## Safeguards Assessments: Expert Panel’s Report (ppea2022059)

## Source details

**Canonical URL:** [Safeguards Assessments: Expert Panel’s Report (ppea2022059)](https://www.imf.org/-/media/files/publications/pp/2022/english/ppea2022059.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/pp/2022/english/ppea2022059.pdf.md)
- [Structured JSON version](/-/media/files/publications/pp/2022/english/ppea2022059.pdf.json)

---

### Executive summary — overview and scope
- Advisory Report of the External Expert Panel presenting conclusions on effectiveness of the safeguards policy and recommendations to the Board.
- Review period: September 2015 to April 2022; Date on document: November 7, 2022.
- Basis of findings:
  - discussions with stakeholders including central banks, Executive Directors’ offices, and IMF staff;
  - review of a sample of the 91 safeguards assessments conducted during the period September 2015 to April 2022;
  - Fund publications, including policy papers, working papers, and other Fund documents.
- Review considerations included the onset of the global pandemic in 2020 and its impact on safeguards assessments and monitoring.
- Focus areas of the Panel:
  - the focus of safeguards assessments;
  - continued appropriateness of the ELRIC framework and its application;
  - adequacy and coverage of safeguards reports;
  - modalities and thresholds for fiscal safeguards reviews (FSRs), increased focus on governance, and broader coverage of integrated risk management.
- Two relevant IMF initiatives reviewed:
  - 2018 Framework for Enhanced Fund Engagement on Governance;
  - 2020 Central Bank Transparency Code (pilot phase at time of report).

### Methodology
- Reviewed policy documents and a representative sample of twenty safeguards assessment reports selected by staff (reflecting borrowing countries in the five Fund regions based on geography, size of loan, and risk rating).
- Held remote meetings with five of the twenty central banks with strict confidentiality and advance questions.
- Met with staff from FIN, FAD, MCM, LEG, SPR, the Office of Risk Management, and area departments (AFR, APD, EUR, MCD, WHD) during Washington, DC visits in April and July 2022.
- Reviewed the four fiscal safeguards reviews conducted since 2015.

### Key findings
- General agreement that the focus of the safeguards assessments framework was appropriate.
- Limited awareness among central banks of the overarching objective of the safeguards policy and little advance knowledge of what the safeguards assessment exercise would entail.
- Measures to enhance knowledge and understanding of the safeguards assessment framework would benefit central banks even absent an IMF program.
- Good progress implementing 2015 Panel recommendations, notably increased emphasis on governance.
- Safeguards assessments since 2015 placed more emphasis on risk management, particularly for emerging risks: COVID-19 pandemic, wars, cyber incidents, and adoption of digital currencies.
- Activity and resourcing:
  - 91 assessments completed from the 2015 review through to end-April 2022.
  - 42 (about 45 percent) of them were in the last two years (April 2020–2022), owing to the pandemic response.
  - Assessments represented 66 central banks.
  - Safeguards monitoring increased by more than 22 percent and is projected to remain elevated over the medium term.
- Staff response and work pressures:
  - Significant staff overtime, reallocation of staff, and new hires to meet increased workload.
  - Between April 2020 and April 2022, monthly staff overtime averaged 16 percent.
  - Prior to the pandemic FINSA staff numbered 12 (excluding two administrative assistants). At the end of June 2021, staff numbered 18.
  - Implementation rate of staff recommendations declined from 82 percent (previous review period) to 69 percent (current review period).
  - Panel concluded quality of assessment and reporting was generally maintained during the pandemic despite remote work limitations.
- Policy effectiveness:
  - Safeguards policy continues to be an effective instrument for preventing misuse of Fund resources and misreporting of program monetary data.
  - Addition of fiscal safeguards review mechanism enhances the Fund’s ability to safeguard its resources.

### Status of implementation of 2015 Panel recommendations (selected highlights)
- Governance:
  - Assessments emphasize governance as an overarching pillar; expanded comprehensive coverage of governance arrangements.
  - Remedial measures included in safeguards reports to address governance vulnerabilities.
  - Staff participated in central bank governance assessments pursuant to the Framework for Enhanced Fund Engagement on Governance and related work.
- Risk management:
  - Deeper evaluations of risk management practices integrated into safeguards assessments.
  - Staff developed a maturity assessment tool and published Working Paper: Risk Management Maturity Assessment at Central Banks (2019).
  - Fund joined the International Operational Risk Working Group (IORWG) in 2018.
  - More structured coverage of cyber risk management and focus on risks related to central bank digital currencies.
- Legal framework:
  - Increase in recommendations for comprehensive legal amendments and staff engagement to draft amendments and advance legal reform, including via IMF technical assistance.
  - Increase in central bank legal amendments being incorporated in program conditionality.
- Transparency, disclosure, and stakeholder engagement:
  - Safeguards-related paragraph included in staff reports for countries undergoing safeguards monitoring.
  - Staff collaborated with TA-providing departments on legal and governance reforms, IFRS, risk management, internal audit, and monetary statistics.
  - Staff published working papers: Effectiveness of Internal Audit and Oversight at Central Banks: Safeguards Findings—Trends and Observations (2018) and External Audit Arrangements at Central Banks (2018).
- Fiscal Safeguards Review threshold:
  - IMF Board approved FSR framework for arrangements with exceptional access where at least 25 percent of the funds will be directed to financing of the state budget.
  - Three FSRs were conducted during the period; lessons learned being considered by FIN, FAD, and LEG.
- Operational documents:
  - Staff updated the Operational Guidelines for Safeguards Assessments in 2017; no significant changes since then.

### Main recommendations (overview)
- Establish a separate pillar on governance focusing on board effectiveness and central bank governance culture.
- Explicitly recognize risk management and focus on high-level review of appropriateness, effectiveness, and maturity of risk management arrangements.
- Prepare comprehensive guidelines reflecting good practices across the safeguards assessment framework.
- Broaden identification of risks to central bank safeguards arising from changes to laws and regulations affecting central bank operations.
- Avoid putting additional pressure on staff resources in implementing recommendations.
- Focus on central bank capacity building to improve implementation of safeguards recommendations.
- Develop guidelines for conducting fiscal safeguards reviews clarifying interdepartmental roles and responsibilities.

### Panel’s opinion and conclusion
- Safeguards policy remains effective for preventing misuse of Fund resources and misreporting of program monetary data.
- Fiscal safeguards review mechanism enhances the Fund’s ability to safeguard its resources.
- Implementation of Panel recommendations will further strengthen the safeguards assessment framework and minimize risks when authorities lack adequate capacity.

*Prepared by the External Expert Panel comprising Mohammed Nyaoga, Blanaid Clarke, Maher Hasan, and Brian Wynter; Joanne Creary served as the secretariat for the Panel.*

### Activity levels, pandemic impact, and monitoring operations
- Activity and scope:
  - 91 assessments completed from the 2015 review through to end-April 2022, representing 66 central banks.
  - Nearly half of the 91 assessments were completed in the last two years of the review.
  - Central banks subject to monitoring increased from 67 to 82.
- Pandemic effects on assessments and timelines:
  - 42 (about 45 percent) of the 91 assessments were conducted remotely during April 2020–2022 owing to the pandemic response.
  - Average assessment duration increased from 9 days to 14 days (a 55 percent increase), mainly due to coordinating across time zones.
  - Remote assessments retained established information requests but faced intangible limitations: connectivity, confidentiality with videoconferencing, loss of nonverbal cues, and inability to observe physical controls.
- Monitoring and IT:
  - Onsite monitoring pre-pandemic occurred in 12 missions where implementation of recommendations was low or vulnerabilities emerged.
  - Staff developed the Safeguards Portal to enhance data management, timelier follow-up via embedded alerts, real-time statistics on outstanding recommendations, and streamlined reporting.

### Governance: Panel recommendations and scope
- Establish a separate governance pillar to reduce risks of misuse of Fund resources and misreporting of program monetary data and to allow holistic governance analysis.
- Governance definition cited from Bossu and Rossi (2019): “the ensemble of structures and arrangements by means of which an organization makes decisions in the pursuit of its mandate.”
- Governance elements already covered in assessments include:
  - legal framework on appointment and dismissal of board members, governor, deputy governor;
  - board members’ qualifications, diversity, independence, executive roles, incompatibility, and tenure;
  - board committees’ composition, roles, and responsibilities;
  - board oversight of internal audit, external audit, risk management, business continuity, reserve management, emergency liquidity assistance, and dealing with problem banks;
  - collegiality in decision making and concentration of power with the governor.
- Board effectiveness:
  - Central banks should be encouraged to measure board effectiveness via regular board evaluations of composition, responsibilities, diversity (including cognitive diversity), and suitability.
  - Board evaluations should assess collegial work and individual contribution, be facilitated every few years by an experienced external independent evaluator, and produce strategic actions and board leadership development deliverables.
- Governance culture:
  - Reviews should include governance culture assessment emphasizing the board’s role in embedding values, incentivizing good behavior, creating productive environments, calling out ethical failings, supporting diversity and inclusion, facilitating constructive challenge, and treating culture risk as part of integrated oversight.
  - Inclusion of culture metrics in assessments would assist boards in identifying and measuring culture risk and evidencing cultural change and impact.

### Risk management — findings and proposed framework changes
- Observation: assessments increasingly cover operational, financial, cyber, and business continuity risks; business continuity importance increased due to COVID-19, wars, climate-related risks, and cyber incidents.
- Recommendation: explicitly recognize risk management in the framework; rename pillar to "risk management and internal control".
- Purpose: focus on a high-level review of appropriateness and effectiveness of existing risk management arrangements and their maturity to ensure relevance and conserve resources.
- Suggested scope of high-level risk management review:
  - risk governance;
  - existence and effectiveness of a board-level risk management committee;
  - availability of appropriate skills at the board level;
  - comprehensiveness and maturity of the enterprise risk management (ERM) framework;
  - adequacy of resources available to management;
  - identification of material emerging risks deserving special attention;
  - review of the three lines model to ensure absence of gaps or overlaps.
- Specific emerging and heightened risk areas to prioritize:
  - central banks’ purchase of government securities;
  - quasi-fiscal activities;
  - adoption of central bank digital currencies (CBDCs).
- Rationale: these activities raise risks of fiscal dominance, debt monetization, undermined central bank independence, and new financial stability, financial integrity, cybersecurity, capital management, and business continuity risks associated with CBDCs.

### Risk governance — board roles (Box 1 summary)
- Consider recommending a risk management oversight committee at the board level rather than assigning risk oversight to the audit committee.
- Board oversight actions include:
  1. adopting risk policies consistent with strategy and risk appetite;
  2. following up on management’s implementation of risk policies;
  3. following up on assurances that policies function as intended;
  4. fostering risk awareness;
  5. encouraging an organizational culture of risk-adjusted awareness.
- Implementation requires appropriate board risk governance and expertise, a separate board committee with clear mandate, and enterprise-wide ERM implementation.

### Revisiting ELRIC and proposed pillar structure
- Recommendation: revisit the ELRIC framework to explicitly include governance and risk management.
- Proposed revised pillars: governance and board oversight (G), legal structure and autonomy (L), external audit mechanism (E), financial reporting framework (R), internal audit mechanism (I), and risk management and internal control (C).
- Expected benefits:
  - give prominence to governance and risk management;
  - reorder pillars by importance;
  - be more flexible to include emerging risks.

### Comprehensive safeguards assessment framework guidelines — rationale and content
- Finding: consensus among central banks on usefulness of a code or guidelines to prepare for assessments; central banks currently lack clear expectations ahead of an assessment.
- Recommendation: Fund should prepare comprehensive, dynamic guidelines that reflect good practices across the safeguards assessment framework to:
  - document institutional memory and consolidate existing reports, internal guidance, and memoranda;
  - guide Fund internal work and central banks’ expectations;
  - help central banks not in a borrowing program improve their risk profile;
  - support consistency in policy application and benefit new hires and other departments involved in reviews.
- Content gaps:
  - E, R, and I pillars draw on established standards; L pillar relies on LEG leading practices; FINSA lacks a dedicated overarching governance document for the proposed G pillar.
- Governance component approach:
  - principles-based governance (autonomy, accountability, disciplined and ethical conduct, transparency, sound decision making, effective oversight);
  - not overly prescriptive; provide recommendations and examples of good practice.
- Expected benefits of guidelines:
  - enabling more reliable measurement of central bank performance;
  - easing staff workload during assessments;
  - encouraging self-assessments by central banks;
  - helping central banks align law and practice with good practices;
  - reducing need for safeguards reform in program conditionality;
  - reducing risks of misreporting and misuse of Fund resources;
  - assisting identification of capacity gaps for targeted training and peer-to-peer learning.
- Interim step:
  - incorporate a separate governance pillar section into the Safeguards Policy – Self-evaluation Tool with examples and a self-evaluation table; make it available on the Fund’s website.

### Legal framework, FSRs, and broadening risk identification
- Legal framework is critical; unmonitored changes in laws and regulations (including procurement laws and public service rules) can affect autonomy, structure, or operations and spill over to safeguards.
- Recommendation: consider including a method to broaden identification of risks arising from changes to laws and regulations affecting central bank operations.

### Fiscal Safeguards Reviews (FSRs) — observations and recommendations
- Current FSR criteria: exceptional access where at least 25 percent of the funds will be directed to financing of the state budget.
- Historical data (2015 through end-2021):
  - Only seven countries have had exceptional access.
  - Of these seven, three had no budget support.
  - The remaining four countries met the FSR criteria, and three completed the review.
  - The amount drawn for budget support for the three FSR cases represents 81 percent of total General Resources Account (GRA) budget financing.
  - Flexible Credit Lines (FCLs) are excluded (not subject to safeguards reviews).
- Panel view: no reason to change current FSR criteria now; revisit scope once sufficient number of FSRs has been conducted.
- Process and resourcing:
  - FAD staff find LETIFA framework served all three FSRs well; staff views current scope as appropriate but resource intensive.
  - National authorities often not fully aware of Fund’s FSR policy, framework, and process.
  - FIN staff leading central bank safeguards do not participate in program negotiations or provide TA before/after safeguards assessments; FAD staff usually participate in program negotiations and provide TA before and after FSRs.
  - Panel recommends developing internal guidelines clarifying interdepartmental roles and responsibilities for FSRs and considering interdepartmental staff swaps to align expectations and improve efficiency.
- Monitoring gap:
  - No structured process for monitoring implementation of FSR recommendations unless incorporated into program conditionalities; otherwise monitoring depends on subsequent engagement initiated by authorities.

### Capacity building and resources
- Capacity constraints are a core challenge to implementing FINSA recommendations; variation in implementation rates across regions; some central banks struggle to find required talent domestically.
- Recommendations:
  - Address capacity building urgently at the regional or subregional level with emphasis on specific needs.
  - Increase frequency and reach of trainings using remote learning technologies.
  - Create a mechanism to facilitate central banks’ sharing of experiences.
- Resources:
  - Pandemic stretched resources; pressure likely to remain medium term.
  - Risk self-assessment identified staff pressure and erosion of work-life balance as key risks facing FIN.
  - Implementation of recommendations should avoid imposing additional pressure on already stretched resources.
  - Panel believes value added of recommendations in reducing misuse/misreporting risk exceeds cost despite marginal resource implications.
- External risks and vigilance:
  - Panel recommends remaining vigilant to spillovers from Russia’s war in Ukraine (food and energy prices, tightening global conditions, capital outflows, higher borrowing costs) that could increase demand for Fund financing and pressure monitoring resources.
  - Regular assessment of such risks is critical to avoid additional pressures and achieve safeguards objectives effectively.

### Conclusions and cautions
- Safeguards assessments and fiscal safeguards reviews effectively assessed risks and made recommendations despite increased staff workload from the COVID-19 pandemic (review period September 2015 to April 2022).
- Panel’s recommendations in Section III expected to strengthen the safeguards assessment framework and provide meaningful tools to staff and central banks.
- Panel cautions implementation of recommendations should not impose additional pressure on already stretched resources or create additional risks.
- Acknowledgements: assistance of Joanne Creary and cooperation of IMF staff, Executive Directors, and DMD Mr. Kenji Okamura.

*Source: ppea2022059 (https://www.imf.org/-/media/files/publications/pp/2022/english/ppea2022059.pdf).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Overview
- This Advisory Report of the External Expert Panel (the Panel) presents the Panel’s conclusions on the effectiveness of the safeguards policy and recommendations to the Board for its consideration to promote the continued and enhanced effectiveness of the policy.
- The Panel’s findings are based on:
  - discussions with stakeholders, including central banks, Executive Directors’ offices, and IMF staff;
  - review of a sample of the 91 safeguards assessments conducted during the period September 2015 to April 2022; and
  - Fund publications, including policy papers, working papers, and other Fund documents.
- The review period includes the onset of a global pandemic in 2020 and attendant changes to prioritize the Fund’s response; the Panel also examined the possible impact of the pandemic on safeguards assessments and monitoring.
- Date on document: November 7, 2022.

### Scope and Focus of the Review
- The Panel focused on the following areas:
  - The focus of safeguards assessments.
  - The continued appropriateness of the ELRIC framework and its application.
  - The adequacy and coverage of safeguards reports.
  - Views on other aspects, including:
    - the modalities and thresholds for fiscal safeguards reviews,
    - the increased focus on governance, and
    - broader coverage of integrated risk management.
- Attention was also directed to two new IMF initiatives relevant to the context:
  - 2018 Framework for Enhanced Fund Engagement on Governance (assessments of governance vulnerabilities and corruption in six categories of state functions, including central bank governance and operations).
  - 2020 Central Bank Transparency Code (pilot phase at time of report).

### Methodology
- Reviewed policy documents and a representative sample of twenty safeguards assessment reports selected by staff (reflecting borrowing countries in the five Fund regions based on geography, size of loan, and risk rating).
- Held remote meetings with five of the twenty central banks, with strict confidentiality and advance questions (Annex IV).
- Met with staff from FIN, FAD, MCM, LEG, SPR, the Office of Risk Management, and area departments (AFR, APD, EUR, MCD, WHD) during visits to Washington, DC, in April and July 2022.
- Reviewed the four fiscal safeguards reviews conducted since 2015.

### Key Findings
- General agreement among stakeholders that the focus of the safeguards assessments framework was appropriate.
- Limited awareness among central banks of the overarching objective of the safeguards policy and little advance knowledge of what the safeguards assessment exercise would entail.
- Measures to enhance knowledge and understanding of the areas covered by the safeguards assessment framework would benefit central banks even in the absence of a program with the IMF.
- Good progress made in implementing the recommendations of the 2015 External Expert Panel, notably increased emphasis on governance in assessments during the review period.
- Safeguards assessments since 2015 placed more emphasis on risk management, especially for emerging risks such as the COVID-19 pandemic, wars, cyber incidents, and adoption of digital currencies.
- Safeguards assessment activities increased significantly due to emergency lending during the pandemic:
  - Since the 2015 review through to end-April 2022, 91 assessments were completed.
  - 42 (about 45 percent) of them were in the last two years (April 2020–2022), owing to the pandemic response.
- The increased workload was met by significant staff overtime, reallocation of staff, and new hires.
- The Panel concluded that despite increased activity and a move to remote work, the quality of assessment and reporting was generally maintained during the pandemic.
- The safeguards policy continues to be an effective instrument for preventing the misuse of Fund resources and misreporting of program monetary data.
- The addition of the fiscal safeguards review mechanism enhances the Fund’s ability to safeguard its resources.

### Status of Implementation of 2015 Panel Recommendations (selected highlights)
- Governance:
  - Safeguards assessments emphasize governance as an overarching pillar.
  - Expanded comprehensive coverage of governance arrangements.
  - Remedial measures were included in safeguards reports to address governance vulnerabilities.
  - Staff participated in central bank governance assessments pursuant to the Framework for Enhanced Fund Engagement on Governance, Article IV and Use of Fund Resources discussions, and regular reviews of policy consultation notes and country staff reports on select governance issues.
- Risk management:
  - Deeper evaluations of risk management practices are now integral to safeguards assessments.
  - Staff developed a maturity assessment tool to evaluate central banks’ implementation of risk management frameworks.
  - Staff published Working Paper: Risk Management Maturity Assessment at Central Banks (2019).
  - The Fund joined the International Operational Risk Working Group (IORWG) in 2018.
  - Safeguards assessments include more structured coverage of central banks’ cyber risk management practices and focus on emerging risks related to central bank digital currencies.
- Legal framework:
  - Comprehensive legal amendments were recommended in an increased number of assessments.
  - Staff engaged with authorities to draft amendments and advance legal reform processes, including through IMF technical assistance.
  - Increase in central bank legal amendments being incorporated in program conditionality.
- Transparency, disclosure, and stakeholder engagement:
  - A safeguards-related paragraph is included in staff reports for countries undergoing safeguards monitoring, with information on status of recommendations and key developments.
  - Staff collaborated with TA-providing departments on legal and governance reforms, IFRS, risk management, internal audit, and monetary statistics.
  - Staff published working papers: Effectiveness of Internal Audit and Oversight at Central Banks: Safeguards Findings—Trends and Observations (2018) and External Audit Arrangements at Central Banks (2018).
  - Staff contributed to regional publications and conducted regional safeguards framework seminars annually.
- Fiscal Safeguards Review threshold:
  - IMF Board approved FSR framework for arrangements with exceptional access where at least 25 percent of the funds will be directed to financing of the state budget.
  - Three FSRs were conducted during the period; lessons learned are being considered by FIN, FAD, and LEG.
- Risk-based monitoring:
  - Staff engaged in onsite monitoring visits pre-pandemic in 12 missions where implementation of recommendations was low or vulnerabilities emerged; remote engagement took place during the pandemic.
- Operational documents:
  - Staff updated the Operational Guidelines for Safeguards Assessments in 2017; no significant changes since then.

### Main Recommendations of the Panel
- Establishment of a separate pillar on governance focusing on board effectiveness and including central bank governance culture.
- Explicit recognition of risk management focusing on a high-level review of the appropriateness and effectiveness of existing risk management arrangements and their maturity.
- Preparation of comprehensive guidelines that reflect good practices in the areas of the safeguards assessment framework.
- Consideration should be given to broadening the identification of risks to central bank safeguards that may arise from changes to laws and regulations.
- The implementation of the recommendations in this report should avoid putting additional pressure on staff resources.
- Attention should be given to central bank capacity building to improve the implementation of safeguards recommendations.
- Development of guidelines for conducting fiscal safeguards reviews that clarify internally the interdepartmental roles and responsibilities.

### Panel’s Opinion and Conclusion
- In the Panel’s opinion, the safeguards policy continues to be an effective instrument for preventing the misuse of Fund resources and misreporting of program monetary data.
- The fiscal safeguards review mechanism enhances the Fund’s ability to safeguard its resources.
- Implementation of the measures recommended by the Panel will further strengthen the safeguards assessment framework and minimize risks to Fund resources that may result when authorities have inadequate capacity to safeguard those resources.

*Prepared by the External Expert Panel comprising Mohammed Nyaoga, Blanaid Clarke, Maher Hasan, and Brian Wynter; Joanne Creary served as the secretariat for the Panel.*

### 15.      Safeguards assessment activities increased significantly in the last two years of the

### 15.      Safeguards assessment activities increased significantly in the last two years of the

### Activity levels and scope
- 91 assessments were completed from the 2015 review through to end-April 2022.
- These assessments represented 66 central banks.
- Nearly half of the 91 assessments were completed in the last two years of the review.
- Safeguards monitoring increased by more than 22 percent and is projected to remain elevated over the medium term.
- Central Banks Monitored (CY 2010–2022) and Quarterly Average Safeguards Activity figures are referenced in the accompanying Policy Paper on Safeguards Assessments: 2022 Review of Experience.

### Staff response, resourcing, and work pressures
- Measures taken to meet demand included a significant increase in staff overtime, suspension of seminars and most outreach activities, and significant reductions in monitoring to mobilize resources for assessments.
- Implementation rate of staff recommendations declined from 82 percent during the previous review period to 69 percent during the current one.
- Staff resources were augmented through temporary internal reallocation and new hires; quality of assessments was maintained despite increased workload.
- Between April 2020 and April 2022, monthly staff overtime averaged 16 percent.
- Prior to the pandemic FINSA staff numbered 12 (excluding two administrative assistants). At the end of June 2021, staff numbered 18, through a combination of temporary internal reallocations and external hires.
- Overtime levels remained high throughout the period; the Panel expressed concern about staff welfare and noted this level of overtime and interrupted leave is not sustainable in the long term.

### Risk profile and implications for monitoring
- The risk profile of central banks assessed during the current review period deteriorated compared to the 2015 review period.
- In each of the five ELRIC pillars, the high and medium-high risk ratings increased by 11 to 18 percentage points relative to the prior period.
- This deterioration will likely put additional pressure on resources needed to ensure effective risk-based monitoring over the medium term.

### Stakeholder engagements: central bank perspectives and common themes
- Central banks generally agreed the safeguards assessments framework focus was appropriate, particularly on governance, risk management, and internal and external audit mechanisms.
- There was generally a lack of awareness of the safeguards policy and its applicability to central banks, except in the context of program negotiations.
- Central banks valued the assessments for promoting best practices and identifying areas for improvement and saw utility even without plans to enter program negotiations.
- Central banks requested access to guidance on best practices and a common understanding of concepts covered by safeguards assessments prior to undergoing assessments to better prepare and to benchmark against peers.
- Central banks suggested guidance would be useful for educating board members on oversight importance.
- The Panel observed more attention by staff since 2015 to governance, risk management, and autonomy given their link to the risk of misuse of Fund resources and misreporting of program monetary data.
- On governance, staff and the Panel noted expanded coverage but limited understanding among central banks of board decision making and culture; staff suggested an independent pillar on governance.
- On risk management, central banks welcomed increased focus but some were dissatisfied with scope; staff evaluations covered operational, financial, and cyber risks and highlighted increasing importance of business continuity risks, risks from central bank purchases of government securities, and risks from adoption of digital currencies.
- Central banks suggested assessments should consider the effectiveness of the three lines model and risk governance.
- Capacity constraints within central banks were recognized as a key challenge to implementing safeguards recommendations.
- Outreach and training by the safeguards team were valued but were temporarily discontinued during the review period; stakeholders called for increased outreach, training, and peer-to-peer learning opportunities.

### Impact of the COVID-19 pandemic on assessments and monitoring
- At the outset of the pandemic in 2020, staff switched from on-site assessments to a fully remote work mode, which continued up to the end of the review period.
- Of the 91 assessments conducted during the review period (September 2015 to April 2022), 42 (about 45 percent) were conducted remotely during the two-year period April 2020-2022 owing to the pandemic response.
- The length of time for conducting an assessment increased from an average of 9 days to an average of 14 days (a 55 percent increase), mainly due to coordinating work across different time zones.
- Requests for emergency lending increased; the number of central banks subject to safeguards monitoring increased from 67 to 82.
- For emergency lending, safeguards assessments are required to be completed before any subsequent arrangements can be approved; staff prioritized assessments where requests for subsequent arrangements were likely.
- During the pandemic, established processes for conducting assessments and the information requested from central banks and external auditors remained the same; staff noted potential intangible limitations of remote work including connectivity issues, confidentiality concerns with videoconferencing, loss of nonverbal cues, and inability to physically observe vault operations and controls.
- The Panel concluded the quality of assessment and reporting was generally maintained during the pandemic, notwithstanding the limitations noted.

### Monitoring operations and IT enhancements
- Monitoring is conducted for as long as Fund credit remains outstanding; intensity depends on the nature of Fund exposure and staff’s assessment of safeguards risks.
- Onsite monitoring pre-pandemic took place in 12 missions during the review period where there was a low rate of implementing recommendations and key vulnerabilities emerged.
- During the pandemic, monitoring occurred remotely.
- Staff developed a new database (Safeguards Portal) to enhance IT capabilities and facilitate monitoring activities.
- The Safeguards Portal strengthened data management of safeguards findings, enabled timelier follow up on recommendations through embedded alerts, provided real-time statistics on outstanding safeguards recommendations, and streamlined management reporting through dashboards.
- The portal was developed in-house with collaboration between departments and enhanced data integration with other relevant Fund financial information.

### Panel recommendations on governance (summary)
- Establish a separate pillar on governance focusing on board effectiveness to reduce risks of misuse of Fund resources and misreporting of program monetary data; a separate pillar would allow a more holistic view of governance, elevating focus on board governance, effectiveness, and leadership.
- A separate, explicit governance focus would allow deeper and more consistent analysis of governance structures, processes, and best practices; the Panel found current governance review fragmented across pillars.
- Central bank governance definition adopted from Bossu and Rossi (2019): “the ensemble of structures and arrangements by means of which an organization makes decisions in the pursuit of its mandate.”
- Good governance balances effectiveness and soundness, enhances autonomy, disciplined and ethical conduct, accountability, transparency, sound decision making, and effective oversight.
- Safeguards assessments already encompassed many governance elements, including:
  - The legal framework regarding the appointment and dismissal of board members, governor, and deputy governor;
  - Board members’ qualifications, diversity, independence, executive roles, incompatibility, and tenure;
  - Board committees’ composition, roles, and responsibilities;
  - Board oversight of internal audit, external audit, risk management, business continuity, compliance, reserve management, emergency liquidity assistance and dealing with problem banks; and
  - Collegiality in decision making and the concentration of power with the governor.
- Central banks should be encouraged to measure board effectiveness, identifying strengths and weaknesses, with regular board evaluations of composition, responsibilities, diversity (including cognitive diversity), and members’ suitability.
- Board evaluations should assess collegial work and individual contribution, be facilitated every few years by an experienced external independent evaluator, and yield deliverables in strategic actions and board leadership development.
- The Panel recommended that reviews include governance culture assessment, emphasizing the board’s role in embedding values, incentivizing good behavior, creating a productive environment, calling out ethical failings, supporting diversity and inclusion, facilitating constructive challenge, and treating culture risk as part of integrated oversight.
- The Panel noted inclusion of culture metrics in safeguards assessments would assist boards in identifying and measuring culture risk and evidencing cultural change and its impact.

*https://www.imf.org/-/media/files/publications/pp/2022/english/ppea2022059.pdf*

### 44.      The Panel recommends that there be an increased emphasis in the safeguards

### ppea2022059 - 44.      The Panel recommends that there be an increased emphasis in the safeguards

### Emphasis on governance in safeguards assessments
- Recommendation: increase emphasis in the safeguards assessments on the board’s risk governance roles and responsibilities (see Section III.B).
- Rationale: risk governance allows application of principles of good governance to identification, assessment, management, and communication of risks.
- Proposal: include a governance component in the proposed comprehensive safeguards assessment framework guidelines (see Section III.C) covering general principles, recommendations, and best practices to assist central banks—whether within a program or not—to evaluate and improve their governance frameworks.

### Risk management: findings and recommended framework changes
- Observation: recent safeguards assessments appropriately paid more attention to risk management, with staff within the internal control pillar covering different risks, including operational and financial risks, and detailed coverage of cyber and business continuity risks. Factors raising business continuity importance include the COVID-19 pandemic, wars, climate-related risks, and cyber incidents.
- View: the Panel views the increasing focus on risk management as appropriate; size and depth of risk management analysis are increasing to reflect central banks’ emerging risks and such analysis has become a core part of analyzing the internal control pillar.
- Recommendation: explicitly recognize risk management in the framework and focus on a high-level review of the appropriateness and effectiveness of existing risk management arrangements and their maturity.
- Structural change proposed: rename the pillar "risk management and internal control" (instead of current internal control) to reflect current practices, give risk management deserved importance, and enable the framework to deal with emerging risks without creating uncertainty for authorities.
- Purpose of high-level review: ensure relevance to objectives of safeguards assessments and conservation of resources; consistent with evidence that most central banks are in the early stages of risk management maturity (see chart “Risk Management Maturity Spectrum" in paragraph 24 of Safeguards Assessments: 2022 Review of Experience).
- Implementation flexibility: staff may still flag significant risks and recommend how these risks should be addressed, including building capacity outside assessments (for example, through technical assistance).

### Suggested scope of the high-level risk management review
- The high-level review could include:
  - risk governance;
  - the existence and effectiveness of the risk management committee at the board level (see Box 1);
  - the availability of appropriate skills at the board level;
  - the comprehensiveness and maturity of the enterprise risk management (ERM) framework;
  - the adequacy of resources available to management;
  - identification of material emerging risks that deserve special attention;
  - a review of the three lines model to ensure the absence of gaps or overlaps in the control functions.

### Specific emerging and heightened risk areas to prioritize
- Particular attention in new assessments to risks arising from:
  - central banks’ purchase of government securities;
  - quasi-fiscal activities; and
  - the adoption of central bank digital currencies (CBDCs).
- Context and concerns:
  - COVID-19 pressure led central banks to purchase government securities and expand quasi-fiscal activities (subsidized lending, credit guarantees) to support specific economic sectors including small and medium-sized enterprises.
  - Current high commodities prices will likely renew these pressures.
  - These activities raise the risk of fiscal dominance and debt monetization and could undermine central banks’ independence.
  - Central banks’ digitization of payment systems and introduction of CBDCs increase risks including financial stability, financial integrity, cybersecurity, effectiveness of capital management measures, and business continuity.

### Box 1: Risk Governance (summary of suggested board roles)
- Recommendation: consider recommending a risk management oversight committee at the board level rather than assigning responsibility to the audit committee.
- Board role in risk oversight (boards can fulfil oversight by):
  1. Adopting policies and procedures around risk consistent with the central bank’s strategy and risk appetite.
  2. Following up on management’s implementation of risk management policies and procedures.
  3. Following up on assurances that risk management policies and procedures function as intended.
  4. Taking steps to foster risk awareness.
  5. Encouraging an organizational culture of risk-adjusting awareness.
- Implementation requirements: appropriate risk governance and expertise at the board level, a separate board committee with a clear mandate, and implementation of enterprise-wide risk management across the central bank.

### Revisiting the ELRIC framework
- Recommendation: explicitly include governance and risk management, warranting revisiting the ELRIC framework.
- Proposed revised framework pillars: governance and board oversight (G), legal structure and autonomy (L), external audit mechanism (E), financial reporting framework (R), internal audit mechanism (I), and risk management and internal control (C).
- Expected benefits of amendment:
  - (i) give prominence to governance and risk management;
  - (ii) reorder the pillars in terms of importance;
  - (iii) be more flexible to include emerging risks.

### Developing comprehensive safeguards assessment framework guidelines
- Finding: consensus among central banks in the Panel’s sample on usefulness and importance of a code or guidelines to assist preparation for a safeguards assessment.
- Problem: presently central banks lack a clear way to understand what is expected in a safeguards assessment ahead of experiencing one; safeguards assessments often occur in times of crisis and are infrequent, making self-assessment and preparation difficult.
- Recommendation: Fund should prepare comprehensive guidelines that reflect good practices in the areas of the safeguards assessment framework.
  - Guidelines would document institutional memory and collect contents of existing reports, internal guidance, and memoranda.
  - Guidelines would be dynamic and updated by staff to respond to emerging risks and challenges.
  - Uses: guide the Fund’s internal work, guide central banks on expectations, help central banks not in a borrowing program to improve risk profile under the safeguards assessments framework, support consistency in policy application, and benefit new hires and staff in other departments involved in the safeguards review process (including SPR).

### Content gaps and principles-based governance component
- Noted coverage: E, R, and I pillars use existing well-developed standards maintained by independent standard-setting bodies; L pillar relies on LEG leading practices; monetary data and international reserves draw on Balance of Payments Manual and MCM’s template; internal controls used staff-developed working paper on risk management.
- Gap: no specific dedicated documentation relied upon by FINSA for overarching governance elements proposed as a separate G pillar.
- Recommendation: include a governance component focused on board effectiveness that takes the form of general principles (autonomy, accountability, disciplined and ethical conduct, transparency, sound decision making, effective oversight), recommendations, and examples to establish best practice and explain rationales.
- Approach: principles-based governance acknowledging “no one size fits all” given diversity of central banks’ mandates and contexts; guidelines should not be overly prescriptive but should set out measures to facilitate good governance.

### Rationale and precedents for guidelines
- Evidence of FINSA adaptability: examples include incorporating World Bank guidance on IFRS 9 (R pillar), heightened cybersecurity focus after a 2016 central bank cyber heist and emergence of CBDCs (C pillar), and accommodating temporary liquidity support to governments during COVID-19 (L pillar).
- Builds on 2015 Panel recommendation on outreach initiatives; central banks have requested guidance and examples (e.g., on board autonomy).
- Past practice: Fund staff have provided safeguards recommendations and annexes in country reports, including detailed guidelines on personal autonomy and model audit committee charters.

### Expected benefits of comprehensive guidelines (Panel list)
- Enabling more reliable measurement of central bank performance;
- Easing the workload of staff by reducing the need to explain measures during assessments;
- Encouraging self-assessments by central banks;
- Helping central banks evaluate and improve frameworks and bring law and practice closer to good practices;
- Reducing deviation from good practices;
- Reducing the need for safeguards reform to be included in program conditionality;
- Reducing the risk of misreporting of program monetary data and misuse of Fund resources;
- Assisting in identifying gaps and capacity deficits for targeted training and peer-to-peer learning.
- Additional benefit: help central banks not needing Fund resources but seeking to strengthen legal frameworks and maturity of governance, risk management, financial reporting, and internal control practices.

### Resources and interim steps
- Acknowledgement: development of the proposed Safeguards Assessments Framework guidelines would consume already scarce resources (see Section III.F).
- Interim recommendation: consider incorporating a separate governance pillar section into the Safeguards Policy – Self-evaluation Tool, following the existing format with examples of good practices and a self-evaluation table to be completed by central banks; make this document available on the Fund’s website.
- Note: staff to provide feedback on the pilot review of the Central Bank Transparency Code, which could yield important lessons for the guidelines project.

*Source: Safeguards Assessments: Expert Panel’s Report, paragraphs 44–63*

### 64.      The Panel recommends giving consideration to including a method to broaden the

### 64. The Panel recommends giving consideration to including a method to broaden the identification of risks to central bank safeguards that may arise from changes to laws and regulations affecting a central bank and its operations

### Legal framework and identification of risks
- The legal framework of a central bank is identified by the safeguards assessment policy as a critical component of a central bank’s safeguards.
- Different central banks operate under different legal frameworks, which may undergo changes from time to time.
- Unmonitored changes may affect the autonomy, structure, or general operations of a central bank and can have spillover effects on existing safeguards.
- The Panel observed that risks arise not only from changes in central bank legislation but also from other laws and regulations affecting central bank operations, for example procurement laws and public service rules and practices.
- Recommendation: Give consideration to including a method to broaden identification of such risks arising from changes to laws and regulations.

### E. Capacity Building
- Lack of capacity identified as one of the challenges to implementation of FINSA staff recommendations and the rate of implementation (paragraph 65).
- The Panel observed variation in the rate of implementation of recommendations across regions; some central banks struggle to find required talents within their jurisdictions (paragraph 66).
- IMF staff in departments other than FIN and central banks interviewed confirmed lack of capacity as a core safeguards issue (paragraph 66).
- Panel recommendation: Address capacity building urgently, focusing at the regional or subregional level with emphasis on specific needs of central banks within a region or subregion (paragraph 67).
- Current activities: Safeguards staff have been conducting seminars aimed at capacity building (paragraph 68).
- Further recommendations:
  - Increase frequency and reach of trainings, taking advantage of available technologies for remote learning (paragraph 68).
  - IMF should create a mechanism to facilitate central banks’ sharing of experiences (paragraph 68).

### F. Resources
- The pandemic has stretched resources for safeguards assessments work to the limit and pressure on resources is likely to remain over the medium term (paragraph 69).
- Even if the number of new assessments might decrease over the medium term, the number of central banks subject to monitoring is projected to remain elevated and related activities will increase to offset reduced monitoring during the pandemic (paragraph 69).
- The risk self-assessment conducted by FIN under the supervision of the Office of Risk Management identified pressure on staff and erosion of work-life balance as key risks facing FIN (paragraph 69).
- Implementation guidance:
  - Implementation of recommendations should avoid putting additional pressure on already stretched resources or creating additional risks (paragraph 70).
  - Panel believes the value added of implementing the recommendations in reducing risk of misuse of Fund resources and misreporting of program monetary data exceeds the cost, despite potential marginal resource implications (paragraph 70).
  - Failing to address resources risks imposing additional pressure on staff and/or reducing other activities such as outreach and monitoring (paragraph 70).
- External risks and vigilance:
  - Current staff assessment indicates limited impact of Russia’s war in Ukraine on new programs and resources, but the Panel recommends remaining vigilant (paragraph 71).
  - Potential spillovers: prolonged impact on food and energy prices, rapid tightening of global financial conditions, capital outflows from some emerging markets and developing economies, increases in cost of borrowing and debt service could increase number of countries approaching the Fund for financing (paragraph 71).
  - These factors might slow implementation of reforms identified during assessments and increase pressure on monitoring resources (paragraph 71).
  - Regular assessment of these risks is critical to avoid additional pressures on resources and to achieve safeguards objectives effectively (paragraph 71).

### Panel's opinion of the Fiscal Safeguards Reviews (FSRs)
- Panel does not see reason to change current criteria for FSRs as they cover a large percentage of Fund resources used for budget support (paragraph 72).
- Historical data (2015 through end-2021):
  - Only seven countries have had exceptional access.
  - Of these seven, three had no budget support.
  - The remaining four countries met the FSR criteria, and three completed the review.
  - The amount drawn for budget support for the three FSR cases represents 81 percent of total General Resources Account (GRA) budget financing (paragraph 72).
  - Flexible Credit Lines (FCLs) are excluded (not subject to safeguards reviews) (paragraph 72).
- Recommendation: Revisit scope of FSRs once a sufficient number of FSRs has been conducted; limited number of completed FSRs hinders effective assessment of scope and monitoring framework (paragraph 73).
- Staff views:
  - Staff view current scope as appropriate and helpful but consider it resource intensive (paragraph 73).
  - FAD staff stated LETIFA framework served all three FSRs well and consider it comprehensive and based on sound principles (paragraph 73).
  - National authorities are generally not fully aware of the Fund’s policy on FSRs, the framework, and the process (paragraph 73).
- Conflict of interest considerations:
  - FIN staff who lead central bank safeguards assessments do not participate in program negotiations or provide TA before/after safeguards assessments; by contrast, FAD staff usually participate in program negotiations and provide TA before and after FSRs (paragraph 74).
  - Important to avoid any appearance of conflict of interest; assigning reviews to another department viewed as impractical given small number of reviews (paragraph 74).
  - Panel agrees with FAD that potential conflict of interest is minimal as implementation of TA recommendations depends largely on authorities’ commitments, capacity, and political environment (paragraph 74).
- Recommendation: Develop internal guidelines clarifying interdepartmental roles and responsibilities for conducting FSRs to ensure alignment on objectives; consider arranging interdepartmental staff swaps to align expectations and improve efficiency (paragraph 75).
- Monitoring gap:
  - No structured process for monitoring implementation of FSR recommendations (paragraph 76).
  - If recommendations are incorporated into program conditionalities, program reviews provide updates; otherwise monitoring relies on subsequent engagement with authorities, subject to authorities’ decision on seeking follow-up assistance (paragraph 76).
- Pandemic impact:
  - Most noticeable impact on fiscal safeguards work was mission duration extension beyond usual two-week period observed before the pandemic (paragraph 77).
  - This aligns with findings of increased time taken for safeguards assessments of central banks during the pandemic (paragraph 77).

### Conclusions
- The safeguards assessment policy continues to be an effective instrument for preventing misuse of Fund resources and misreporting of program monetary data (paragraph 78).
- Addition of the fiscal safeguards review mechanism enhances the Fund’s arsenal for safeguarding resources, though it is still in early stages of operationalization compared with safeguards assessment framework (paragraph 78).
- Panel conclusion for review period September 2015 to April 2022:
  - Safeguards assessments of central banks and fiscal safeguards reviews effectively assessed and made recommendations to mitigate identified risks despite increased staff workload from the COVID-19 pandemic (paragraph 79).
- The Panel’s recommendations are contained in Section III of the report and are expected to strengthen the safeguards assessment framework and provide meaningful tools to staff and member country central banks (paragraph 80).
- Panel cautions that implementation of recommendations should not impose additional pressure on already stretched resources or create additional risks (paragraph 81).
- Acknowledgements:
  - The Panel acknowledges assistance of Ms. Joanne Creary in coordinating its work and preparing its report (paragraph 82).
  - The Panel acknowledges cooperation of IMF staff and thanks Executive Directors and DMD Mr. Kenji Okamura, as well as IMF staff for robust discussions and helpful comments (paragraph 83).

*Source: ppea2022059 - 64 (https://www.imf.org/-/media/files/publications/pp/2022/english/ppea2022059.pdf).*

### 11.      As noted, the Chair of the Panel will return to Washington to present the Panel’s main

### ppea2022059 - 11.      As noted, the Chair of the Panel will return to Washington to present the Panel’s main

### Panel timing, rights, and deliverables
- Paragraph 11: The Chair of the Panel will return to Washington to present the Panel’s main findings and recommendations to the Board in June 2022.
- Paragraph 12: The Fund reserves the exclusive rights to the written views of the Panel and the individual Panel members undertake not to publish any part of these views independently.

### Annex II — Panel composition (fourth review of safeguards assessments policy)
- The fourth review of the safeguards assessments policy was conducted in 2022. Scheduled to take place in 2020 but delayed owing to the COVID-19 pandemic, the External Expert Panel (the Panel) was assembled in 2021 and conducted its review in 2022.
- Panel membership:
  - Mr. Mohammed Nyaoga (Chair)
    - Chairman of the Central Bank of Kenya Board of Directors and A Senior Counsel and Senior Partner of Mohammed/Muigai LLP Advocates.
    - Corporate governance trainer and consultant for various institutions, among them the Center for Corporate Governance Kenya.
    - Regular speaker and trainer for Central Banking Publications London.
    - Has served as the Chairman of Ecobank and been a Director of the Capital Markets Authority of Kenya.
    - Holds LLB and LLM degrees.
  - Professor Blanaid Clarke
    - McCann FitzGerald Chair in Corporate Law, Trinity College Dublin, specializing in corporate governance and financial services law.
    - Member of the Irish Central Bank Commission (2010–2018) and chaired its Audit Committee.
    - Irish representative on the OECD’s Corporate Governance Committee.
    - Vice President of the Academic Board of the European Banking Institute, and Deputy Chairman of the Irish Banking Culture Board.
  - Dr. Maher Sheikh Hasan
    - Counsellor and Chief Economist of the Arab Monetary Fund.
    - Served two terms (2012–2022) as a Vice Chairman of the Board of Directors and Deputy Governor of the Central Bank of Jordan.
    - Worked for the IMF (2005–2012) in different departments; last position was deputy division chief in the Monetary and Capital Markets Department.
    - Holds a PhD in Economics and an MS in Statistics from Washington State University.
  - Mr. Brian Wynter
    - Former Governor of Bank of Jamaica; company director and consultant.
    - Founding CEO of Jamaica’s Financial Services Commission.
    - Graduate of the London School of Economics and Political Science, The City University (London) and Columbia University’s School of International and Public Affairs.
    - Called to the bar in the UK and Jamaica.

### Annex III — Safeguards assessments conducted since last review (as at end-January 2022)
- The Annex provides a numbered table of safeguards assessments (Country; Area Dept; Approval Date; Assessment Type; Selected in Sample).
- The table entries are numbered 1 through 87. Excerpts (exact entries as listed):
  - 1 Afghanistan MCD 1/11/2017 Update
  - 2 Afghanistan MCD 10/19/2020 Update
  - 3 Angola AFR 4/2/2019 Update
  - 4 Argentina WHD 10/15/2018 Update Yes
  - 5 Armenia MCD 9/18/2019 Update
  - 6 Bahamas WHD 11/18/2021 First-time Yes
  - 7 Bangladesh APD 1/10/2022 Update
  - 8 Barbados WHD 12/13/2018 First-time
  - 9 BCEAO AFR 4/13/2018 Update
  - 10 BEAC AFR 8/23/2017 Update
- Additional excerpted entries (preserving exact formatting):
  - 35 Jamaica WHD 5/15/2017 Update Yes
  - 38 Kenya AFR 9/18/2019 Update Yes
  - 49 Malawi AFR 12/13/2021 Update Yes
  - 53 Moldova EUR 9/9/2020 Update Yes
  - 56 Morocco MCD 4/29/2019 Update Yes
  - 64 Pakistan MCD 12/11/2019 Update Yes
  - 69 Rwanda AFR 1/14/2022 Update Yes
  - 70 Samoa APD 5/19/2021 Update Yes
  - 80 Suriname WHD 2/11/2021 Update Yes
  - 82 Tonga APD 12/13/2021 First-time Yes
  - 86 Ukraine EUR 5/22/2019 Update Yes
  - 87 Vanuatu APD 10/24/2016 First-time Yes

### Annex IV — Questions provided to central banks in advance of discussions with Panel
Policy Framework
1. The International Monetary Fund (IMF)’s safeguards assessment policy focuses on five key areas in the assessment process and procedures, which are the: (1) external audit mechanism; (2) legal structure and independence; (3) financial reporting framework; (4) internal audit mechanism; and (5) internal controls system, collectively often referred to by the acronym ELRIC. Do you believe the policy is accessible, understandable, coherent and well-targeted? Do you believe any changes or improvements could or should be made to it to enhance its effectiveness?
2. Safeguards assessments are intended to provide reasonable assurance to the IMF Executive Board that the central bank’s internal controls are adequate to ensure the integrity of its operations. Do you believe the assessment achieves that objective as currently structured? If not, what changes would you propose to strengthen the degree of assurance that it provides?
3. Do you believe the safeguards assessment provides value to the central bank, its management and overall governance through an independent perspective on the five key areas of focus? What did you find to be the most beneficial aspects of the safeguards assessment process? What were the most difficult aspects to address?
4. External audit and financial reporting: to what extent has the safeguards assessment helped in establishing or strengthening external audit policies and processes, and establishing a standard financial reporting framework or facilitating the alignment of your practices with international financial reporting standards?
5. Internal audit: in your view, is the safeguards policy effective in diagnosing capacity constraints in this area? How does the central bank deal with capacity constraints in this area (if any)? Have assessments been helpful in identifying issues with de facto and de jure lines of internal audit accountability at your central bank (e.g., providing the audit committee with an assessment of the overall effectiveness of the governance and risk and control framework of the central bank, and conclusions on whether the bank’s risk appetite is being adhered to)?
6. Legal framework and internal controls: what impact did the safeguards assessment have on the central bank’s legal framework, including on aligning with leading practice in central bank legislation? Within internal controls (which includes, inter alia, foreign reserves management, currency operations, banking and lending operations, risk management), to what extent has the assessment helped in strengthening the control environment?
7. In assessing the five key areas above, do you believe the items were appropriately examined during the assessment of the central bank? Were some components within ELRIC not examined that perhaps should have been?
8. Governance: In assessing governance, staff reviewed many elements, including:
   - The legal framework regarding the appointment and dismissal of board members, governor, deputy governor; autonomy; and board members’ qualifications, diversity, independence, executive roles, incompatibility, and tenure.
   - Board committees’ composition, roles, and responsibilities.
   - Board effectiveness in overseeing internal audit, external audit, risk management, business continuity, reserve management, ELA, dealing with problem banks.
   - Collegiality in decision-making and concentration of power with the Governor.
   Do you think the focus of the assessment process on these elements was appropriate, or do you think they should have a greater focus in their own right?
9. Risk management (operational, financial, cyber, business continuity in the event of pandemic, wars, climate, cyber incidents): Was the focus on these elements appropriate, or do you think they should be given more focus?
Safeguards Assessment Operations
10. Do you believe the safeguards assessment process appropriately prioritizes the key areas of focus as well as the findings of its assessments? Are there some areas of the process that you believe should receive more or less attention than they currently do and if so, what are those and what would you propose to change or improve them? Are there any other changes that you would recommend with respect to the Fund’s safeguard assessments and policies, or comments you would like to make? Was the process fair? Were your opinions and objections reflected correctly and accurately in the report?
Outreach Activities
11. Has your central bank found the regional safeguards seminars conducted periodically by the IMF helpful in learning about the safeguards assessment methodology and the findings? Are they a useful forum for your staff to share experiences with other central banks? Did your bank attend any of the Forums on Central Bank Governance in Dubai (December 2016, March 2018, January 2019 and 2020), and if so, was it useful? Would further education or sharing of best practice be useful?
12. Do you think that having available guidelines or a code that summarizes good practices in the five areas covered by the safeguards assessments would have been useful in better preparing for the assessment? Do you see any value for such guidelines or code beyond the assessment?

*Source: ppea2022059 - 11.      As noted, the Chair of the Panel will return to Washington to present the Panel’s main*

---


_Source: https://www.imf.org/-/media/files/publications/pp/2022/english/ppea2022059.pdf_