## taar2018

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### Overview and scope (Preface)
- TA delivered to around 130 countries, including many with Fund-supported programs.
- TA field delivery in FY2018 reached 80 full-time equivalents (FTEs).
- Including support from headquarters (HQ), FY2018 TA delivery reached 130 FTEs.
- Volume of TA delivery: 1,086 country missions taking place in FY2018.
- 38 percent increase in TA delivery since FY2011.
- MCM plans to roll out FSSRs for at least 25 LLMICs over the next five years.
- Present expectation: TA field delivery will be maintained at current levels (about 80 FTEs yearly) over the medium-term.
- MCM’s 2017–2020 Medium-Term TA Strategy Update builds on prior strategic framework.

### Core themes, priorities, and TA approach
- Core areas of MCM assistance:
  - financial supervision and regulation;
  - systemic risk analysis;
  - financial crisis preparedness and management;
  - debt management;
  - monetary policy; and
  - central bank operations.
- Three pillars of MCM TA approach:
  - enhancing capacity to respond to the membership’s needs;
  - fostering knowledge creation, management, and dissemination;
  - strengthening governance and accountability through result-based management (RBM) of TA.

### Delivery modalities, staffing, and field operations
- Modalities used: TA missions, long-term experts (LTXs), training, annual workshops, tools and guidelines, peer-to-peer learning, RTACs combined with bilateral TA.
- A standard MCM two-week, two-person TA mission is about 0.10 FTEs.
- TA field delivery by resource type, FY2018:
  - STX 45%
  - LTX 46%
  - Staff 9%
- LTXs and STXs together account for over 90 percent of all field delivery, split almost equally, with the rest conducted by MCM staff.
- As of end-April 2018, MCM had 36 LTXs stationed in the field:
  - 19 in RTACs
  - 17 bilateral LTXs across all regions
- LTXs’ terms range from one to five years; close to 60 percent of LTXs provide capacity building in financial sector regulation and supervision.

### Financing and partnerships
- Donors supported approximately 80 percent of MCM’s field delivery in FY2018.
- Donor-funded active TA projects, FY2018 (in share of U.S. Dollars):
  - Non-RTAC 48%
  - AFRITAC Central 2%
  - AFRITAC East 6%
  - AFRITAC South 8%
  - AFRITAC West 5%
  - AFRITAC West 2 7%
  - CAPTAC-DR 8%
  - CARTAC 7%
  - METAC 3%
  - PFTAC 3%
  - SARTTAC 4%
- Bilateral donor partners highlighted: Japan; Canada; the Swiss State Secretariat for Economic Affairs (SECO); the United Kingdom; Norway; Belgium; Netherlands; Sweden.
- Multi-donor trust funds supporting MCM programs include: Financial Sector Stability Fund (FSSF); Financial Reform and Strengthening Initiative (FIRST); Debt Management Facility (DMF); Somalia Trust Fund; South Sudan Trust Fund; Managing Natural Resource Wealth (MNRW) Topical Trust Fund.
- FIRST and DMF are examples of IMF-World Bank TA partnership through joint implementation.
- Cooperating Official Institutions (COIs) participating include: Central Bank of Brazil; Bank of Canada; Banque de France; Norges Bank; Monetary Authority of Singapore; South African Reserve Bank; Bank of Thailand.

### MCM TA and training thematic structure
- Thematic groups and focus areas:
  - Financial Sector Supervision and Regulation (including Basel II/III and IFRS).
  - Central Bank Operations (monetary and FX market operations; governance, risk management, legislation, currency reform, accounting).
  - Monetary, Foreign Exchange, and Macroprudential Policy (FPAS engagement; monetary policy communication).
  - Debt Management and Capital Market Development (MTDS is a primary TA topic).
  - Financial Stability/Systemic Risk (financial stability analysis and reporting; stress testing; systemic risk monitoring).
  - Crisis Preparedness and Management (represented 4 percent of MCM’s TA in 2018; bank restructuring and resolution, contingency planning, distressed asset management, deposit insurance).

### Capacity building, training volume, and modalities
- Capacity building (TA and training) accounted for 26 percent of staff time allocation in FY2018.
- MCM staff time allocation by functions, FY2018:
  - Technical Assistance 26%
  - Financial Sector Assessment Program 20%
  - GFSR and Related Work 18%
  - Policy and Analytical Work 19%
  - Area Dept. Surveillance Support 13%
  - Other Multilateral Surveillance 4%
- FY2018 MCM training delivery:
  - Conducted 77 targeted workshops, seminars, and training missions.
  - MCM organized 24 ICD-program courses for a total of 728 participants.
  - Regional concentration (in percent of FTEs): Asia and Pacific 43%, Middle East and Central Asia 25%, Africa 15%, Europe 2%, Western Hemisphere 15%.
- Training financed by donors: donor contributions financed 65 percent of MCM’s training activities in FY2018.
- Expansion of online curricula in collaboration with ICD and external agencies (Debt Sustainability and Debt Management; Bank Supervision and Regulation — collaboration with the BIS to expand access to FSI Connect).

### Financial Sector Stability Review (FSSR) — LLMIC diagnostic tool
- Purpose and structure:
  - Demand-led TA instrument to help LLMICs prepare a comprehensive roadmap for financial sector reforms.
  - Integrated product delivering: diagnostic review, assessment of financial statistics (Financial Soundness Indicators and balance sheet matrices), a TA Roadmap, and follow-up TA supported through a Financial Sector Stability Fund (FSSF).
- FSSF contributors include: China, Italy, Luxembourg, Switzerland, the European Investment Bank, the United Kingdom, and Saudi Arabia.
- FY2018 activity and outputs:
  - FSSRs conducted in Costa Rica, Paraguay, Fiji, and Uganda; a scoping mission completed in Nicaragua.
  - TA Roadmaps prepared for Costa Rica, Paraguay, Fiji, and Uganda.
  - Supporting capacity development provided in financial sector statistics to strengthen Financial Soundness Indicators and construct balance sheet matrices.
- Key lessons from TA Forum (April 4, 2018):
  - Ownership of the TA Roadmap is critical for implementation; authorities participated directly in designing and prioritizing the Roadmap.
  - Strengthening regulation and supervision of the nonbank sector is vital given linkages and potential spillovers.
  - Proportionality in supervisory design is a key issue for LLMICs and small countries.
  - Limited interagency coordination and lack of systematic surveillance of financial sector interconnections impede reform.

### Proportionality in banking regulation
- Principles:
  - Full set of Basel standards should apply to banks similar in operations and systemic importance to large international institutions.
  - Smaller, less complex institutions could be subject to a simpler, proportionate regulatory framework that ensures resilience without disproportionate operational/compliance costs.
  - Proportionate regimes may require more conservative calibration of prudential norms.
- MCM country examples:
  - Eritrea: adopting a Basel I/II hybrid approach.
  - Malawi and Kenya: priorities include enhancing the risk-based supervisory process.
- MCM is finalizing a technical guidance note on incorporating international standards into prudential frameworks for developing economies based on TA and FSAP experience.

### Cybersecurity — risk, lessons, and MCM program
- Observations:
  - Cybersecurity risk awareness is increasing; number and sophistication of cyberattacks threaten to outstrip resilience efforts.
  - Financial sector reliance on IT and interconnectedness makes cybersecurity a financial stability risk.
  - Since 2017 the cybercrime industry has matured, adopting mainstream business models.
- Lessons and focus areas:
  - Continuous training on basic cyber hygiene is key.
  - Cyber risk mitigation should emphasize detection, response, and recovery.
  - Supervisors must ensure institutions establish cyber-breach identification, response protocols, and recovery measures.
  - Key aspects of cyber resilience: business processes, technology, and governance—with focus on governing boards and senior management.
- MCM TA program approach:
  - (i) Annual workshops: first annual cybersecurity workshop for financial supervisors in LLMICs hosted at IMF HQ in December 2017 (co-hosted with the National Bank of Belgium); second annual workshop planned for December 2018.
  - (ii) Periodic regionally focused RTAC workshops: first regional workshop hosted by PFTAC in August 2018, with another three events to follow by January 2019.
  - (iii) Bilateral TA missions: country-specific missions to build regulatory and supervisory capacity and promote cyber resilience.

### Fintech — challenges, policy implications, and capacity development
- Observations:
  - Fintech rapidly changes delivery methods of financial services; type and penetration vary across countries and regions.
  - Countries seek guidance on regulation for crypto-assets, stability risks, and modernization/oversight of payment systems.
  - Fintech offers benefits: lowering costs and promoting financial inclusion; but risks must be understood and mitigated.
- Policy implications:
  - Cross-border regulatory cooperation becomes critical as fintech shifts regulation to borderless activities.
  - Coordination with international bodies (Financial Stability Board, Financial Action Task Force, World Bank) is required.
  - MCM has produced research and is developing policy advice and capacity development tools within the Fund’s broader digital economy strategy.
- Capacity development examples:
  - Workshop in China with the China Securities Regulatory Commission on fintech and cyber risks.
  - Topics prioritized by participants included sandboxing and crypto-asset regulation.

### Financial inclusion — definition, gaps, and TA focus
- Definition: access to basic financial services at affordable cost.
- Problems and gaps:
  - Banks focus on large and well-connected enterprises; large population segments and SMEs remain excluded.
  - Gaps persist across income, gender, age, and geographic lines.
- MCM TA focus:
  - Regulatory environment enabling financial inclusion compatible with financial stability.
  - Modernizing national payment systems.
  - Increasing focus on the nonbank segment due to growing NBFI asset bases and interlinkages with banking sector.
- Examples:
  - Swaziland: FIRST-funded TA to strengthen supervision of NBFIs.
  - Botswana: TA to enhance payment systems to better reach the underserved.

### Selected notable TA engagements (country cases)
- Somalia: Financial Sector Reform in a Fragile State
  - IMF re-engagement with the Federal Government of Somalia in 2013.
  - Somalia Trust Fund donors: Arab Fund for Economic and Social Development, Canada, European Union, Italy, United Kingdom, United States.
  - Fund established in May 2014; operational since February 2015.
  - MCM’s three projects account for 46 percent of the latest approved budget of the fund allocated to all IMF TA departments.
  - All TA projects supported by the Somalia Trust Fund were extended for FY2019–21.
  - MCM conducted a total of 46 CD activities (as of July 2018).
  - Primary TA areas: central bank organization, transparency, and governance; accounting, internal audit, and risk management; banking supervision and regulation; currency reform.
  - Delivery adapted to security constraints—missions held outside the country; methods included hands-on training modules, field visits, desk reviews, and conference calls.
- South Africa: Upgrading Stress Testing Capacity for Financial Stability Analysis
  - Financial Sector Regulation Bill signed into law in August 2017 and implemented in April 2018 establishing a Twin Peaks framework.
  - SARB requested Fund TA to strengthen top-down stress-testing capacity; visits in July 2017 and March 2018.
  - TA objectives: strengthen top-down stress-testing framework and introduce liquidity perspective.
  - Solvency enhancements: include standardized exposures, improved net income projections, additional risks (market and currency), portfolios beyond loan book, Bayesian Model Averaging for credit risk parameters, single factor sensitivity tests.
  - Liquidity enhancements: Liquidity Coverage Ratio (LCR) template, implementation using existing reporting, calibration of LCR parameters, development of cash-flow based liquidity stress-test tool.
- Republic of Uzbekistan: Transitioning to Inflation Targeting
  - Project started in late 2017; partially supported by the MNRW Trust Fund.
  - CBU unified official and parallel exchange rates in September (year not specified), causing sharp depreciation; state-owned banks received public capital injections in FX.
  - Two MCM missions: roadmap for upgrading monetary policy tools and an interim monetary policy framework for transition to inflation targeting.
  - Key recommendations:
    - Reform reserve requirements and standing facilities.
    - Introduce open market operations.
    - Develop liquidity forecasting.
    - Keep real short-term money market rates in positive territory until disinflation to single-digit territory.
    - Introduce an interest rate corridor and declare its midpoint as the new policy rate; conduct liquidity management to align market rates with the policy rate.
    - Shift intermediate target to the CBU’s inflation forecast once forecasting capacity is established.
    - Allow more exchange rate flexibility; consider an intervention rule for systematic FX interventions.
    - Urgently reform FX regulation, improve exchange rate management capacity, and develop the FX market, including reducing the market maker role of the central bank.
  - Progress: CBU declared price stability as primary objective and announced intention to bring inflation down to single-digit figures; revision of central bank law and FX regulation underway with MCM and LEG support.

### Field perspectives and LTX placements (as of end-April 2018)
- Selected LTX placements and country examples cited across RTACs and bilateral assignments (examples include CAPTAC-DR, ECCU/ECCB, CARTAC, AFRITAC West/West 2/Central/East/South, METAC, PFTAC).
- Representative verbatim expert highlights illustrate TA delivery, regional engagement, and recipient commitment.
- Appendix I and Appendix II list RTAC locations and MCM LTX placements (as of April 30, 2018).

### Key lesson (Section III-A)
- Strengthening regulation and supervision of the nonbank sector is becoming increasingly vital for enhancing financial stability.
- Implications for future MCM TA work:
  - Financial inclusion expected to remain an important element of TA work.
  - As more FSSRs are undertaken and gaps identified, expected growth in TA support in:
    - (i) continued work in strengthening regulatory and supervisory environment for the NBFIs;
    - (ii) adaptation of oversight frameworks to emerging applications of fintech; and
    - (iii) in collaboration with the World Bank, enhancing payment system aspects of financial inclusion.

*Source: PREFACE; BOX 2; SECTION II; Section III-A; SECTION IV, 2018 Technical Assistance Annual Report | Monetary and Capital Markets (taar2018).*

### PREFACE

### PREFACE

### Overview and scope
- TA delivered to around 130 countries, including many with Fund-supported programs.
- TA field delivery in FY2018 reached 80 full-time equivalents (FTEs).
- Including support from headquarters (HQ), FY2018 TA delivery reached 130 FTEs.
- Volume of TA delivery: 1,086 country missions taking place in FY2018.
- 38 percent increase in TA delivery since FY2011.
- MCM plans to roll out FSSRs for at least 25 LLMICs over the next five years.
- The present expectation is that TA field delivery will be maintained at current levels (about 80 FTEs yearly) over the medium-term.
- MCM’s 2017–2020 Medium-Term TA Strategy Update builds on prior strategic framework.

### Key themes and priorities
- Core areas of MCM assistance:
  - financial supervision and regulation;
  - systemic risk analysis;
  - financial crisis preparedness and management;
  - debt management;
  - monetary policy; and
  - central bank operations.
- Three pillars of MCM TA approach:
  - enhancing capacity to respond to the membership’s needs;
  - fostering knowledge creation, management, and dissemination;
  - strengthening governance and accountability through result-based management (RBM) of TA.

### Notable initiatives and innovations
- Launched Financial Sector Stability Reviews (FSSRs) in FY2018 as a diagnostic tool for LLMICs; FSSRs produce TA Roadmaps to guide tailored follow-up TA programs.
- Begun providing TA on implementing emerging good practices in cyber risk supervision.
- Expanding knowledge base and information sharing on financial technology (Fintech)-related issues.
- Successful rollout of the Financial Sector Stability Review (FSSR) diagnostic tool; growing pipeline of requests.
- Significant investments in boosting MCM’s expertise in fintech and cybersecurity in FY2018.
- Collaboration examples:
  - Legal Department (LEG) on regional conferences addressing withdrawal of correspondent banking relationships (“de-risking”);
  - Bank for International Settlements (BIS) on a symposium on capacity building in financial sector regulation;
  - Cooperating Official Institutions (COIs) providing on-request staff participation in missions.

### Delivery modalities and coordination
- Use of multiple modalities: TA missions, long-term experts (LTXs), training, annual workshops, tools and guidelines, peer-to-peer learning, RTACs combined with bilateral TA.
- On average, a standard MCM two-week, two-person TA mission is about 0.10 FTEs.
- Cooperation and synergies sought across IMF area departments, ICD, ITD, and external partners to integrate TA with surveillance, lending, and training.

### Partnerships and funding
- Donors supported approximately 80 percent of MCM’s field delivery in FY2018.
- Bilateral donor partners highlighted: Japan; Canada; the Swiss State Secretariat for Economic Affairs (SECO); the United Kingdom; Norway; Belgium; Netherlands; Sweden.
- Multi-donor trust funds supporting MCM programs include: Financial Sector Stability Fund (FSSF); Financial Reform and Strengthening Initiative (FIRST); Debt Management Facility (DMF); Somalia Trust Fund; South Sudan Trust Fund; Managing Natural Resource Wealth (MNRW) Topical Trust Fund.
- FIRST and DMF are examples of IMF-World Bank TA partnership through joint implementation.
- COIs participating include: Central Bank of Brazil; Bank of Canada; Banque de France; Norges Bank; Monetary Authority of Singapore; South African Reserve Bank; Bank of Thailand.

### Organizational commitments and outlook
- Commitment to high-quality, result-focused TA responsive to demand from membership.
- Emphasis on sustaining TA relevance, efficiency, effectiveness, impact, and sustainability.
- Continued efforts to enhance TA diagnostics, design, delivery, internal capacity, and coordination with partners and stakeholders.
- Gratitude expressed to stakeholders—recipient countries, donors, and cooperating institutions—for continued dedication and trust.

*Source: PREFACE, 2018 Technical Assistance Annual Report | Monetary and Capital Markets*

### BOX 2. PARTNERSHIPS FOR TRAINING

### BOX 2. PARTNERSHIPS FOR TRAINING

### BIS–IMF collaboration and symposium
- MCM partnered with the BIS to further commonly shared goals in developing capacity of financial sector supervisors.
- An inaugural jointly sponsored symposium in Basel, Switzerland brought together leaders of the Fund and the Bank for International Settlements on February 8 and 9, exploring ways to further strengthen the expertise of member countries in financial sector supervision and regulation.
- In opening remarks, the IMF’s Managing Director hailed the hands-on training and knowledge-sharing that the IMF provides and noted that TA, which now accounts for about one-third of MCM’s annual budget, is a major part of how the IMF and the BIS promote financial stability.
- Agustín Carstens, the General Manager of the BIS, emphasized the importance for all stakeholders to continuously identify the changing capacity-building needs of financial sector authorities worldwide, and to enhance coordination in order to more effectively and efficiently meet these needs.
- The conference was attended by officials from standard-setting bodies, financial-sector authorities, government agencies, international organizations and regional supervisory groups—representing the providers, recipients and donors of technical assistance.

### Joint online course for bank supervisors — design and delivery
- A new BIS‑IMF initiative will create a new joint online course for bank supervisors.
- Course structure:
  - Duration: 3.5 months.
  - Content components: participants will study i) pre-assigned tutorials developed by the BIS’s Financial Stability Institute; ii) IMF-developed online case-study modules; and iii) attend a series of live webinars.
  - IMF-developed case-study materials consist of video clips (lectures and interviews), online text, discussion fora, and knowledge checks.
  - A series of interactive live webinars for each topic will provide the opportunity to engage with expert speakers.
- Production and roles:
  - ICD provided design advice and technical help on the production of IMF content.
  - MCM developed the content.
- Target audience:
  - Professionals relatively new to banking regulation and supervision, as well as experienced supervisors who would like to refresh their knowledge.
- Pilot and scale:
  - The course will be piloted this year for about 185 participants worldwide, and would supplement existing face-to-face courses offered by the IMF and the Financial Stability Institute.

*BIS-IMF Symposium: Capacity Building in Financial Sector Regulation and Supervision (February 8, 2018).*

### SECTION II  |  192018 Technical Assistance Annual Report  |  Monetary and Capital Markets

### SECTION II  |  192018 Technical Assistance Annual Report  |  Monetary and Capital Markets

### MCM TA and Training Thematic Structure
- MCM’s CD work—TA and training—is classified into broad thematic groups with specific workstreams and defined TA focus areas:
  - Financial Sector Supervision and Regulation: regulation of commercial banks including Islamic banking; nonbank sectors such as insurance and securities markets; risk-based and consolidated supervision; implementation of Basel II/III; TA on International Financial Reporting Standards (IFRS). Core themes in FY2018 included Basel II/III and IFRS.
  - Central Bank Operations: (i) monetary and FX market operations (e.g., liquidity management, financial market infrastructures, and payments systems) — remained in high demand in FY2018; (ii) central bank governance, risk management, legislation, currency reform, and accounting.
  - Monetary, Foreign Exchange, and Macroprudential Policy: monetary policy framework design and implementation; FX regulation and market development; strengthening macroprudential policies and instruments. Forecasting and Policy Analysis Systems (FPAS) was a key engagement area in FY2018; monetary policy communication emerged as a theme.
  - Debt Management and Capital Market Development: Medium-Term Debt Management Strategy (MTDS) remains a primary TA topic; covers capacity building in public debt management, government securities and debt market development, and domestic market deepening. The updated MTDS framework was discussed by the IMF Executive Board in July 2017.
  - Financial Stability/Systemic Risk: targeted TA on (i) financial stability analysis and reporting; (ii) stress testing; and (iii) systemic risk monitoring.
  - Crisis Preparedness and Management: represented 4 percent of MCM’s TA in 2018; includes TA on bank restructuring and resolution, contingency planning, distressed asset management, and deposit insurance systems.

### Field Delivery and Top Recipients
- TA field delivery by region (FY2014–18) and top recipient countries (FY2018) highlight concentrated demand; Figure references indicate regional and country FTE distributions.
- MCM Top 10 TA recipient countries, FY2018 (in FTEs) include: Ukraine, Sierra Leone, Ghana, Albania, Myanmar, Nigeria, Jamaica, Nepal, Kyrgyz Republic, Cambodia.
- BOX 7: MCM Top 5 TA recipient countries by region, FY2018 (in FTEs) — examples shown for AFR, APD, EUR, MCD, WHD.

### Financing of TA — Donor Partnerships
- External donors finance a majority of MCM’s TA field work—close to 80 percent—allowing the IMF to respond to strong demand.
- Donor-partner profile comprises bilateral partners, multi-donor trust funds (TF), and RTACs.
- Donor-funded active TA projects, FY2018 (in share of U.S. Dollars):
  - Non-RTAC 48%
  - AFRITAC Central 2%
  - AFRITAC East 6%
  - AFRITAC South 8%
  - AFRITAC West 5%
  - AFRITAC West 2 7%
  - CAPTAC-DR 8%
  - CARTAC 7%
  - METAC 3%
  - PFTAC 3%
  - SARTTAC 4%
- BOX 9: Listing of key financial contributors to IMF trust funds for FY2018 (examples):
  - FIRST: Germany, Luxembourg, the Netherlands, Switzerland, United Kingdom
  - Somalia TF: Arab Fund for Economic and Social Development, Canada, European Union, Italy, United Kingdom, United States
  - DMF II: African Development Bank, Austria, European Union, Germany, The Netherlands, Norway, Russia, Switzerland
  - FSSF: China, European Investment Bank, Italy, Luxembourg, Saudi Arabia, Switzerland, United Kingdom
  - South Sudan TF: European Union, Norway, United Kingdom
  - MNRW TF: Australia, European Union, the Netherlands, Norway, Switzerland

### How Capacity Building Is Conducted
- Capacity building (TA and training) is a core MCM function, accounting for 26 percent of staff time allocation in FY2018.
- MCM staff time allocation by functions, FY2018:
  - Technical Assistance 26%
  - Financial Sector Assessment Program 20%
  - GFSR and Related Work 18%
  - Policy and Analytical Work 19%
  - Area Dept. Surveillance Support 13%
  - Other Multilateral Surveillance 4%
- TA delivery modes:
  - HQ support: remote engagement via emails, calls, videoconferences; targeted workshops/webinars; desk reviews and analysis; project and budget management; donor coordination; logistical and administrative support; technical backstopping and HR services for LTXs.
  - TA field work: delivered by long-term resident experts (LTXs), short-term experts (STXs), and MCM staff missions (typically 1–2 weeks) for training, workshops, seminars, donor/steering meetings, program evaluations, and other TA activities.
- TA field delivery by resource type, FY2018:
  - STX 45%
  - LTX 46%
  - Staff 9%
- TA field delivery overall: LTXs and STXs together account for over 90 percent of all field delivery, split almost equally, with the rest conducted by MCM staff.

### Long-Term Resident Experts (LTXs)
- LTXs’ terms range from one to five years.
- LTX deployment:
  - Deployed in high-intensity TA countries.
  - Support either a single institution (bilateral LTX) or a set of countries under an RTAC.
  - Responsibilities include developing, executing, and monitoring country-specific TA programs; extensive regional travel; and coordinating with IMF HQ teams.
- As of end-April 2018, MCM had 36 LTXs stationed in the field:
  - 19 in RTACs
  - 17 bilateral LTXs across all regions
- Close to 60 percent of LTXs provide capacity building in financial sector regulation and supervision; the remainder work on central banking and debt management issues.

### Training and Capacity Development
- Training objectives align with the Fund-wide training strategy: (i) increase training volume; (ii) update curriculum; (iii) expand platform via online/distance learning; (iv) enhance partnerships and co-financing.
- Training volume has risen since 2012, supported by donor contributions financing 65 percent of MCM’s training activities in FY2018.
- FY2018 MCM training delivery:
  - Conducted 77 targeted workshops, seminars, and training missions.
  - Regional concentration: Asia and Pacific 43%, Middle East and Central Asia 25%, Africa 15%, Europe 2%, Western Hemisphere 15% (in percent of FTEs).
  - MCM organized 24 ICD-program courses for a total of 728 participants.
- Training modalities:
  - In-house direct delivery to bilateral recipient institutions and, where needed, third-party locations.
  - Regional training centers as part of ICD’s structured Fund-wide program (policy-oriented, peer-to-peer learning, modular curricula).
  - Expanding online curricula in collaboration with ICD and external agencies: (i) Debt Sustainability and Debt Management; and (ii) Bank Supervision and Regulation — collaboration with the BIS to expand access to FSI Connect.

### Notable TA Engagements and Examples
- BOX 8 — Chile FPAS joint mission with IMF Research Department:
  - Objective: assess and advise on models and processes supporting the Central Bank of Chile’s inflation-forecast targeting regime.
  - Findings: CBOC’s FPAS is highly advanced with desirable features of established successful inflation-forecast targeting frameworks.
  - Outcome: recommendations to maintain system strength and technical suggestions for refinements.
- BOX 10 — CARTAC LTXs’ work in the ECCU:
  - Two long-term resident advisors in CARTAC (Financial Stability and Financial Sector Supervision) assisted the Eastern Caribbean Central Bank (ECCB) with upgrading financial stability function and implementing Basel II.
  - Outcomes: development of systemic risk indicators published in ECCB’s inaugural financial stability report; Basel II implementation plan; tailoring of Pillar I guidelines; TA on enhancing ECCU Uniform Insurance and Pension Bill to support a Single Insurance and Pension Market.
- BOX 11 — Regional workshops:
  - Workshop for securities regulators on IOSCO’s Multilateral Memorandum of Understanding (MMoU) with ATI and IOSCO: addressed obstacles to MMoU signatory status; 1.5-day training in December 2017; bilateral discussions and follow-up TA coordination.
  - Debt management seminar for GCC officials with the Middle East Center for Economics and Finance (CEF), January 2018: covered governance, MTDS formulation and implementation, international bond issuance, local government bond market development, investor relations, Sovereign Asset and Liability Management Framework, and interaction with cash management and monetary policy.

*Source: SECTION II  |  192018 Technical Assistance Annual Report  |  Monetary and Capital Markets*

### SECTION II  |  292018 Technical Assistance Annual Report  |  Monetary and Capital Markets

### SECTION II  |  292018 Technical Assistance Annual Report  |  Monetary and Capital Markets

### GLOBAL PLACEMENT OF MCM LONG-TERM EXPERTS (AS OF END-APRIL 2018) — Views from the Field
- Long-term experts (LTX) were placed across multiple RTACs and bilateral assignments (examples in text include: CAPTAC-DR, ECCU/ECCB, CARTAC, AFRITAC West/West 2/Central/East/South, METAC, AFW, AFW projects in Sierra Leone, Ghana, Nigeria, Rwanda, Mozambique, Ukraine, Albania, Kyrgyz Republic, Tajikstan, Nepal, Myanmar, PFTAC).
- Donor-partner models highlighted in field perspectives include: Caribbean Development Bank, Multi-Donor arrangements, Norway, FIRST, SECO, Japan, and others.
- Selected expert perspectives (verbatim highlights):
  - Alev Ozkan (Bank Supervision), Eastern Caribbean Central Bank: “TA delivery is all about mutual trust and respect, and a shared commitment to change. It has been a pleasure to work with such a supportive and focused management team at the ECCB. An additional bonus—waking up to the Caribbean sun every day!”
  - Brian Langrin (Financial Stability), CARTAC: “The strong TA demand reflects regional countries’ awareness of the role they play in building financial sector resilience to system-wide threats. CARTAC continues to actively promote capacity development for systemic risk surveillance with well-coordinated institutional arrangements for macroprudential policy.”
  - Oumar Dissou (Debt Management), AFRITAC West: “In my time at AFW, I have had the great satisfaction of seeing member-countries play a catalytic role in the implementation of reforms aimed at improving the quality of public debt management operations, and putting the regional government securities market on a solid footing.”
  - Kristin Gulbrandsen (Central Bank Operations), Bank of Mozambique: “My project at the Bank of Mozambique (BoM) takes a holistic approach to central bank modernization. The commitment and enthusiasm of the Governor and staff of the BoM, and Norway’s support and strong engagement, are the key factors behind its success.”
  - Rajinder Kumar (Bank Supervision and Financial Stability), Bank of Albania: “This assignment is a perfect example of not only supporting the implementation of micro- and macroprudential policies, but also harnessing the synergies between them. Settling in Tirana has been smooth, as the authorities took care that I got integrated into the organisational culture quickly, and they have been extremely welcoming!”
  - Faith Stewart (Financial Market Infrastructures and Payments), AFRITAC East & South: “Working in two RTACs to support 20 countries at varying stages of national payment systems development, presents unique opportunities for knowledge-sharing and peer-to-peer learning. One of the most fulfilling aspects of my job is seeing TA recipients’ keen interest and resourcefulness in adopting good practice, while at the same time customizing solutions to meet country-specific needs.”
  - Ebru Sonbul Iskender (Bank Supervision), National Bank of the Kyrgyz Republic: “Over the last three years, the NBKR transitioned from the traditional compliance-based to the risk-based supervision approach, and strengthened their regulatory framework. These achievements could not have been possible without the NBKR management’s support and staff’s hard work, commitment, and enthusiasm.”
  - Jun Iwasaki (Monetary and Foreign Exchange Operations), TAOLAM/CDOT: “The core TA recipients in my portfolio are Myanmar, Cambodia, and Vietnam. In these dynamic countries, what I find is sincere dedication and kind cooperation at each central bank. With the valuable support provided by colleagues at TAOLAM and HQ, it is my greatest pleasure to contribute to promoting the economic well-being in the region.”
  - Benjamin Stefanou (Financial Sector Supervision), PFTAC: “The rewards of working with the Pacific’s ‘small island, but large ocean’ states are as immense as the area we cover. Our counterparts treat TA as an opportunity, applying open minds and earnest focus and resources, to achieve the most out of the work we do together.”

### FINANCIAL SECTOR STABILITY REVIEW (FSSR): Helping Low- and Lower-Middle Income Countries Strengthen Financial Stability Frameworks
- Purpose and structure:
  - Demand-led TA instrument to help LLMICs prepare a comprehensive roadmap for financial sector reforms.
  - Integrated product delivering: diagnostic review of key components of the financial sector; assessment of financial statistics (Financial Soundness Indicators and balance sheet matrices); a TA Roadmap; and follow-up TA supported through a Financial Sector Stability Fund (FSSF).
  - FSSF supported by contributions from China, Italy, Luxembourg, Switzerland, the European Investment Bank, the United Kingdom, and Saudi Arabia.
  - Complements the FSAP (Financial Sector Assessment Program), which focuses on systemically important financial systems.
- FY2018 activity and outputs:
  - FSSRs conducted in Costa Rica, Paraguay, Fiji, and Uganda; a scoping mission completed in Nicaragua.
  - TA Roadmaps prepared for Costa Rica, Paraguay, Fiji, and Uganda to guide reforms over the next few years.
  - Supporting capacity development provided in financial sector statistics to strengthen Financial Soundness Indicators and construct balance sheet matrices.
- Key lessons from a TA Forum chaired by MCM’s Director on April 4, 2018:
  - Emphasizing ownership of the TA Roadmap is critical for implementation; authorities participated directly in designing, prioritizing, and sharpening the Roadmap and incorporated recommendations into work plans.
  - Strengthening regulation and supervision of the nonbank sector is vital given strong linkages with the banking sector and potential spillovers; supervisory standards for credit unions, microfinance, insurance, and pensions in some LLMICs need enhancement.
  - Proportionality in design and adaptation of supervisory principles is a key issue in LLMICs and small countries; challenge is reducing operational burden for small and less complex institutions without eroding minimum capital and liquidity requirements.
  - Limited interagency coordination and lack of systematic surveillance of financial sector interconnections have impeded reform; effective coordination among microprudential regulators and macroprudential authorities is key.
- Box 12 — Costa Rica FSSR (highlights):
  - First fully fledged FSSR mission completed in September 2017.
  - Authorities sought a financial sector “health check”; flexibility of FSSR was valued.
  - FSSR provided comprehensive diagnosis and recommendations to prepare authorities to handle potential distress without seriously compromising fiscal resources.
  - TA Roadmap agreed to address gaps in: financial supervision, monitoring of financial stability, public debt markets, measures to manage high dollarization, bank resolution, financial safety nets, financial inclusion, and financial statistics.
  - Authorities welcomed the final report, requested publication, and the publication elicited domestic attention and internal debate.

### PROPORTIONALITY IN BANKING REGULATION
- Context and rationale:
  - Post-global financial crisis reforms focused on large international financial institutions and complex markets; smaller institutions and developing markets may require tailored approaches.
  - Aim: implement main elements of global regulatory reform while adapting to institution size, business sophistication, market relevance, information granularity, and supervisory capacity.
- Proportionality regime principles:
  - Full set of Basel standards should apply to banks similar in operations and systemic importance to large international institutions.
  - Smaller, less complex institutions could be subject to a simpler, proportionate regulatory framework that ensures resilience without disproportionate operational/compliance costs.
  - Balancing simplicity and risk-sensitivity is challenging; proportionate regimes may require more conservative calibration of prudential norms.
- MCM country examples and work:
  - Eritrea: adopting a Basel I/II hybrid approach given the small size of the banking system.
  - Malawi and Kenya: priorities include enhancing the risk-based supervisory process.
  - MCM is finalizing a technical guidance note on how developing economies could incorporate international standards into their prudential framework based on TA and FSAP experience.

### CYBERSECURITY
- Risk assessment and trends:
  - Cybersecurity risk awareness is increasing, but the number and sophistication of cyberattacks threaten to outstrip resilience efforts.
  - Financial sector reliance on IT and system interconnectedness makes cybersecurity a financial stability risk.
  - Since 2017 the cybercrime industry has matured, adopting mainstream business models.
- Lessons and focus areas:
  - Continuous training on basic cyber hygiene is key, especially as technological solutions rapidly become obsolete.
  - Cyber risk mitigation should emphasize detection, response, and recovery.
  - Supervisors must ensure financial institutions establish and maintain cyber-breach identification, response protocols, and recovery measures.
  - Key aspects of cyber resilience: business processes, technology, and governance—with particular focus on governing boards and senior management.
- MCM TA program approach (threefold):
  - (i) Annual workshops: first annual cybersecurity workshop for financial supervisors in LLMICs hosted at IMF HQ in December 2017 (co-hosted with the National Bank of Belgium). The second annual workshop planned for December 2018.
  - (ii) Periodic regionally focused RTAC workshops: MCM working with RTACs; first regional workshop hosted by PFTAC in August 2018, with another three events to follow by January 2019.
  - (iii) Bilateral TA missions: country-specific missions building regulatory and supervisory capacity, promoting good practice, and sharing strategies to strengthen cyber resilience.

### FINTECH — CHALLENGES AND OPPORTUNITIES
- Observations:
  - Fintech is rapidly changing delivery methods of financial services; type and penetration vary across countries and regions.
  - Countries seek guidance on regulatory design for crypto-assets, stability risks, and modernization/oversight of payment systems.
  - Fintech offers potential benefits: lowering costs and promoting financial inclusion; but stakeholders must understand and mitigate associated risks.
- Policy implications and IMF role:
  - Cross-border regulatory cooperation becomes critical as fintech shifts regulation from national entities to borderless activities.
  - Market conditions and technology evolve rapidly; coordination with international bodies (Financial Stability Board, Financial Action Task Force, World Bank) is required.
  - MCM has produced research and analysis and is developing policy advice and capacity development tools within the Fund’s broader digital economy strategy.
  - An MCM-led Staff Discussion Note summarized initial considerations on fintech’s impact and regulatory responses (reference in text).
- Capacity development examples:
  - A workshop in China organized by MCM and the China Securities Regulatory Commission trained securities regulators on fintech and cyber risks, highlighting global regulatory/supervisory issues, emerging trends, and technological developments.
  - Topics prioritized by participants included sandboxing and crypto-asset regulation.

### FINANCIAL INCLUSION
- Definition and policy priority:
  - Financial inclusion defined as access to basic financial services at affordable cost; it is a policy priority for many Fund members.
- Problems and gaps:
  - Banks in many countries focus on large and well-connected enterprises; large population segments and SMEs remain excluded from financial services and face credit access difficulties.
  - Gaps persist across income, gender, age, and geographic lines, deterring countries from reaching growth potential.
- MCM TA focus and interventions:
  - Emphasis on the regulatory environment to enable financial inclusion compatible with financial stability and on modernizing national payment systems.
  - Increasing TA focus on the nonbank segment due to growing NBFI asset bases and interlinkages with the banking sector.
  - Example: In Swaziland, FIRST-funded TA aimed to strengthen supervision of NBFIs by providing hands-on TA to regulatory staff to enhance supervisory capability.
  - Example: In Botswana, TA to enhance payment systems to better reach the underserved.

*Source: SECTION II  |  292018 Technical Assistance Annual Report  |  Monetary and Capital Markets (content unit: taar2018 - SECTION II).*

### Section III-A, one of the key lessons

### Section III-A, one of the key lessons

### Key lesson
- Strengthening regulation and supervision of the nonbank sector is becoming increasingly vital for enhancing financial stability.

### Implications for future MCM TA work
- Financial inclusion is expected to remain an important element in the Fund’s TA work.
- As more FSSRs are undertaken and financial inclusion gaps are identified, several strands of TA support to our membership are expected to grow:
  - (i) continued work in strengthening the regulatory and supervisory environment for the NBFIs;
  - (ii) adaptation of oversight frameworks to emerging applications of fintech; and
  - (iii) in collaboration with the World Bank, enhancing payment system aspects of financial inclusion.

*taar2018 - Section III-A, one of the key lessons*

### SECTION IV  |  472018 Technical Assistance Annual Report  |  Monetary and Capital Markets

### SECTION IV

### SOMALIA: Financial Sector Reform in a Fragile State
- Context and program:
  - IMF re-engagement with the Federal Government of Somalia in 2013.
  - MCM provided capacity development (CD) to build a well-functioning Central Bank in Somalia, supported by the IMF’s multi-donor Country Fund for Somalia.
  - The donors to the Somalia Trust Fund are: Arab Fund for Economic and Social Development, Canada, European Union, Italy, United Kingdom, and United States.
  - The fund was established in May 2014 and has been operational since February 2015; MCM’s three projects account for a large share (46 percent) of the latest approved budget of the fund allocated to all IMF TA departments.
  - All TA projects supported by the Somalia Trust Fund were recently extended for another three years (FY2019–21) after completion of the first phase covering FY2016–18.
  - Security concerns require that all missions are held outside of the country.
- Delivery and scale:
  - MCM conducted a total of 46 CD activities (as of July 2018) since the start of the program.
  - The mode of TA delivery was tailored to the CBS’s needs, relying on hands-on training modules combining field visits, desk reviews by MCM staff and experts, and periodic conference calls.
  - MCM coordinated with IMF area department, LEG, and ICD, and with other TA providers (e.g., World Bank, U.S. Treasury, DFID) to avoid overlap and ensure consistency.
- Primary TA areas:
  - (i) Central bank organization, transparency, and governance; accounting, internal audit, and risk management functions.
  - (ii) Banking supervision and regulation.
  - (iii) Currency reform.
- Key contributions and outcomes:
  - Intensive TA/training to Licensing and Supervision Department staff in developing regulatory and operational frameworks for prudential supervision of commercial banks.
  - Support to the CBS currency reform team, including practical advice on logistics, accountability framework, communication, anti-counterfeiting, and budget, and review of relevant CBS documents related to the currency reform.
  - TA/training to accounting and internal audit staff in risk-based auditing, adopting the International Financial Reporting Standards framework, and preparing complete financial statements.
  - Support in implementing the CBS roadmap for financial sector reform through a review of current organizational structure.
- Implementation challenges and approach:
  - Pace of delivery required flexibility to address security risks, alternative off-site locations, and slow absorption capacity due to knowledge and skills gaps.
  - The CD program followed a coordinated, practical, prioritized, and sequential approach to gain traction.
- Selected authority feedback:
  - “The Central Bank of Somalia is very appreciative of the technical assistance provided by the IMF–MCM. We have seen a huge increase in the technical and functional capacity of the CBS staff, and we could benefit from the continued technical assistance from the MCM.” — Executive Management, Central Bank of Somalia

### SOUTH AFRICA: Upgrading Stress Testing Capacity for Financial Stability Analysis
- Context:
  - A Financial Sector Regulation Bill, signed into law in August 2017 and implemented in April 2018, established a Twin Peaks framework and conferred on the South African Reserve Bank (SARB) an explicit statutory mandate to enhance and protect domestic financial stability.
  - SARB conducts full stress-testing exercises once every two years or when deemed necessary; SARB carried out bottom-up and top-down common scenario stress-testing exercises in 2015–16, with results published in the Financial Stability Review.
  - SARB requested Fund TA to strengthen top-down stress-testing capacity; MCM reviewed the SARB’s framework and the 2016 macroprudential stress tests, and visited Pretoria in July 2017 and March 2018.
- TA objectives:
  - Strengthen SARB’s top-down stress-testing framework and introduce liquidity perspective to complement solvency focus.
- TA elements and enhancements:
  - Solvency stress-testing framework:
    - Expansion of the model to include standardized exposures.
    - Improvements in projections of net income.
    - Inclusion of additional risks (e.g., market risks, including currency risk) and portfolios beyond the loan book (e.g., holdings of securities).
    - Improvements in projection of credit risk parameters through the application of Bayesian Model Averaging techniques.
    - Implementation of single factor sensitivity tests.
  - Liquidity stress-testing framework:
    - Development of a Liquidity Coverage Ratio (LCR) template.
    - Implementation of the template using the existing reporting framework.
    - Calibration of LCR parameters.
    - Development of a cash-flow based liquidity stress-test tool.
  - Cross-country perspective provided for calibration and interpretation of stress testing components.
- Selected authority feedback:
  - “Through the technical assistance engagements of the IMF with the SARB on stress testing, the IMF made improvements to the existing SARB stress testing model and also expanded it by adding a perspective on liquidity to the solvency focus of the model. They also conveyed crucial skills and attributes to the team and maintained their support into the next stress testing cycle. As an institution we are immensely appreciative to the IMF and acknowledge the contribution of the MCM team in the IMF.” — Francois Groepe, Deputy Governor responsible for Financial Stability, South Africa Reserve Bank

### REPUBLIC OF UZBEKISTAN: Transitioning to Inflation Targeting
- Context and recent reforms:
  - Following a change in government in 2016, Uzbek authorities have embraced economic reforms aiming at a more market-based economy.
  - Financial markets are undeveloped; the Central Bank of Uzbekistan (CBU) has not historically actively managed liquidity or interest rates.
  - The project was partially supported by the MNRW Trust Fund and started in late 2017.
  - The CBU unified official and parallel exchange rates in September (year not specified in excerpt), leading to a sharp depreciation of the official exchange rate; state-owned banks received public capital injections in FX to prepare for associated losses.
  - Inflation rose sharply and the degree of dollarization remained elevated; adjustment did not cause major disruptions in bank loans to households and firms and economic activity.
- TA missions and goals:
  - Two MCM missions: first provided a roadmap for upgrading tools and operational structure for monetary policy; second assisted in designing an interim monetary policy framework for transition to inflation targeting.
  - An important early focus was designing a credible disinflation strategy supported by a sound monetary policy framework and prudent policy approach.
  - Monetary policy implementation needs to move from passive to active mode, implying significant operational changes for the CBU.
- Key recommendations to achieve CBU objectives and lay groundwork for inflation targeting:
  - Reform reserve requirements and standing facilities (lending and deposit facilities accessible on demand).
  - Introduce open market operations.
  - Develop liquidity forecasting.
  - Keep real short-term money market rates in positive territory, at least until the disinflation goal is met and inflation returns to single-digit territory.
  - Introduce an interest rate corridor for the short-term money market rate to facilitate keeping real short-term rates positive.
  - Declare the midpoint of the interest rate corridor as the new policy rate and conduct liquidity management to align a short-term money market rate with the new policy rate.
  - Once modeling and forecasting capacity is established and the CBU’s inflation forecast proves reasonably reliable, shift the intermediate target from real short-term rates to the CBU’s inflation forecast.
  - Allow for more flexibility in the exchange rate through an increased role of market forces; consider an intervention rule to introduce greater exchange rate flexibility via a systematic approach to FX interventions.
  - Urgently reform FX regulation, improve exchange rate management capacity, and develop the FX market, including reducing the market maker role of the central bank.
- Progress and next steps:
  - The CBU publicly declared price stability as the primary objective for monetary policy and announced its intention to bring inflation down to single-digit figures.
  - Revision of the central bank law and FX regulation is underway, supported by MCM and LEG Departments.
  - Measures were taken to pave the way for greater operational independence for the CBU.
  - MCM is prepared to assist with creation of a liquid government securities market and yield curve in Uzbekistan.
- Selected authority feedback:
  - “Currently Uzbekistan is undergoing through wide-scale structural reforms which include recent liberalization of foreign exchange market and modernization of monetary policy in line with international best practice. IMF’s active support of reforms in form of various consultations and technical assistance missions were valuable and timely. With the help of IMF experts, we developed a new monetary policy strategy and plans for enhancing monetary operations in the medium term. Bearing in mind challenges in the upcoming years, further cooperation with IMF is considered as an important part of capacity building for the successful transition to the inflation targeting.” — Timur Ishmetov, First Deputy Chairman, The Central Bank of Uzbekistan

### APPENDICES: Technical Assistance Infrastructure and Contacts
- Appendix I: IMF Regional Technical Assistance Centers (RTAC)
  - Lists RTAC locations and member countries across AFRICA, ASIA, MIDDLE EAST, and WESTERN HEMISPHERE regions (e.g., AFRITAC Central — Libreville, Gabon; AFRITAC South — Ebene Cybercity, Mauritius; PFTAC — Suva, Fiji; METAC — Beirut, Lebanon; CARTAC — Bridgetown, Barbados; CAPTAC-DR — Guatemala City, Guatemala).
- Appendix II: MCM Long-Term Resident Expert Placement (as of April 30, 2018)
  - Lists long-term resident expert placements by affiliation, country, topic, and donor-partner (examples include AFRITAC Central — Gabon — Financial Regulation and Supervision — Multi-donor; Bank of Albania — Albania — Monetary and Foreign Exchange Operations — SECO; Central Bank of Myanmar — Myanmar — Monetary and Foreign Exchange Operations — Japan).
- MCM TA Contacts (main contact points for requesting MCM TA):
  - Director Tobias Adrian — Tel.: +(1) 202.623.5372 — Email: tadrian@IMF.org
  - Deputy Director Aditya Narain — Tel.: +(1) 202.623.9616 — Email: anarain@IMF.org
  - Technical Assistance Division Chief Simon Thorburn Gray — Tel.: +(1) 202.623.6432 — Email: sgray@IMF.org
  - Deputy Division Chief Maria A. Oliva — Tel.: +(1) 202.623.8149 — Email: molivaarmengol@IMF.org
  - Deputy Division Chief Naomi Griffin — Tel.: +(1) 202.623.4462 — Email: ngriffin@IMF.org
  - Deputy Division Chief Veronica Bacalu — Tel.: +(1) 202.623.4816 — Email: vbacalu@IMF.org

*Source: https://www.imf.org/-/media/files/publications/technical-assistance-annual-report/taar2018.pdf*

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_Source: https://www.imf.org/-/media/files/publications/technical-assistance-annual-report/taar2018.pdf_