## 1surea2023005 ## Source details **Canonical URL:** [1surea2023005](https://www.imf.org/-/media/files/publications/cr/2023/english/1surea2023005.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2023/english/1surea2023005.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2023/english/1surea2023005.pdf.json) --- ### Mission and context - A CARTAC mission was conducted in person from November 14 to 18, 2022, to assist the Central Bank of Suriname (CBS) to enhance its financial stability report (FSR). - The CBS has published three FSRs: October 2015, May 2021, October 2022. The 2022 report was finalized and published after the mission at the end of 2022. - The mission consisted of a targeted workshop, meetings with CBS management and teams, and preparatory Webex meetings. The mission was conducted by Mr. Petr Jakubik (LTX). ### Financial system structure and coverage - The overall financial system of Suriname is highly dominated by the banking sector: 75% of the total financial system assets, 95% of GDP. - Insurance companies: 12% of the total financial system assets, 15% of GDP. - Pension Funds: 12% of the total financial system assets, 15% of GDP. - Other sectors: 1% of financial system assets. - The Financial Stability Department is part of the Directorate of Prudential Supervision at the CBS. ### Key findings and diagnostics - The FSR is the flagship CBS product in the financial stability area and is the joint effort of several teams within the bank; collaboration across teams is critical. - The FSR should provide a forward-looking, frank, and consistent financial stability risk assessment that is easy to understand by readers. - A detailed FSR production plan is critical; it should include different steps and set up a firm date of publication. Targeting semi-annual FSR releases in the medium to long term was recommended. - The CBS should prepare a communication strategy to establish the report as the key financial stability communication tool, containing a central risk story based on the forward-looking assessment. - The report’s structure should move to a top-down approach to improve structure and readability. - The CBS has made progress developing financial stability analyses and indicators (FSI/FHSI/AFSI/BSI), but the analytical toolkit should be further enhanced and revised to avoid overlaps and to identify, monitor, and assess all relevant financial stability risks. - Banking top-down stress tests are regularly performed and have benefited from CARTAC technical assistance in March 2021 covering nine key commercial banks, but methodological improvements are needed. - Non-bank sectors (insurance and pension) require more in-depth analysis; bank-like activities undertaken by non-banks should be fully assessed and monitored. - All available data sources should be utilized; the possibility to use credit registers for statistical/financial stability work should be explored. Existing data gaps could be covered by industry surveys. - The CBS should initiate discussion on software/tools for processing large data in the bank. ### Recommendations — Organizational and operational setup (priorities and timeframes) - Prepare the FSR production plan with the dates of different steps and the final publication. — Priority: High; Timeframe: Near term - Prepare a communication strategy on the report, establish the FSR as the key communication tool, consider press conference/presentation/discussion with market participants/analysts. — Priority: High; Timeframe: Near term - Discuss the FSR in the Financial Stability Committee. — Priority: High; Timeframe: Near term - Organize cross-departmental discussion(s) before starting the report drafting and during the drafting process. — Priority: High; Timeframe: Near term - Set up firm date(s) for the publications. — Priority: High; Timeframe: Near term - Target semi-annual FSR releases in the medium to long term. — Priority: Medium; Timeframe: Medium to long term ### Recommendations — Structure of the report - Reflect the broader macro-context and a more forward-looking perspective; streamline the report to follow the central story with key messages clear for readers with limited knowledge of Suriname’s financial system. — Priority: High; Timeframe: Near term - Change the structure to top-down: start with the key risks and then elaborate on them, add mission statements/themes to each paragraph, use boxes and annex(es) when appropriate. — Priority: High; Timeframe: Near term - The revised report should contain a foreword, executive summary, overview of the key risks for financial stability in Suriname, the internal and external macroeconomic environment and potential implied tail risks, the real sector assessment including the property market, and financial sector assessment of all segments including financial system infrastructure. — Priority: High; Timeframe: Near term ### Recommendations — Content, analytical toolkit, and data sources - Include discussion of the regulatory framework, any potential changes planned and policy actions impacting financial stability risks. — Priority: High; Timeframe: Near term - Elaborate on financial inclusion/education in the report. — Priority: High; Timeframe: Near term - Include analysis of the real sector as the key element of credit risks for banks dominating the financial system in Suriname. — Priority: High; Timeframe: Near term - Explore existing work on non-banks not used for financial stability purposes, investigate bank-like activities carried out by non-banks; assess potential spillover risks from non-banks to banks, consider enhancing cooperation between insurance, pension, and banking teams. — Priority: Medium; Timeframe: Medium term - Revise the existing financial stability assessment framework to avoid overlaps, consider enhancement of stress test methodologies and develop a cross-sectoral interconnectedness network. — Priority: Medium; Timeframe: Medium term - Consider extending utilized data sources to the latest available information (market data), clearly communicate the cut-off dates for different data sources. Initiate surveys with the industry to cover existing data gaps. — Priority: Medium; Timeframe: Medium term - Consider dedicating a person(s) to support FSR on economic research (econometric modelling). — Priority: Medium; Timeframe: Medium term - The Financial Stability Department should be strengthened by additional headcounts to be able to fully cover the financial stability agenda. — Priority: High; Timeframe: Medium term - Investigate the possibility and prepare an implementation plan to use credit register(s) for statistical/financial stability work in the future (i.e., calculation of default rates). — Priority: Medium; Timeframe: Medium term - Organize a discussion and prepare an implementation plan on software/tools to use for large data processing in the future. — Priority: Medium; Timeframe: Medium term ### Data transparency and methodology - The sources and cut-off date of the data should be indicated clearly and in an easily identifiable place. - The data used should be made available to the public on the internet, on the same website where the reports are published. - The methodology used for projections, sensitivity analyses, and stress tests should be explained in clear and simple terms in the text, with more technical details provided in special boxes or annexes. - Analysis should consider aggregate and average measures, distributional indicators, where appropriate extreme or individual values (with proper safeguards to preserve confidentiality), and highlight the position of the weakest or most vulnerable institutions or asset classes. - Reports should be published within three months of the cutoff date for the data, preferably at least two times a year. - The publication date should be announced in advance, changed only infrequently, and past publication dates should be clearly indicated on the website. ### Stress testing — current practice and suggested methodological improvements - Banking top-down stress test is regularly performed and covers nine key commercial banks. - CARTAC technical assistance enhanced the stress test framework in March 2021. - The 2021 FSR presented results of both solvency and liquidity stress tests based on a range of scenarios. - Current methodology: first-generation top-down stress tests using a static balance sheet approach (instantaneous shocks, no time horizon). - Solvency stress test details: - Single shock scenarios: an NPLs increase, default of top borrowers, and USD/SRD depreciation. - Multiple factor risk scenarios: combinations of exchange rate and credit risk shocks and combination of all mentioned single shocks. - None of the employed shocks are derived from any consistent macro-financial model. - Recommendations: - Derive market-consistent scenarios based on a macroeconomic model and link financial variables such as NPLs via estimated econometric models to such a scenario. - Break down credit risk calculation for corporates, personal consumer loans and mortgages. - Link interbank contagion risk analysis to the bank solvency stress test by deducting losses from capital after stress tests where credit and FX shocks are applied. - Transition to dynamic stress testing: - Recommendation: generate a market-consistent macroeconomic scenario (for example by using an adjusted macroeconomic projection employed for monetary policy purposes reflecting potential tail risks) and estimate satellite econometric models to link scenarios to key bank balance sheet items (in particular NPLs). - Such models could be estimated using only Suriname data when historic time series are sufficiently long or panel data covering several relevant countries. - Liquidity stress test enhancements: - Current liquidity scenarios: a large deposit withdrawal and continuous daily outflow of deposits. - Recommendation: incorporate assumption of fire sales implying haircuts on different asset types, noting many liquid assets have no market in Suriname or are illiquid (e.g., government bonds). - Note: liquidity risk does not seem to be the major issue for the banking sector in Suriname. ### Capacity, staffing, and skills - The Financial Stability Department consists of 4 members including the director and her deputy. - Current headcount constraints mean the department cannot produce the report without assistance; additional headcount is recommended via new hires or staff reallocation. - There is limited capacity to perform financial stability analyses beyond banking; financial stability experts have solid banking expertise but limited experience with the non-bank sector. - Recommendation: dedicate staff to support financial stability related research (such staff could be from the existing Research Department – Monetary and/or Real Sector) to work closely with the Financial Stability Department. - Train staff involved in FSR drafting on written communication skills to produce more concise and clear messages; provide targeted training based on the revised report published in 2023. ### Data sources, timeliness, credit registers, and surveys - The report uses mostly year-end balance sheet data for financial institutions; the report is published in October resulting in an approximately 3-quarter lag between when data are available and the report publication. - Recommendation: use more recent financial market data before final publication; the report does not have to have the same cut-off date for all data sources but all cut-off dates should be clearly stated in the report. - Credit registers: - The possibility to use credit registers for statistical/financial stability work should be explored. - Credit registers provide observed PDs and loss given defaults (LGDs), allowing calculation of default rates and average LGDs for different loan portfolios. - The CBS should ensure credit register(s) are set up to enable complex statistical analysis, not only supervision of individual cases. - Industry surveys to cover data gaps could include: - Average PD/default rate for corporate loans, consumer loans and mortgages; - Average LGD for corporate loans, consumer loans and mortgages; - Average lending rates for corporate loans, consumer loans and mortgages; - Information for corporates could potentially be further broken down to SMEs and large corporates; - Information on type of collateral – real estate, other assets, etc.; - Average deposit rates. - A cyber risk survey could cover: - Number of cyber incidents with impact exceeding the defined threshold; - Total losses related to cyber incidents; - Potential breakdown by type of cyber incidents (e.g., malware attack, phishing attack, insider threat, etc.). ### Reporting, communication, and governance recommendations - Prepare a production plan/road map with exact dates, deadlines, responsibilities, and the final publication day. - Organize cross-departmental high-level discussions on key topics before drafting. - Organize expert meetings on main risks/messages with all contributors before and during drafting. - Prepare a financial stability communication strategy. - Use the foreword to communicate key messages by the Governor; consider a press conference with the Governor and circulate an email with highlights on publication day. - Organize a seminar with market participants/analysts shortly after publication to discuss key findings. - Discuss the FSR in the Financial Stability Committee to internalize main messages and identify follow-up issues; involve important stakeholders, including the Minister of Finance. - Set firm publication dates and aim for semi-annual frequency in the medium- to long-term; short-term: annual publication is reasonable given current capacity. ### Key conclusions - CARTAC technical assistance reviewed organizational and operational setup, communication, structure, content of the report, analytical toolkit, and data sources with recommendations across these areas. - Strengthening the analytical toolkit and data usage will allow CBS to provide more in-depth financial stability analyses and assessments, increase credibility, and potentially influence market participants to limit systemic risk. - The mission recommended investigating credit register(s) for statistical/financial stability work and preparing an implementation plan. *Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1surea2023005.pdf* ### Executive Summary ...................................................................................................... ### Executive Summary ### Mission and context - A CARTAC mission was conducted in person from November 14 to 18, 2022, to assist the Central Bank of Suriname (CBS) to enhance its financial stability report (FSR). - The CBS has published three FSRs: October 2015, May 2021, October 2022. The 2022 report was finalized and published after the mission at the end of 2022. Since 2016, FSRs had not been produced until the recent resumption. - The mission consisted of a targeted workshop, meetings with CBS management and teams, and preparatory Webex meetings. The mission was conducted by Mr. Petr Jakubik (LTX). ### Financial system structure and coverage - The overall financial system of Suriname is highly dominated by the banking sector: 75% of the total financial system assets, 95% of GDP. - Insurance companies: 12% of the total financial system assets, 15% of GDP. - Pension Funds: 12% of the total financial system assets, 15% of GDP. - Other sectors: 1% of financial system assets (as shown in the provided distribution). - The Financial Stability Department is part of the Directorate of Prudential Supervision at the CBS. ### Key findings and diagnostics - The FSR is the flagship CBS product in the financial stability area and is the joint effort of several teams within the bank. Collaboration across teams is critical. - The FSR should provide a forward-looking, frank, and consistent financial stability risk assessment that is easy to understand by readers. - A detailed FSR production plan is critical; it should include different steps and set up a firm date of publication. Targeting semi-annual FSR releases in the medium to long term was recommended to provide more up-to-date information. - The CBS should prepare a communication strategy to establish the report as the key financial stability communication tool, containing a central risk story based on the forward-looking assessment. - The report’s structure should move to a top-down approach to improve structure and readability. - The CBS has made progress developing financial stability analyses and indicators (FSI/FHSI/AFSI/BSI), but the analytical toolkit should be further enhanced and revised to avoid overlaps and to identify, monitor, and assess all relevant financial stability risks. - Banking top-down stress tests are regularly performed and have benefited from CARTAC technical assistance in March 2021 covering nine key commercial banks, but methodological improvements are needed: - The solvency stress test could be further elaborated, especially for credit risk. - Projection of market consistent scenarios and developing other econometric models would allow movement from a static to a dynamic balance sheet stress test applying the same time horizon. - Non-bank sectors (insurance and pension) require more in-depth analysis; bank-like activities undertaken by non-banks should be fully assessed and monitored. - Cooperation between banking, insurance, and pension teams should be strengthened. - All available data sources should be utilized. The possibility to use credit registers for statistical/financial stability work should be explored. Meanwhile, existing data gaps could be covered by industry surveys. - The CBS should initiate discussion on software/tools for processing large data in the bank. - The CBS has compiled the methodological description of the Aggregated Financial Stability Index (AFSI), Banking Stability Index (BSI), Cobweb for determining financial stability risks, interconnectedness work within the banking sector, credit-to-GDP gap estimates, and dollarization data—all of which informed the mission. ### Recommendations — Organizational and operational setup of the report and its communication - Prepare the FSR production plan with the dates of different steps and the final publication. — Priority: High; Timeframe: Near term - Prepare a communication strategy on the report, establish the FSR as the key communication tool, consider press conference/presentation/discussion with market participants/analysts. — Priority: High; Timeframe: Near term - Discuss the FSR in the Financial Stability Committee. — Priority: High; Timeframe: Near term - Organize cross-departmental discussion(s) before starting the report drafting and during the drafting process. — Priority: High; Timeframe: Near term - Set up firm date(s) for the publications. — Priority: High; Timeframe: Near term - Target semi-annual FSR releases in the medium to long term. — Priority: Medium; Timeframe: Medium to long term ### Recommendations — Structure of the report - Reflect the broader macro-context and a more forward-looking perspective; streamline the report to follow the central story with key messages clear for readers with limited knowledge of Suriname’s financial system. — Priority: High; Timeframe: Near term - Change the structure to top-down: start with the key risks and then elaborate on them, add mission statements/themes to each paragraph, use boxes and annex(es) when appropriate. — Priority: High; Timeframe: Near term - The revised report should contain a foreword, executive summary, overview of the key risks for financial stability in Suriname, the internal and external macroeconomic environment and potential implied tail risks, the real sector assessment including the property market, and financial sector assessment of all segments including financial system infrastructure. — Priority: High; Timeframe: Near term ### Recommendations — Content of the report including analytical toolkit and data sources - Include discussion of the regulatory framework, any potential changes planned and policy actions impacting financial stability risks. — Priority: High; Timeframe: Near term - Elaborate on financial inclusion/education in the report. — Priority: High; Timeframe: Near term - Include analysis of the real sector as the key element of credit risks for banks dominating the financial system in Suriname. — Priority: High; Timeframe: Near term - Explore existing work on non-banks not used for financial stability purposes, investigate bank-like activities carried out by non-banks; assess potential spillover risks from non-banks to banks, consider enhancing cooperation between insurance, pension, and banking teams. — Priority: Medium; Timeframe: Medium term - Revise the existing financial stability assessment framework to avoid overlaps, consider enhancement of stress test methodologies and develop a cross-sectoral interconnectedness network. — Priority: Medium; Timeframe: Medium term - Consider extending utilized data sources to the latest available information (market data), clearly communicate the cut-off dates for different data sources. Initiate surveys with the industry to cover existing data gaps. — Priority: Medium; Timeframe: Medium term - Consider dedicating a person(s) to support FSR on economic research (econometric modelling). — Priority: Medium; Timeframe: Medium term - The Financial Stability Department should be strengthened by additional headcounts to be able to fully cover the financial stability agenda. — Priority: High; Timeframe: Medium term - Investigate the possibility and prepare an implementation plan to use credit register(s) for statistical/financial stability work in the future (i.e., calculation of default rates). — Priority: Medium; Timeframe: Medium term - Organize a discussion and prepare an implementation plan on software/tools to use for large data processing in the future. — Priority: Medium; Timeframe: Medium term *Source: Executive Summary of the CARTAC mission report to the Central Bank of Suriname (November 14–18, 2022).* ### 12. FSRs should indicate the data and methodology used and make them easily available. The sources ### 12. FSRs should indicate the data and methodology used and make them easily available. The sources ### Data transparency and methodology - The sources and cut-off date of the data should be indicated clearly and in an easily identifiable place. - The data used should be made available to the public on the internet, on the same website where the reports are published. - The methodology used for: - projections, - sensitivity analyses, and - stress tests should be explained in clear and simple terms in the text, with more technical details provided in special boxes or annexes. - Analysis should consider: - aggregate and average measures, - distributional indicators, - where appropriate, extreme or individual values (with proper safeguards to preserve confidentiality), - and highlight the position of the weakest or most vulnerable institutions or asset classes. ### Publication timing, frequency, and communication - Reports should be published within three months of the cutoff date for the data, preferably at least two times a year. - The publication of the reports should be supported by a well-designed communication strategy including: - a dedicated, easy-to-navigate webpage on the publishing authority’s website containing current and past issues and a database with the data used; - links to other relevant publications and agencies; - an outreach campaign (audiovisual broadcasts, press releases, public presentations, press conferences); - adaptation of format and medium to the intended audience. - The publication date should be: - announced in advance, - changed only infrequently, - and past publication dates should be clearly indicated on the website. - Target medium- to long-term frequency: set firm date(s) of publication and target semi-annual releases. Short-term: annual publication is reasonable given current capacity. ### Report structure and content organization - Reports should follow a logical and integrated structure with unifying themes centered on the key risks. - Structure should: - enable readers to identify where specific information is located, - facilitate discussion of cross-cutting topics, - be consistent over time to allow comparison, - contain boxes or appendices for slowly evolving or passing issues. - Recommended components of the revised report: - Foreword providing the key messages to be communicated by the Governor. - Executive Summary providing a good overview of the key risks and their assessment. - Overview of the key risks for financial stability in Suriname. - Internal and external macroeconomic environment (factors that might form adverse scenarios and tail risks). - Real sector assessment including the property market. - Financial sector assessment and changes in financial infrastructure, including regulatory and supervisory framework. - Table of acronyms, glossary of technical terms, methodological and statistical annexes. - Stress test results should be incorporated into the financial sector assessment chapter; further methodological details and detailed results should be in an annex. - The real sector assessment chapter needs to be linked to the financial sector chapter to better capture credit risk dynamics. ### Organizational and operational setup - The Financial Stability Department is responsible for the FSR but many other teams contribute: banking supervision, insurance supervision, pension fund supervision, credit union supervision, research, financial markets, payment system, open market operations, and international relations teams. - The Financial Stability Department consists of 4 members including the director and her deputy. - Current headcount constraints mean the department cannot produce the report without assistance; additional headcount is recommended via new hires or staff reallocation. - The production plan/road map should be prepared jointly with all departments/teams involved, discussed to obtain commitment on timelines, and adopted by top management. - Recommended operational steps to improve coherence and messaging: - Prepare a production plan/road map with exact dates, deadlines, responsibilities, and the final publication day. - Organize cross-departmental high-level discussions on key topics before drafting. - Organize expert meetings on main risks/messages with all contributors before and during drafting. - Prepare a financial stability communication strategy. ### Internal and external communication and governance - Use the foreword to communicate key messages by the Governor. - Consider organizing a press conference with the Governor and circulate an email with highlights on publication day. - Organize a seminar with market participants/analysts shortly after publication to discuss key findings. - Discuss the FSR in the Financial Stability Committee to internalize main messages and identify follow-up issues; this would involve important stakeholders, including the Minister of Finance. - Set firm publication dates and aim for semi-annual frequency in the medium- to long-term; interim approach could split releases into one comprehensive (annual data) and one shorter update on key risks. ### Content enhancements and analytical toolkit - Expand analysis of the real sector to assess vulnerabilities in corporate and household balance sheets, covering solvency, profitability, activity, and liquidity for firms, and disposable income, unemployment, indebtedness, lending rates, and savings for households. - Provide comprehensive statistics in an annex; correct inconsistencies in numbers across segments. - Assess evolving fiscal and monetary policy context and strengthen coordination with relevant departments. - Add description of relevant elements of the regulatory framework for different financial segments and provide definitions for all ratios used; ensure charts include necessary descriptions. - Elaborate on financial literacy, education, and inclusion from a financial stability perspective and reflect consumer protection work in the report. - Undertake a more in-depth analysis of the insurance sector: - Current descriptive statistics suggest insurance sector underwriting seems to generate persistent losses. - The overall positive profitability of insurers reported seems driven by depreciation of domestic currency, implying a potentially non-viable business model independent of macroeconomic developments. - Fully assess bank-like activities of non-banks (insurers, pension funds granting loans) and potential regulatory arbitrage and spillovers to banks; assess distortions from under-supervised non-bank credit provision on credit market functioning. - Enhance cooperation between insurance, pension, and banking teams (e.g., one banking expert supporting insurance/pension) to build capacity to supervise non-traditional activities. - Strengthen cooperation between pension and financial stability teams to reflect existing work on monitoring and assessing pension sector risks in the FSR; explore options for automatization of manual processes for pension analysis or assign to an intern if no free human capacity exists. ### Staff capacity and skills - Strengthen Financial Stability Department staffing to fully cover the financial stability agenda. - Train staff involved in FSR drafting on written communication skills to produce more concise and clear messages; provide targeted training based on the revised report published in 2023. *IMF | CARTAC Suriname* ### 36. Although, the CBS has made significant progress in developing financial stability analyses over the ### 1surea2023005 - 36. Although, the CBS has made significant progress in developing financial stability analyses over the ### Governance, toolkit progress, and scope - Although the CBS has made significant progress on developing systemic risk indicators and carrying out financial network analysis, this has been produced only for the banking sector so far. - The CBS should further build up the capacity to monitor especially credit risk and disaggregate the relevant indicators to follow different risk drivers – e.g., breakdown of loans to corporates, mortgages, and consumer loans to households. - The CBS should build up a cross-sectoral interconnectedness network to understand how risks could be transferred among different segments of the financial system, showing the relative importance of the non-bank sector to financial stability. - The existing financial stability analysis toolkit should be revised to avoid all existing overlaps. The information provided by the Aggregated Financial Stability Index (AFSI), Banking Stability Index (BSI) and Cobweb needs careful interpretation because of overlaps (for example, between BSI and Cobweb for banking related indicators). - Indicators that are duplicated across indices should be streamlined to capture their intended scope; indicators must be complemented by expert judgement. - The current style of the report that mechanistically describes results of indices should be replaced by a central risk story supported by results obtained from different indicators. ### Stress testing: current practice and methodological improvements - The banking top-down stress test is regularly performed and covers nine key commercial banks. - CARTAC technical assistance enhanced the stress test framework in March 2021. - The 2021 FSR presented results of both solvency and liquidity stress tests based on a range of scenarios. - The current methodology is based on first-generation top-down stress tests using a static balance sheet approach. - Solvency stress test details: - Single shock scenarios used: an NPLs increase, default of top borrowers, and USD/SRD depreciation. - Multiple factor risk scenarios used: combinations of exchange rate and credit risk shocks and combination of all mentioned single shocks. - None of the employed shocks are derived from any consistent macro-financial model. - Recommendation: derive market-consistent scenarios based on a macroeconomic model and link financial variables such as NPLs via estimated econometric models to such a scenario. - Recommendation: break down credit risk calculation for corporates, personal consumer loans and mortgages. - Recommendation: link interbank contagion risk analysis to the bank solvency stress test by deducting losses from capital after stress tests where credit and FX shocks are applied. - Transition to dynamic stress testing: - The current exercise is static with instantaneous shocks and no time horizon. - Recommendation: generate a market-consistent macroeconomic scenario (for example by using an adjusted macroeconomic projection employed for monetary policy purposes reflecting potential tail risks) and estimate satellite econometric models to link scenarios to key bank balance sheet items (in particular NPLs). - Such models could be estimated using only Suriname data when historic time series are sufficiently long or panel data covering several relevant countries. - Liquidity stress test enhancements: - Current liquidity scenarios: a large deposit withdrawal and continuous daily outflow of deposits. - Recommendation: incorporate assumption of fire sales implying haircuts on different asset types, noting many liquid assets have no market in Suriname or are illiquid (e.g., government bonds). - Note: liquidity risk does not seem to be the major issue for the banking sector in Suriname so this might have lower priority. ### Capacity beyond banking and research support - There is currently limited capacity to perform financial stability analyses beyond banking; financial stability experts have solid banking expertise but limited experience with the non-bank sector. - Experts from other departments provide inputs to the financial stability report, but the Financial Stability Department has had no capacity to challenge those inputs. - Given the size of the Financial Stability Department, it is unrealistic the team will gain all necessary expertise; however, the team needs to gradually build broader understanding of the non-banking sector, especially insurance and pension sectors, to assess inputs from other teams. - Economic research capacity is very limited within the Financial Stability Department. - The central bank’s Research Department staff focuses almost entirely on research supporting the CBS’s monetary policy. - Recommendation: dedicate staff to support financial stability related research (such staff could be from the existing Research Department – Monetary and/or Real Sector) to work closely with the Financial Stability Department. ### Data sources, timeliness, and surveys - The report uses mostly year-end balance sheet data for financial institutions; the report is published in October resulting in an approximately 3-quarter lag between when data are available and the report publication. - Recommendation: use more recent financial market data before final publication; the report does not have to have the same cut-off date for all data sources but all cut-off dates should be clearly stated in the report. - Credit registers: - The possibility to use credit registers for statistical/financial stability work should be explored. - Credit registers provide observed PDs and loss given defaults (LGDs), allowing calculation of default rates and average LGDs for different loan portfolios. - As banks dominate the financial system in Suriname, credit risk is crucial; the CBS should ensure credit register(s) are set up to enable complex statistical analysis, not only supervision of individual cases. - Tools and staff for large data: - The CBS should initiate discussion on software/tools for processing large data in the bank and train or hire staff able to work with large data (e.g., payments systems, credit register(s) once set up). - Industry surveys to cover data gaps: - The CBS could initiate surveys with the industry to cover gaps related to credit risk and cyber risk; surveys could include: - Average PD/default rate for corporate loans, consumer loans and mortgages; - Average LGD for corporate loans, consumer loans and mortgages; - Average lending rates for corporate loans, consumer loans and mortgages; - Information for corporates could potentially be further broken down to SMEs and large corporates; - Information on type of collateral – real estate, other assets, etc.; - Average deposit rates. - A cyber risk survey could cover: - Number of cyber incidents with impact exceeding the defined threshold; - Total losses related to cyber incidents; - Potential breakdown by type of cyber incidents (e.g., malware attack, phishing attack, insider threat, etc.). - Any other survey addressing identified data gaps or emerging risks could be considered. ### Reporting, communication, and organizational recommendations - Prepare a detailed FSR production plan with steps and firm publication date; discuss with all departments to obtain views and commitments on timelines. - Target semiannual FSR releases in medium to long term to provide more up-to-date information. - Establish the report as the key communication tool; organize a press conference and subsequent presentations. - Ensure extensive internal structured communication among teams contributing to the report. - Revise report structure to be more top-down: - Start with key risks and then elaborate in more detail. - Add mission statements/themes to each paragraph. - Use boxes for methodological explanations or specific topics; move detailed statistics to annexes when appropriate. - The revised report should contain: a foreword, executive summary, overview of key risks for financial stability in Suriname, internal and external macroeconomic environment and potential implied tail risks, real sector assessment including the property market, and financial sector assessment of all segments including financial system infrastructure. - The report should reflect regulatory framework and real sector analysis to allow proper interpretation of indicators and to assess credit risks for banks. - Enhance work on the financial system beyond banking, particularly bank-like activities by non-banks and potential spillovers; facilitate cooperation between insurance, pension, and banking teams. - Revise the analytical toolkit to address overlaps, enhance stress test methodologies, and develop cross-sectoral interconnectedness network; support these with increased headcount in the Financial Stability Department. - Organize discussion on software/tools for large data processing and prepare implementation plan. ### Key conclusions - CARTAC technical assistance reviewed organizational and operational setup, communication, structure, content of the report, analytical toolkit, and data sources with recommendations across these areas. - Strengthening the analytical toolkit and data usage will allow CBS to provide more in-depth financial stability analyses and assessments, increase credibility, and potentially influence market participants to limit systemic risk. - The mission recommended investigating credit register(s) for statistical/financial stability work and preparing an implementation plan. *Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1surea2023005.pdf* --- _Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1surea2023005.pdf_