annual data starting from 2015.
  - New FSI metadata (FSM template).
  - Responsible institution: MMA.
- 8/31/2023 — Start regular reporting to STA for dissemination on the IMF’s FSI data portal:
  - New FSI-SR with data beginning from September 2015.
  - New FSIC with annual data starting from 2015.
  - New FSM template and update as necessary.
  - Responsible institution: MMA.

### Action plan priorities and selected target dates
- High priority (H) and other milestones:
  - Document deviations from Basel I and methodological deviations from the 2019 FSIs Guide in metadata — 7/31/2023 (H).
  - Report the Herfindahl Index — 7/31/2023 (M).
  - Report MRPS’s total assets under OFC-PF template until complete PF data are available — 7/31/2023 (H).
  - MMA and CMDA to collaborate to close data gaps on non-MMF investment funds, financial auxiliaries and PFs — 3/31/2024 (H).
  - Sign memorandum of understanding with MBS on data sharing for NFCs and households for FSIs compilation — 12/31/2023 (H).
  - Expand FSIs to include indicators for NFCs and households — 12/31/2024 (H).
  - Compile FSIs using the workbook mapping developed by the mission — 7/31/2023 (H).
  - Update NPL definition in Regulation on Asset Classification, Provisioning and Suspension of Interest — 3/31/2024 (H).
  - Align reporting instructions with IFRS 9 asset classification and measurement — 3/31/2024 (H).
  - Collect data to identify residential and commercial real estate loans — 3/31/2024 (M).
  - Develop detailed reporting instructions for ICs report forms — 12/31/2023 (M).
  - Collect data to identify property for own use vs. investment for ICs — 12/31/2023 (M).
  - Ensure consistency and accuracy of reinsurance claims for ICs — 12/31/2023 (M).
  - Develop residential real estate price index to compile core FSI on residential real estate prices — 7/31/2024 (M).

### Outputs and next steps agreed
- Updated bridge tables for DTs; new bridge tables for ICs, OFCs, and households.
- MMA will finalize metadata (FSM) and institutional coverage (FSIC) forms and report the new templates to STA by the agreed deadlines for STA review and subsequent publication on the IMF’s FSIs data portal.

*Source: IMF | Technical Report — Preface and Summary of Mission Outcomes and Priority Recommendations (1mdvea2023003).*

### 13.      A significant portion of debt securities held by the commercial banks are valued at

### 13.      A significant portion of debt securities held by the commercial banks are valued at

### Valuation of debt securities and market liquidity
- A significant portion of debt securities held by the commercial banks are valued at amortized cost since they are held to maturity to collect interest and principal payments. This limits the impact of these differences on the reported financial statements.
- Deposit takers report a small share of their debt securities as "trading”, however, currently there is no local secondary market for securities and MMA’s repo facility is no longer active.
- As of December 2022, around one-third of the securities investments of the DTs constitute foreign exchange (FX) denominated debt securities issued by the Government of the Maldives, with the ratio varying significantly across DTs.

### Regulatory framework for capital adequacy and deviations from Basel I
- The regulatory framework for compiling the capital adequacy ratios of banks follows Basel I Capital Accord, with MMA-implemented adjustments that significantly affect compiled FSIs.
- Components of regulatory capital and RWAs are defined in the MMA’s Regulation on Capital Adequacy. Deviations and implementation practices for foreign bank branches should be documented in the metadata.
- Regulatory capital composition:
  - Tier 1 capital comprises permanent shareholders' equity, disclosed reserves and minority interests in the equity of consolidated subsidiaries.
  - Tier 2 capital consists of year-to-date earnings (or losses), undisclosed reserves, asset revaluation reserves, general loan loss provisions (limited to 1.25 percent of risk-weighted assets), subordinated term debt (limited to 50 percent of Tier 1 capital), and hybrid debt-equity capital instruments.
  - Total regulatory capital is the sum of the Tier 1 and Tier 2 capital (net of deductions).
  - For branches of foreign banks assigned capital is taken into account as Tier 1 capital and net amounts due from head office and branches are excluded from capital.
- Adjusted RWAs (Basel I with specific deviations):
  - Foreign currency claims on Government of the Maldives are assigned a zero percent risk weight, as opposed to a 100 percent risk weight under Basel I.
  - Claims on banks are 20 percent risk weighted, without considering the maturity.
  - Loans secured by residential property are assigned a 100 percent risk weight (50 percent risk weight under Basel I framework).
  - Capital adequacy framework does not require capital for market risk and operational risk.
- Regulatory requirements:
  - MMA requires DTs to maintain a 6 percent Tier 1 capital and 12 percent total regulatory capital (as opposed to 8 percent total regulatory capital requirement under the Basel-I framework).
- Basel III implementation gaps:
  - MMA has not yet implemented the definition of capital component of Basel III (common equity Tier 1), liquidity standards (liquidity coverage ratio (LCR) and net stable funding ratio (NSFR)), and Basel III leverage ratio (total exposure measure).
  - Consequently, it was not possible to compile these core FSIs: (i) Common equity Tier 1 capital to risk weighted assets; (ii) liquidity coverage ratio (LCR); (iii) net stable funding ratio (NSFR); and (iv) Basel III leverage ratio.
  - The MMA plans to implement the LCR and NSFR liquidity standards by the end of the year.
- Metadata requirement:
  - Any major deviation from the Basel framework should be reported in the FSIs metadata.

### Loan classification, NPLs, and provisioning
- National NPL definition versus 2019 FSIs Guide:
  - Regulation on Asset Classification, Provisioning and Suspension of Interest (No. 2015/R-168 - RACLLP) defines NPLs when (i) any portion of principal or interest is due and unpaid for 90 days or more; or (ii) interest payments for 90 days or more have been capitalized, refinanced, or rolled-over into a new loan.
  - The 2019 FSIs Guide additionally requires loans to be categorized as NPL when evidence exists to reclassify them as nonperforming even in the absence of a 90 days past due payment.
  - In accordance with the RACLLP, loans are classified as nonstandard when one or more contractual payments of interest or principal are past due for 90 days or more, or certain qualitative/subjective criteria are met.
  - For the mission’s FSI compilation, substandard, doubtful and loss categories were considered as NPLs, providing broader coverage than the MMA’s NPL definition because it considers both qualitative and quantitative criteria.
- Accrued interest and non-accrual:
  - Treatment of accrued interests on national definition of NPLs are in line with the 2019 FSIs Guide: MMA requires loans to be placed on non-accrual status when classified as NPLs.
  - Because of the narrow NPL definition, substandard loans based on subjective criteria may still continue to accrue interest, as they are not covered under the MMA’s NPL definition.
- IFRS 9 implementation and provisions:
  - DTs started implementing IFRS 9 for financial reporting purposes.
  - Article 6 of the RACLLP requires banks to set aside higher provisions when IFRS 9 provisioning requirements are higher.
  - MMA has not started data collection dedicated to IFRS 9 implementation.
  - Following IFRS 9 implementation, DTs set aside specific provisions for impaired assets (under substandard, doubtful and loss categories). The mission identified inconsistencies in reporting of these specific provisions in Schedule #4 (in certain cases provisioning amounts exceeding loan amounts).
  - MMA should start to collect data to closely monitor provisions set aside for IFRS 9 implementation.
- Minimum provisioning requirements (Table 2: Loans Classification and Minimum Provisioning Requirements):
  - Pass: Secured portion 0.5% ; Unsecured portion 0.5%
  - Special Mention: Secured portion 3% ; Unsecured portion 3% ; Provisioning if loan is classified based on subjective factors 3%
  - Substandard: Secured portion 20% ; Unsecured portion 20% ; Provisioning if loan is classified based on subjective factors 10–20%
  - Doubtful: Secured portion 25% ; Unsecured portion 50% ; Provisioning if loan is classified based on subjective factors 50%
  - Loss – < 720 days past due: Secured portion 50% ; Unsecured portion 100% ; Provisioning if loan is classified based on subjective factors 100%
  - Loss – >= 720 days past due: Secured portion 100% ; Unsecured portion 100%
  - Source: MMA
- Regulatory note on forbearance:
  - The MMA implemented forbearance measures starting in March 2020 (reduced minimum reserve requirements and provisioning requirements, and moratorium for borrowers), which likely affected FSIs such as NPLs and profitability ratios during the implementation period.

### Recommendations on NPLs and provisions
- Document discrepancies related to the regulatory and supervisory framework in comparison to the Basel I framework and any methodological deviations from 2019 FSIs Guide in the metadata.
- Update the definition of NPLs in the Regulation on Asset Classification, Provisioning and Suspension of Interest to broaden the coverage in line with the 2019 FSIs Guide definition.
- Align reporting instructions with the IFRS 9 asset classification and measurement requirements.
- MMA should start collecting data to closely monitor provisions set aside for the IFRS 9 implementation.

### Source data, reporting practices, and supervisory data coverage
- Source data adequacy:
  - Source data for DTs and ICs are broadly adequate to compile the FSIs.
  - For NFCs and households (HHs), the MMA does not collect data directly from the corresponding sectors.
- Reporting coverage and frequency:
  - Source data to compile FSIs for DTs and ICs cover income and expense statements, balance sheets and memorandum series collected from regulated entities on a monthly basis, except income and expense statements for ICs which are quarterly.
  - Supervisory data for DTs and other financial intermediaries are collected and compiled by the Banks and Other Financial Institutions Division; supervisory data for ICs are collected and compiled by the Insurance Division.
- Reporting instructions and timeliness:
  - MMA provides banks with comprehensive reporting instructions for DTs covering capital adequacy, asset quality, loans by sectors, maturity gap and net open positions in FX.
  - Reporting instructions for ICs are not readily available; work is ongoing to prepare reporting instructions for ICs reporting templates.
  - Supervisory reporting is timely: report forms for DTs, ICs, PF and other financial intermediaries are reported to the MMA within 10 days after the end of the period.
- Recommendation:
  - Develop detailed reporting instructions for ICs report forms to reduce the possibility of misreporting.

### Compilation framework, automation, and bridge tables
- Compilation tools:
  - MMA staff currently compile FSIs using automated Python programming language codes to aggregate data from call reports. The codes should be revisited based on the mission’s suggested mapping to reflect changes to the 2019 FSIs Guide methodology.
- Mission assistance outcomes:
  - The mission worked with MMA staff to compile core and additional FSIs and to update bridge tables for DTs in line with the 2019 FSIs Guide methodology.
  - New bridge tables were developed to compile additional FSIs for ICs, two FSIs on the size of the OFCs sector, and one additional FSI for households.
  - Bridge tables map income and expense statement, balance sheet and memorandum series items to FSI-SRs template tables (5.1 DT, 5.3 ICs, 5.3.2 ICs – nonlife insurance corporations, 5.6 HHs, and 5.7 OFCs) and were provided to the MMA to facilitate automation.
- Expanded FSI reporting:
  - New FSIs compiled during the mission: one additional FSI for DTs (spread between reference lending and deposit rates), two additional FSIs on the size of the OFCs sector (with disaggregation for insurance, pension fund, and OFCs other subsectors), three additional FSIs for ICs, and one additional FSI on HHs.
  - FSIs for DTs to be compiled and reported to STA monthly; FSIs for ICs, OFCs and HHs to be reported quarterly.
- Differences and documentation:
  - Differences between existing FSIs compiled by MMA and those developed during the mission (based on 2019 FSIs Guide) are explained in Annex IV (not reproduced here).

### Sectoral financial statements and specific compilation adjustments
- Income and expense statement:
  - MMA aggregates flows from the beginning of the year until the end of the reporting period (cumulative) as recommended by the 2019 FSIs Guide. Adjustments were made to income and expense statement and sectoral balance sheet (see Annex V).
  - Mapping of noninterest income lines was revised; fees and commissions receivable and gains and losses on financial instruments data are identified using reporting instructions. Mapping needs revisiting once reporting instructions are updated for IFRS 9.
  - Extraordinary profits/losses were reclassified to other income/expenses consistent with 2019 FSIs Guide and IAS1.
  - 2019 FSIs Guide recommends reporting Other Comprehensive Income (OCI) as an additional line item; MMA currently does not collect OCI data.
- Ratios and formulae:
  - Mission clarified annualization of net income before tax and averaging of total assets and capital/reserves for ROA and ROE calculations:
    - ROA: annualized net income before tax divided by average total assets. The 2019 FSIs Guide recommends using net profit before tax for ROA.
    - ROE: annualized net income after tax divided by total equity. The 2019 FSIs Guide recommends using net income after tax for ROE.
    - Preferred methods for annualization and averaging of monthly data were explained to MMA staff (formulae provided during mission).
- Accrued interest mapping:
  - In line with 2019 FSIs Guide, accrued interest receivable and payable were mapped to corresponding financial instruments (previously reported under other financial assets and other liabilities). Source data on accrued interest was sufficiently granular; inconsistencies were identified that need further investigation.
- Interbank deposits and customer deposits:
  - Deposits with domestic and foreign banks were mapped on the asset side to interbank loans, consistent with the 2019 FSIs Guide which treats claims of one DT on another as interbank loans, not deposits. This update materially affects balance sheet presentation and FSIs such as the NPL ratio.
  - Customer deposits mapping revised: deposits from other financial corporations, and central and local government were excluded from customer deposits and mapped to other currency and deposits, per 2019 FSIs Guide.
- Specific provisions treatment:
  - Specific provisions set aside based on subjective factors were moved from general and other provisions to specific provisions on the asset side as a contra item (these provisions are for loans categorized as substandard, doubtful, or loss based on qualitative criteria, including supervisory or excess IFRS 9 provisions).
- Large exposures and net open position in FX:
  - National large exposures definition (Regulation No 2015/R150) defines large exposures as exposures equal to or exceeding 10% of a bank’s total regulatory capital; this diverges from 2019 FSIs Guide which defines large exposures based on DT’s Tier 1 capital. The divergence and exposures exempted (which reduce reported large exposures) should be disclosed in metadata.
  - MMA’s net open position in foreign exchange methodology broadly aligns with the 2019 FSIs Guide shorthand method, includes on- and off-balance sheet positions, but excludes net open position in gold. Mission confirmed banks do not carry gold positions.
  - MMA allows banks to establish structural positions and deduct such positions from the open position calculation for USD; currently two banks implement this approach.
- Liquid assets and short-term liabilities:
  - Liquid assets definition updated to include cash, balances at depository institutions, and debt securities with a remaining maturity of 3-months or less. MMA excludes required reserves (both in MVR and USD).
  - Given secondary market illiquidity, the mission advised including only securities with remaining maturity of 3-months or less (using maturity gap schedule). MMA may update the definition if secondary market liquidity improves significantly.
  - Short-term liabilities comprise all liabilities maturing within three months based on the maturity gap schedule.
- New FSI compiled:
  - Spread between reference lending and deposit rates compiled during the mission: reference lending and deposit rates were recalculated using average lending and deposit rates of the commercial banks; Islamic bank data excluded. Weighted average lending rate is based on loans issued to private nonfinancial corporations and households.
- Loan concentration by economic activity:
  - 2019 FSIs Guide defines loan concentration by economic activity as ratio of DTs’ lending to the largest three economic activities as a proportion of total gross loans to NFCs, using ISIC Rev.4 classification at highest aggregation.
  - MMA’s Schedule #2 collects sectoral distribution of loans but does not follow ISIC Rev4; it provides nine sectors including Agriculture, Fishing, Manufacturing, Construction, Real Estate, Tourism, Commerce, Transport and Communication, Electricity, Gas, Water and Sanitary Services.
  - Further alignment with ISIC Rev4 is recommended; until then, national sectoral classification differences should be documented in metadata.
  - As of the mission date, Tourism, Commerce, Transport and Communication sectors constitute the three largest exposures.

*Source: IMF | Technical Report (chapter content provided).*

### 41.      The mission compiled the new credit growth to private sector FSI. Credit to private sector

### 1mdvea2023003 - 41.      The mission compiled the new credit growth to private sector FSI. Credit to private sector

### Credit to private sector FSIs (paras 41–43)
- Findings
  - Credit to private sector data provided by the MMA is consistent with the 2019 FSIs Guide as they include gross loans extended by DTs to the nonfinancial private sector (private nonfinancial corporations, HHs and NPISHs) and debt securities exposures issued by private nonfinancial corporations.
  - The MMA’s reporting templates do not allow broad coverage of residential real estate loans and commercial real estate loans.
  - The MMA collects residential real estate loans based on loans where the primary purpose is housing; thus, identification of all loans that are collateralized by residential real estate was not possible.
  - Commercial real estate loans where proceeds were used for purposes other than the purchase of the property, or construction, or refurbishment of improvements are excluded from the reporting line but categorized under appropriate sectors according to the actual use of the loan proceeds.
  - In line with the 2019 FSIs Guide definition, construction loans are added to the mapping for the commercial real estate loans.
  - The MMA does not collect data that would allow compilation of the FSI on geographic distribution of loans. Claims are attributed to economies based on the residency of the entity on which DTs have claims.
  - The suggested regional grouping of countries is provided in Annex 8.2 of the FSIs Guide which is based on the regional classification provided in the IMF’s World Economic Outlook (WEO).
- Recommendations
  - Collect data on OCI in line with the IFRS 9 implementation.
  - Collect additional data to identify residential and commercial real estate loans in line with the 2019 FSIs Guide definitions.
  - Consider collecting data on geographical distribution of loans if operations of the DTs incorporated in Maldives expand abroad.

### Insurance corporations (paras 44–47)
- Findings
  - A bridge table was developed to automatically generate the FSIs for ICs for reporting to STA on a quarterly basis.
  - The ICs cover five NLICs, where only one offers both life and non-life insurance. Insurance laws and regulations require separate financial statements for life and non-life operations, but there are no LICs and the size of the life insurance activities of the NLIC is negligible; MMA agreed not to report separate FSIs for LICs unless life activities become significant.
  - For the bridge table, income and expense statements and sectoral balance sheets of NLICs were mapped to Table 5.3.2 OFC_NLIC of the FSIs-SRs.
  - Classifications of financial instruments and economic sectors are broadly adequate to compile the sectoral balance sheet for ICs.
  - Accrued interest receivables and payables were classified to their respective financial instruments and sectors, effective from September 2015. Source data on accrued interest receivable/payables are sufficiently granular.
  - Nonfinancial assets include both property for own use and property held for investment purposes; current balance sheet does not allow proper disaggregation.
  - Income and expense statements for ICs are not available monthly, necessitating quarterly reporting of ICs indicators. Monthly balance sheets are collected for monetary statistics; quarterly balance sheets and income and expense statements are collected for supervision purposes.
  - Reinsurance recoverable and reinsurance claims are reported interchangeably by NLICs, reducing data quality.
- FSIs compiled for NLICs (three indicators)
  - Shareholder equity to total invested assets:
    - Calculated by taking capital and reserves as numerator; denominator is sum of ICs’ holdings of currency and deposits, loans, debt securities, equity and investment fund shares, other financial assets, financial derivatives and nonfinancial assets held for investment purposes.
  - Return on equity (ROE):
    - Calculated by using annualized net profit after tax divided by average capital and reserves of ICs. Annualization and averaging approach are the same for the DTs.
  - Combined ratio:
    - Calculated as the sum of net incurred losses and underwriting expenses divided by net earned premiums, expressed as a percentage. For nonlife insurers operating in a healthy market, this ratio should be less than 100 percent.
- Recommendations
  - Collect additional data to identify property for own use and property for investment under nonfinancial assets for ICs in line with the 2019 FSIs Guide definitions.
  - Ensure consistency and accuracy of the reporting of reinsurance claims for ICs.

### Pension funds (paras 48–49)
- Findings
  - The Maldives Retirement Pension Scheme (MRPS) is classified as OFCs in the financial corporations’ survey in IFS’s publication. MRPS is a defined-contribution scheme implemented under the Maldives Pension Act 2009. MRPS assets are administered by the Maldives Pension Administration Office (MPAO). MPAO has its own revenues and does not depend on budget grants. There are no privately owned pension funds operating in Maldives.
  - The MMA collects monthly balance sheet data from the MRPS, but income and expense statement data are not readily available.
  - Source data on financial instruments and economic sectors are broadly adequate to compile the sectoral balance sheet (5.4 OFC_PF template) for the MRPS.
  - Pending further collaboration between the MMA and the CMDA, MRPS’s total assets was used in the reporting templates to produce comprehensive coverage of the financial sector for compilation of the OFCs indicators (OFCs assets to financial system assets and OFCs assets to GDP).
- Recommendation
  - Report the MRPS’s total assets under 5.4 OFC-PF template until complete data on the financial statements and memorandum series on the pension fund become available to the MMA.

### Other Financial Corporations (paras 50–51)
- Findings
  - Two additional FSIs on the size of the OFCs sector in Maldives were compiled for reporting to STA on a quarterly basis:
    - OFCs’ financial assets to total financial system assets
    - OFCs’ financial assets to gross domestic product (GDP), disaggregated for ICs and PFs
  - There are no MMFs operating in Maldives.
  - Total financial system assets comprise the total assets of DTs (Table 5.1), ICs (Table 5.3), PF (Table 5.4) and the remaining OFCs-subsectors (Table 5.7 line ii.iv).
  - GDP figures are derived from the IMF’s WEO database.
  - MMA does not receive periodic financial information from the CMDA for non-MMF investment funds, financial auxiliaries and the pension fund, limiting coverage.
  - MMA and CMDA signed a memorandum of understanding (MoU) in 2014; scope can be broadened to cover data sharing for MFS and FSIs.
- Recommendation
  - The MMA and the CMDA collaborate to close the data gaps on non-MMF investment funds, financial auxiliaries and PFs.

### Nonfinancial corporations (NFCs) and Households (paras 52–53)
- Findings
  - Data available to the MMA do not allow compilation of complete sectoral financial statements and memorandum items for the NFCs and households sectors.
  - MMA has data on financial sectors’ exposure to the NFCs and households covering a significant part of NFCs debt (excluding external debt) and most of households’ debt.
  - Mission suggested compilation of debt to GDP indicator for households to be sourced from monetary statistics and the data source to be explained in the metadata. Mapping in bridge tables was provided.
  - MBS collects certain components of income and expense statement and balance sheet information for NFCs from MIRA’s tax statements; MIRA’s data could respond to NFCs mapping needs.
  - A list of state-owned entities with their annual and quarterly financial statements is published on the MoF website; MMA is encouraged to collaborate with MoF to collect data on public nonfinancial corporations.
- Recommendations
  - Sign a memorandum of understanding with the MBS on data sharing with respect to NFCs and households for the purposes of FSIs compilation.
  - Expand the set of FSIs beyond financial sector with the indicators for NFCs and HHs.

### Real estate markets (para 54)
- Findings
  - Residential and commercial real estate prices are not readily available.
  - MMA staff started monitoring housing market developments, focusing on the rental market initially.
  - Commercial real estate prices are not available; commercial real estate constitutes collateral for tourism loans during the development phase, which has a significant share in the DTs loan book.
- Recommendation
  - In coordination with other relevant authorities, develop residential real estate price index to compile the core FSI on residential real estate prices.

### FSIs data and metadata reporting (paras 55–58)
- Findings
  - Metadata reporting is important for interpreting the FSIs and for cross-country comparisons. Metadata should contain information on content and coverage of the FSIs, underlying accounting conventions, other national guidelines, and any deviations from the recommendations of the FSIs Guide.
  - Metadata should be updated whenever changes are observed (e.g., implementation of the IFRS-9, Basel-III implementation, or changes to call report instructions).
  - Understanding of calculation of key underlying series is important; some national calculations may not fully align with the 2019 FSIs Guide due to source data issues or adjustments.
  - The mission prepared the FSIs metadata Excel files for reporting to STA together with the FSIs data for posting on the IMF’s FSIs data portal.
  - The Concentration and Distribution Measures (CDMs) introduced by the 2019 FSIs Guide provide both a concentration measure (the Herfindahl Index) and key moments of the distributions of FSIs for DTs.
    - The FSIs Guide requires at least 28 deposit takers to be included in the calculations for reporting weighted quartiles to the IMF. Currently, the number of institutions in the DTs sector does not satisfy this criterion.
    - The MMA staff calculated the Herfindahl Index during the mission and will report the indicator under the CDM sheet.
  - The MMA can compile and report 14 core and 10 additional FSIs for DTs as well as two additional FSIs on the size of OFCs, 3 FSIs for ICs, one FSI for households and two additional FSI on real estate markets. FSIs for ICs, OFCs and households are available on a quarterly basis.
  - Underlying data available at the MMA for the calculation of FSIs start from September 2015.
  - The mission provided a comprehensive workbook mapping MMA data to the FSI-SR template and introduced the new institutional coverage template (FSIC template) that should be reported to the IMF for dissemination. The FSIC template should include:
    - (i) number of reporting DTs and their branches, split by ownership, and their respective total assets;
    - (ii) number of the ICs, split by ownership and their respective total assets; and
    - (iii) number of other OFCs split by ownership, and their respective total assets.
- Recommendations
  - Compile FSIs using the mapping provided in the workbook developed by the mission.
  - Report the Herfindahl Index.
  - Finalize and report to STA for review the new FSI sectoral financial statements (FSI-SR template) with monthly data for DTs and quarterly data for ICs, OFCs beginning from September 2015, the new FSI institutional coverage (FSIC template) with annual data starting from 2015, and the new FSI metadata (FSM template).
  - Start regular reporting to STA, for disseminating on the IMF’s FSI data portal, of the new FSI-SR template with monthly and quarterly data beginning from September 2015, and the new FSIC template with annual data starting from 2015. Also report the new FSM template and update as necessary.
- Footnote on distribution measures (exact wording preserved)
  - Distribution measures are computed for seven key FSIs, namely Tier 1 Capital to Risk-Weighted Assets, NPLs to Gross Loans, NPLs Net of Provisions to Capital, Provisions to NPLs, Return on Assets, Return on Equity, and Tier 1 Capital to Total Assets. Aggregation for the DTs sector is obtained by using either by the denominator of the respective FSIs or by the total assets as weights, and include quartiles, standard deviation, skewness, and kurtosis.

### Resources, training, and technical cooperation (paras 59–60)
- Findings
  - Mission recommended MMA staff attend regional and HQ training courses on financial sector statistics.
  - During the mission, presentations covered the 2019 FSIs Guide, the reporting templates, IFRS 9 standard, FSIs for OFCs, NFCs, HHs and real estate markets.
  - STA has delivered courses on both MFS and FSIs at IMF headquarters (each course once every two years); after COVID-19, STA started delivering remote courses. Details available on the IMF’s Institute for Capacity Development (ICD) webpage.
  - MMA requested a follow up mission once progress is made with implementing recommendations.
- Suggested follow-up mission tasks
  - Review the updated DTs and ICs templates and instructions.
  - Update the mapping for ICs and develop mapping for PFs.
  - Further help MMA develop additional FSIs for NFCs and HHs.
- Recommendation
  - Participate in IMF training courses on FSIs to improve methodological knowledge and skills in the compilation and interpretation of FSIs.

### Other issues (para 61)
- Findings and actions
  - The mission discussed the Financial Access Survey (FAS) and MFS reporting. MMA is encouraged to improve FAS data with regards to Small and Medium-sized Enterprises (SMEs).
  - Inconsistencies identified in historical gender disaggregated data were discussed.
  - MMA reports MFS to STA for the central bank, other depository corporations, and other financial corporations using STA’s standardized report forms and is a timely reporter of MFS and FAS data.
  - Classification of prepayments of ICs for MFS reporting was clarified in accordance with the MFS Manual: only prepayments related to reinsurance (i.e., with insurance corporations and nonresident ICs as counterparts) are to be classified as technical reserve assets in the 4SR; all other prepayments should be reported as other accounts receivable with corresponding sectors.
  - The mission reiterated the importance of updating the 4SR reporting with non-MMF investment funds and financial auxiliaries identified during the mission.
- Recommendation
  - Review and update mapping so only reinsurance-related prepayments are classified as technical reserve assets in the 4SR; report others as other accounts receivable with corresponding sectors.

*IMF | Technical Report (excerpt).*

### Annex 1. Officials Met During the Mission

### Annex 1. Officials Met During the Mission

### Maldives Monetary Authority
- Ali Hashim — Governor
- Ahmed Imad — Deputy Governor
- Idham Hussain — Assistant Governor, Area 1 - Monetary Policy, Research and Statistics
- Mariyam Shifa — Assistant Governor, Area 2 - Financial Stability
- Mariyam Najeela — Senior Executive Director, Area 2 - Financial Stability
- Hamida Shakeela — Executive Director, Banks & Other Financial Institutions Division | Area 2
- Mansoor Zubair — Executive Director, Statistics Division | Area 1
- Fathimath Faisha — Senior Manager, Statistical Information System Section | Statistics Division | Area 1
- Ahamed Saruvash Hameed — Senior Manager, On-site Supervision Section | Banks & Other Financial Institutions Division | Area 2
- Mohamed Amdhan — Senior Manager, Balance of Payments Section | Statistics Division | Area 1
- Mariyam Jailam Mujuthaba — Deputy Manager, Insurance Supervision Section | Insurance Division | Area 2
- Hawwa Yusra — Deputy Manager, Insurance Supervision Section | Insurance Division | Area 2
- Mariyam Azmath — Senior Economist - Statistician, Monetary and Financial Statistics Section | Statistics Division | Area 1
- Ibrahim Sameeu — Deputy Manager, Monetary and Financial Statistics Section | Statistics Division | Area 1
- Hashma Ahmed — Assistant Manager, Banks Off-site Supervision Section | Banks & Other Financial Institutions Division | Area 2
- Fathmath Jeena — Assistant Manager, Monetary and Financial Statistics Section | Statistics Division | Area 1
- Mohamed Imthinan Saudulla — Senior Research Analyst, Economic Research Section | Research Division | Area 1

### Maldives Bureau of Statistics
- Aishath Hassan — Chief Statistician
- Sajida Ahmed — Statistician, National Accounts & Economic Statistics | Maldives Bureau of Statistics

### Capital Market Development Authority
- Fatimath Abdula Kamaaluddheen — Deputy CEO
- Abdullah Zakariyya — Director General, Pension Supervision Department | Capital Market Development Authority

*Source: Annex 1. Officials Met During the Mission*

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_Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1mdvea2023003.pdf_