## _011609

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---

### I. Introduction — context and objectives
- Improving the quality of the Fund’s financial sector analysis and integrating it with surveillance is a major undertaking involving action on several fronts.
- Key prior inputs and mandates:
  - 2007 Financial Sector Taskforce Report (“Taskforce Report”).
  - 2008 Triennial Surveillance Review (TSR) and supplements; Board’s Statement on Surveillance Priorities.
- Multidimensional efforts underway:
  - Conceptual: enhance the Fund’s methodological toolkit.
  - Operational: adapt surveillance instruments to improve coverage of the financial sector and its linkages with the real economy.
  - Organizational and HR: enhance delivery of financial sector expertise and refocus human resource management.
- Constraints and drivers:
  - More stringent budget environment requiring tradeoffs among bilateral surveillance, multilateral surveillance, and capacity building.
  - Financial crisis increased emphasis on macro-financial issues and need to expand analysis beyond banking stability and central bank operations to cross-market, cross-sector, and cross-border linkages.

### II. Filling the gaps: strengthening financial sector surveillance — major initiatives and tradeoffs
- Three major areas for improvement identified:
  - Close gaps between multilateral and bilateral surveillance by introducing greater cross-country perspective in Article IV consultations and improve analysis of regional, thematic, and market issues.
  - Improve coverage and quality of financial sector issues in Article IV consultations, including strengthening integration of FSAP assessments into surveillance.
  - Strengthen analytical framework and toolkit for studying macro-financial linkages.
- Major initiatives underway:
  - Closer collaboration with the Financial Stability Forum (FSF) and other international fora; proposed Early Warning Exercise (EWE); regional/thematic studies.
  - Shift in focus of recent Article IV consultations toward financial sector issues.
  - Forthcoming FSAP review to make the program more flexible and better integrated with surveillance.
  - Strengthening methodological toolkit, dissemination via training, and building expertise through recruiting, external assignments, and staff mobility.
- Key tradeoffs and questions:
  - Developing appropriate regional/thematic instruments.
  - Balancing resources between expanded Article IV financial coverage and FSAP, multilateral surveillance, program work, and capacity building.
  - Adapting the voluntary FSAP to meet surveillance exigencies.

### III. Enhancing multilateral and regional financial surveillance, EWE, and bridging with bilateral surveillance
- Multilateral vehicles and collaboration:
  - WEO and GFSR remain main vehicles for multilateral surveillance; October 2008 GFSR offered a preliminary road map for exit from the crisis.
  - Closer collaboration with FSF and participation in working groups; modalities discussed in The Fund's Response to the 2007-08 Financial Crisis - Stocktaking and Collaboration with the Financial Stability Forum (September, 2008).
- Early Warning Exercise (EWE) (joint IMF-FSF):
  - Objective: identify and rank emerging pressures in the global economic and financial system and outline policy options to mitigate risks.
  - Tools/indicators to focus extensively on financial linkages, global risks, sectoral vulnerabilities, cross-border distress dependencies, and spillovers across markets.
  - Process: Surveillance Committee and Management finalize prioritization; Board informal discussion; results disseminated to IMFC, Development Committee, G7/G20, and other policy makers; Area Department participation to inform Article IV consultations.
- Regional/thematic assessments:
  - Need instruments for multi-country thematic studies (e.g., cross-border/cross-functional supervision, crisis management frameworks).
  - Nordic-Baltic supervisory and regulatory review (2007) cited as a useful model.
- Other cross-country initiatives:
  - MCM operational guidance to Article IV and FSAP mission teams (June 2008).
  - MCM internal working groups on regulation perimeter, procyclicality, leverage, systemic liquidity management.
  - MCM and LEG studying crisis management and bank resolution frameworks.
  - Expansion of financial sector coverage in Regional Economic Outlooks (REOs) and flexible regional engagement.

### IV. Improving financial sector analysis in bilateral surveillance
- Resource tradeoffs and strategic deployment:
  - Article IV consultation is the main bilateral surveillance vehicle; FSAP provides more in-depth but less frequent assessments.
  - Quality of Article IV financial coverage depends on availability of expert resources (mainly in MCM).
  - Tradeoffs in deploying MCM expert resources across Article IV support, FSAP, Fund programs, capacity-building, multilateral surveillance, and methodological development.
- Allocation and FSAP voluntary nature:
  - TSR recommended a risk-based approach prioritizing systemic or regional importance, vulnerabilities, and importance of financial development for macro or external stability.
  - FSAP participation is voluntary; Fund cannot always direct FSAP resources to highest-priority cases despite majority coverage.
- Article IV consultations and financial sector focus:
  - Dominant issues: vulnerability of domestic banking systems to contagion; risks from housing credit and new financial instruments; financial safety nets and crisis management; central bank liquidity management.
  - Financial Sector Guidance Note (MCM and SPR) under preparation to codify standards and expectations for depth and breadth of financial sector analysis in bilateral surveillance.
- Remaining obstacles:
  - Organizing framework for systematic macro-financial surveillance not yet well-established.
  - MCM contributions to Article IV support were cut in recent Fund restructuring.
  - Progress on toolkit enhancement, recruitment, mobility, and training will be gradual and near-term embedding depends heavily on specialized staff availability.

### V. The FSAP — role, recent focus, limitations, and proposals
- Achievements and recent focus:
  - FSAP raised quality of financial sector analysis in Article IV consultations and became a recognized comprehensive assessment of stability and developmental needs.
  - Bank involvement in non-industrial countries helps ensure consistent advice and leverages Fund resources.
  - With increasing shift to updates, resource cost contained.
  - Box 1 — Focus of recent FSAPs (last 18 months):
    - "35 FSAP assessments were initiated, of which 25 were updates (not including the FSAP updates in the Crown Dependencies of the U.K.)."
    - Advanced economies assessed (three): Canada, Austria, and Iceland — focus on exposure to U.S. subprime-related products, risks from external contagion, cross-border coordination; Iceland: crisis management and problem bank resolution.
    - Emerging market FSAPs focused on resilience to shocks, stress-testing “sudden stop” scenarios, crisis management frameworks, and cross-border cooperation.
- Limitations as a surveillance instrument:
  - Voluntary nature constrains prioritization.
  - Despite 2005 streamlining, joint Bank-Fund missions and comprehensive assessment requirements mean missions still take long and are infrequent; gap between updates is 5–7 years.
  - As long as FSAP remains voluntary, seamless integration into Fund surveillance will be elusive.
- Proposals under consideration (three options discussed by Bank and Fund staff):
  - “Modular” FSAPs:
    - Separate, stand-alone stability and developmental assessment modules when authorities request; modules could be conducted separately or together.
    - Existing coordination mechanisms (Financial Sector Liaison Committee) to continue ensuring joint program nature.
    - Potential benefits: more responsive, quicker, more focused assessments; permit Fund to mold stability modules more closely to surveillance needs and possibly increase frequency.
    - Caveat: modular approach risks diluting quality if taken too far.
  - Stronger integration of analytical content and offsite monitoring:
    - Develop analytical framework focusing on systemic links and dynamics, cross-country benchmarks and indicators, and systematic approach to stability and developmental assessments.
    - Develop capacity for continuous offsite monitoring subject to resource constraints.
    - Expected outcome: enhanced integration of policy advice within and across countries.
  - Risk-based ROSCs:
    - Current practice requires comprehensive assessment of all principles; number of ROSCs dropped from five per initial FSAP in FY2002 to about two in FY2007 (and to less than one in FSAP updates).
    - Proposal: after initial comprehensive assessment, permit full or partial ROSC updates determined in advance on basis of key risks and vulnerabilities (“risk-based”), with safeguards against “cherry-picking.”
    - Footnote: This option would not apply to AML/CFT standards, which would continue to be assessed in their entirety.
    - Expected benefit: streamline FSAP and improve transparency of standards assessments.
- Alternative under current constraints:
  - Expand financial stability work in Article IV consultations — already occurring gradually as Area Departments build expertise.
  - A decisive push requires a substantial increase of MCM resources for Article IV participation or Area Department mission support; under current resources this would come at expense of other MCM activities (FSAP, capacity building, multilateral surveillance).
  - Therefore, reforms making FSAP more flexible would improve integration and ensure continued program strength.

### VI. Improving analytical toolkit, statistics, data initiatives, and training
- RES research grouped under four headings:
  - Fundamentals of macro-financial linkages.
  - Boom-bust cycles in financial and macro variables.
  - Implications of financial globalization.
  - Financial system performance and governance.
- MCM methodological developments and applications:
  - Credit risk: stress-testing using new approaches to model credit portfolio loss distributions under limited data and time-varying default correlations.
  - Liquidity risk: methods incorporate non-traditional funding liquidity risks, market liquidity risks (“fire sales”), and off-balance sheet concentration risk.
  - Second-round effects: models capture correlations between financial institutions for contagion and joint default probabilities.
  - Risk-adjusted balance sheets: increased use of the contingent claims approach (CCA) integrated with macroeconomic models.
  - Summary fragility measures: system-level stress testing producing time series measures applied to national banking systems, cross-border and cross-sector correlations, and counterparty exposures.
- Statistics and data initiatives (STA):
  - Supplementary Report Forms for monetary and financial statistics to improve balance sheet analysis.
  - STA working to initiate regular collection and dissemination of Financial Soundness Indicators (FSIs) for banks, client sectors, and financial and real estate markets for around 50 IMF member countries in the second quarter of 2009, with subsequent expansion.
  - STA exploring broadening the SDDS on financial indicators for early warning and monitoring comparable across countries.
  - Identified data needs: data on nonbank financial institutions, housing-related statistics, credit risk transfers, and financial operations of large nonfinancial corporates with domestic and cross-border links.
  - STA chairs an Inter-Agency Group on Finance Statistics (BIS, ECB, Eurostat, OECD, UN, World Bank).
- Dissemination and training:
  - New courses by the IMF Institute (INS) and MCM:
    - Foundations of Macro-Financial Surveillance — balance sheet analysis, FSIs, regulatory policy, cross-border supervision, macro-financial linkages.
    - Extracting Information from Financial Data — market indicators: yield curves, options prices, spreads.
  - Resource constraints on training and staffing:
    - Internal training is time-intensive and competes for time of experienced staff.
    - Recruitment focuses on economists with financial economics and regulation experience.
    - Swap arrangements and temporary assignments (TAPs) and leave without pay (LWOP) external assignments facilitated by management.
    - Uptake of TAPs limited (one senior staff on TAP to MCM) largely due to increased work pressures in Area Departments.

### VII. Country-level integration of financial sector issues in bilateral surveillance — recent activities (selected highlights)
- The source documents extensive country-level activities where Article IV consultations and FSAP updates were used to integrate financial sector analysis. Examples (activity focus and outputs):
  - FSAPs, FSAP Updates, and Article IV consultations across advanced, emerging, and developing economies addressed bank resilience to shocks, liquidity risks, cross-border supervisory coordination, crisis preparedness and contingency planning, Basel II implementation, deposit insurance, bank resolution, macro-financial linkages, and effects of global financial turmoil.
  - Boxed country examples include Australia, Austria, Canada, Chile, Croatia, Czech Republic, Denmark, Estonia, Finland, Germany, Iceland, India, Italy, Japan, Korea, Lithuania, Mexico, Netherlands, Portugal, South Africa, Sweden, Switzerland, United Kingdom, United States, and many others.
  - Outputs cited: Article IV Consultation Staff Reports, Selected Issues Papers, FSSA Reports, Mission Concluding/Preliminary Statements, Working Papers, Occasional Papers.

### VIII. Appendix Table 4 — FSAP Country Coverage, FY00–09 (selected numeric entries preserved exactly as in source)
- Coverage — All member countries: 64.9 67.6 63.7 64.1 16.8 20.5 9.3 12.5
- Coverage — By regions:
  - AFR: 47.7 54.5 84.8 86.7 11.4 13.6 43.9 46.7
  - APD: 27.3 30.3 68.5 70.4 3.0 3.0 0.0 0.2
  - EUR (Euro area / region): 95.3 95.3 99.9 99.9 20.9 32.6 7.0 15.6
  - MCD: 71.0 74.2 92.3 92.5 29.0 32.3 31.4 34.8
  - WHD: 79.4 79.4 21.7 21.7 20.6 23.5 13.8 13.8
- Coverage — By systemic importance:
  - G-20: 78.9 78.9 56.5 56.5 15.8 21.1 6.2 8.8
  - Other: 63.3 66.9 90.6 92.8 16.9 21.1 21.0 26.6
- Coverage — By level of development (3/):
  - Advanced economies: 86.8 86.8 63.3 63.3 15.8 18.4 5.8 6.7
  - Emerging markets: 69.1 70.2 61.2 63.2 22.3 29.8 23.1 35.1
  - Developing economies: 41.5 50.9 88.0 89.2 7.5 7.5 2.2 2.2
- Notes (preserved wording):
  - "2/ Numbers reflect initial assessments and updates completed as of November 2008. Regional FSAPs in ECCU and CEMAC are not counted, but all their member countries are counted as covered. WAEMU members are counted only if they have had an individual assessment following the regional FSAP. Countries covered both by an individual FSAP and a regional FSAP, or by two updates, are counted in the year of the first assessment."
  - "3/ Level of development is based on the World Bank's classification of countries by income and the following criteria: all high income countries are classified as advanced; upper middle income and lower middle income as emerging; and low income as developing."
  - "Initial Assessments: Weighted by GDP 1/ and Simple share"
  - "Updates: Simple share and Weighted by GDP 1/"
  - "1/ Weighted by the FSAP countries' GDP in total GDP of the respective category."

### IX. Issues for discussion posed to Directors (preserved verbatim)
- Has the focus and depth of analysis of macro-financial issues in Article IV surveillance been appropriate, and in what areas would there be scope for further improvement?
- Given budget constraints, is the Fund’s limited financial expertise appropriately targeted between Article IV surveillance, FSAPs, and other areas, including programs, capacity building, multilateral surveillance, and methodological development?
- Where do Directors see the priorities for reshaping the FSAP and integrating it more effectively into bilateral surveillance?
  - Is there a need to reconsider the voluntary nature of the program and the manner in which assessments are prioritized in the forthcoming FSAP review?
  - Is there merit in introducing more modular FSAP assessments, stronger offsite monitoring, and risk-based ROSCs, currently under discussion with the Bank?
- What are the appropriate vehicles for regional and thematic financial sector assessments, and do Directors view these as a useful approach to bridging the gap between multilateral and bilateral surveillance?

*Source: _011609 (excerpts from IMF staff paper; sections I–V, Box 1, Appendix Tables 2 and 4, Table 3).*

### 1. Number of Assessments, FY00–FY10 ................................................................................26

### 1. Number of Assessments, FY00–FY10

### I. Introduction — context and objectives
- Improving the quality of the Fund’s financial sector analysis and integrating it with surveillance is a major undertaking involving action on several fronts.
- Key prior inputs and mandates:
  - 2007 Financial Sector Taskforce Report (“Taskforce Report”) provided a comprehensive assessment and organizing framework for integrating finance into Article IV surveillance.
  - 2008 Triennial Surveillance Review (TSR) and supplements developed the theme further; the Board’s Statement on Surveillance Priorities made integration of macroeconomic and financial sector surveillance one of four overarching operational priorities for Fund surveillance.
- Multidimensional efforts underway:
  - Conceptual: enhance the Fund’s methodological toolkit.
  - Operational: adapt surveillance instruments to improve coverage of the financial sector and its linkages with the real economy.
  - Organizational and HR: enhance delivery of financial sector expertise and refocus human resource management.
- Constraints and drivers:
  - Efforts occur in a more stringent budget environment, requiring tradeoffs for allocation of financial sector expert resources among bilateral surveillance, multilateral surveillance, and capacity building.
  - The financial crisis has increased emphasis on macro-financial issues, strain on expert resources, and the need to expand analysis beyond banking stability and central bank operations to cross-market, cross-sector, and cross-border linkages.

### II. Filling the gaps: what is being done to strengthen financial sector surveillance
- Three major areas for improvement identified by the Taskforce Report and the TSR:
  - Closing gaps between multilateral and bilateral surveillance by introducing greater cross-country perspective in Article IV consultations and by improving analysis of regional, thematic, and market issues.
  - Improving coverage and quality of financial sector issues in Article IV consultations, including strengthening integration of FSAP assessments into surveillance.
  - Strengthening the analytical framework and toolkit for studying macro-financial linkages.
- Major initiatives underway:
  - Closer collaboration with the Financial Stability Forum (FSF) and other international fora; proposed Early Warning Exercise (EWE); regional/thematic studies to bridge multilateral-bilateral gaps.
  - Shift in focus of recent Article IV consultations toward financial sector issues, reflecting the financial crisis.
  - Forthcoming FSAP review intended to make the program more flexible and better integrated with surveillance (as called for by the October 2008 IMFC Communiqué).
  - Strengthening methodological toolkit, disseminating tools via training, and building expertise through recruiting, external assignments, and staff mobility.
- Key tradeoffs and questions highlighted:
  - Developing appropriate instruments for regional/thematic assessments.
  - Balancing resources between expanded Article IV financial coverage and other Fund financial sector work (FSAP, multilateral surveillance, program work, capacity building).
  - Adapting the FSAP (a joint Bank-Fund program with voluntary country participation) to meet surveillance exigencies.

### III. Enhancing multilateral and regional financial surveillance, early warning systems, and bridging with bilateral surveillance
- Main multilateral vehicles:
  - World Economic Outlook (WEO) and Global Financial Stability Report (GFSR) remain main vehicles for multilateral surveillance, with recent issues focusing on the financial turmoil and implications.
  - October 2008 GFSR provided a preliminary road map for financial sector policy makers on how to exit from the crisis and restore confidence.
- Collaboration with standards setters and international fora:
  - Closer collaboration with FSF and participation in standing Working Groups provide platforms to present Fund analysis and contribute to emerging consensus on lessons and policy implications.
  - Appendix Table 2 (in source) lists international working groups with staff participation.
  - Modalities of collaboration with the FSF were discussed in The Fund's Response to the 2007-08 Financial Crisis - Stocktaking and Collaboration with the Financial Stability Forum (September, 2008).
- Bridging the multilateral–bilateral gap (dimensions identified by the TSR):
  - Ensure findings of WEO and GFSR and joint work with FSF/other fora are leveraged in bilateral consultations.
  - Improve access to cross-country knowledge to inform bilateral consultation discussions with cross-country perspectives.
  - Develop regional/thematic surveillance initiatives and instruments.
- Early Warning Exercise (EWE):
  - Joint IMF-FSF EWE under preparation aims to identify emerging pressures in the global economic and financial system and rank them.
  - EWE will attempt to outline policy options to mitigate risks; tools/indicators will focus extensively on financial linkages and analyze global risks, sectoral vulnerabilities, cross-border distress dependencies, and spillovers across markets.
  - Process: Surveillance Committee and Management will finalize prioritization; Board will discuss at an informal session; results would be disseminated to the IMFC, Development Committee, G7/G20, and other policy makers.
  - Area Department participation intended to ensure results reflect and inform Article IV consultations.
- Regional/thematic assessments:
  - Need for appropriate instruments to conduct regional/thematic assessments with a financial sector focus.
  - Article IV consultations and FSAPs have been predominantly bilateral; exceptions include Euro area and some currency unions (e.g., West African Economic and Monetary Union).
  - 2007 review of Nordic-Baltic supervisory and regulatory frameworks cited as a useful model.
  - Potential for focused, multi-country thematic studies on issues common to several countries (e.g., cross-border/cross-functional supervision, crisis management frameworks, issues from the EWE).
- Other initiatives to bring cross-country perspectives into bilateral surveillance:
  - MCM issued detailed operational guidance to Article IV and FSAP mission teams in June 2008 following the IMFC report on preliminary lessons.
  - MCM internal working groups studying gaps that contributed to the crisis and deriving policy recommendations in areas including cross-border/cross-functional regulation, perimeter of regulation, procyclicality in accounting and prudential frameworks, leverage, and systemic liquidity management.
  - MCM and Legal Department (LEG) studying crisis management and bank resolution frameworks.
  - Analytical work on lessons from major central banks’ efforts to restore money market functioning.
  - Expansion of financial sector coverage in Regional Economic Outlooks (REOs) and use of flexible regional engagement (seminars, ad hoc meetings) to supplement bilateral surveillance (Appendix Table 3 in source provides examples).

### IV. Improving financial sector analysis in bilateral surveillance
- Resource tradeoffs and strategic deployment:
  - Article IV consultation is the main vehicle for bilateral surveillance but receives critical support from FSAP, which provides more in-depth but less frequent assessments.
  - Quality of financial sector coverage in Article IV consultations depends importantly on availability of expert resources (mainly in MCM).
  - Tradeoffs in deploying MCM expert resources across Article IV support, FSAP assessments, Fund programs, capacity-building, multilateral surveillance, and methodological development.
- Allocation across countries and FSAP voluntary nature:
  - TSR recommendation: deploy financial sector expertise strategically using a risk-based approach and prioritize according to criteria of systemic or regional importance, importance of vulnerabilities, and importance of financial development issues for present or prospective macroeconomic or external stability.
  - FSAP participation is voluntary for members; Fund cannot always direct FSAP resources to most urgent needs despite majority coverage (Appendix Table 4 and Figures 1–3 in source).
  - Fund and Bank try in practice to respond positively to FSAP requests (though possibly with delay), limiting scope to focus resources on high-priority cases.
- Article IV consultations and financial sector focus:
  - Financial sector issues have become more central to Article IV consultations, partly reflecting the financial turmoil.
  - TSR documented progress; Appendix Table 5 lists financial sector topics in recent Article IV consultations.
  - Dominant issues in recent Article IVs: vulnerability of domestic banking systems to contagion; risks from housing credit and new financial instruments; financial safety nets and crisis management frameworks; central bank liquidity management.
  - This focus is more prominent when Article IV consultations are combined with FSAPs.
- Financial Sector Guidance Note:
  - MCM and Strategy, Policy, and Review Department (SPR) preparing a Financial Sector Guidance Note for staff.
  - Purpose: codify standards and expectations regarding depth and breadth of financial sector analysis in bilateral surveillance; provide operational guidance to staff in key areas.
  - Expected benefits: enhance quality and evenness of analysis and make it easier for Article IV teams to bring cross-country perspectives into consultations.
- Remaining obstacles and constraints:
  - Organizing framework for systematic macro-financial surveillance, including analysis of macro-financial linkages, is still not well-established.
  - MCM contributions to Article IV support were cut in the recent Fund restructuring.
  - Progress on toolkit enhancement, recruitment, mobility, and training will be gradual; near-term prospects for embedding financial sector issues in bilateral surveillance depend heavily on availability of specialized staff resources for Article IV missions.

### V. The FSAP — role and integration (introductory points from source)
- FSAP provides more in-depth assessments of financial stability but is less frequent and voluntary for member countries.
- Review of FSAP presents an opportunity to make the program more flexible and better integrated with surveillance (noted in October 2008 IMFC Communiqué).
- Integration challenges:
  - Voluntary nature constrains ability to direct FSAP resources to highest-priority cases.
  - Practical responsiveness of Fund and Bank to requests (often positive, possibly delayed) further limits strategic prioritization of FSAP allocations.

*Source: IMF document excerpt, sections I–II and subsections A–B (pages and appendices referenced within the source).*

### 20.      Since its inception a decade ago, the FSAP has achieved significant success. As

### Since its inception a decade ago, the FSAP has achieved significant success.

### Achievements and recent focus
- The FSAP has substantially raised the quality of financial sector analysis in Article IV consultations and established an established “brand name” as a comprehensive assessment of both stability and developmental needs of the financial sector.
- The involvement of the Bank in non-industrial countries helps ensure consistent advice and allows the Fund to leverage its limited resources.
- With the increasing shift to updates, the resource cost of the program has been contained.
- The recent crisis illustrated the scope for the focus of assessments to respond to emerging priorities.

Box 1 — Focus of recent FSAPs (last 18 months)
- 35 FSAP assessments were initiated, of which 25 were updates (not including the FSAP updates in the Crown Dependencies of the U.K.).
- In almost all cases, the focus of the assessments—and of the Article IV consultation that followed—was influenced by the turmoil.
- Advanced economies assessed (three): Canada, Austria, and Iceland.
  - Focus: evaluating risks of exposure to U.S. subprime-related products; risks from external contagion (e.g., a sharp rise in funding costs); cross-border coordination; and, particularly for Iceland, crisis management and problem bank resolution.
- Emerging market country FSAPs:
  - Focus: assessing resilience to a range of possible shocks that could be triggered by the unfolding crisis.
  - Particular attention to stress-testing “sudden stop” scenarios given large external funding needs of some countries.
  - Emphasis on crisis management frameworks and cross-border cooperation arrangements where foreign banks predominate.

### Limitations of the FSAP as a surveillance instrument
- Voluntary nature constrains scope for prioritization.
- Despite streamlining of FSAP updates endorsed by the Board in 2005:
  - Joint Bank-Fund missions, requirement for relatively comprehensive assessments, and Fund resource constraints mean missions still take long to prepare and are infrequent.
  - The gap between updates is 5–7 years.
- Even reshaped, seamless integration into the Fund’s surveillance would be elusive so long as the FSAP remains voluntary.

### Proposals to reshape the FSAP
- Three proposals under consideration (discussed by Bank and Fund staff in the context of the forthcoming FSAP review):
  - “Modular” FSAPs
    - Option to launch separate, stand-alone stability and developmental assessment modules, respectively, when circumstances call for—and the authorities request—a more flexible approach.
    - Individual modules would not be substitutes for a “complete” assessment, but could be conducted separately or together.
    - Existing coordination mechanisms (notably the Financial Sector Liaison Committee) would continue to ensure the joint nature of the program.
    - Benefits: more responsive to circumstances; possible quicker and more focused assessments; strengthen accountability along each institution’s mandate and comparative advantage; permit the Fund to mold stability modules more closely to surveillance needs and, resources permitting, increase their frequency relative to current comprehensive FSAPs.
  - Stronger integration of analytical content and offsite monitoring
    - Continue developing an analytical framework focusing on systemic links and dynamics, cross-country benchmarks and indicators, and a more systematic approach to stability and developmental assessments to make these more comparable across countries.
    - Develop capacity for more continuous offsite monitoring to bridge information gaps between assessments, subject to resource constraints.
    - Expected outcome: enhanced integration of both institutions’ policy advice, within and across countries.
  - Risk-based ROSCs
    - Current practice: ROSCs—initial assessments or updates—must be based on a comprehensive detailed assessment of all principles.
    - Issue: financial standards and methodologies have become more complex while FSAPs have been resource-constrained; number of ROSCs dropped from five per initial FSAP in FY2002 to about two in FY2007 (and to less than one in FSAP updates).
    - Staff have been producing technical notes on selected principles, which is arguably less transparent and less effective.
    - Proposal: modify existing requirement so that, following the initial comprehensive assessment, staff could undertake either a full or a partial ROSC update.
      - The principles selected for a partial reassessment would be determined in advance of the mission on the basis of key risks and vulnerabilities (“risk-based”), with appropriate safeguards against “cherry-picking.”
      - Footnote: This option would not apply to AML/CFT standards, which would continue to be assessed in their entirety.
    - Expected benefit: streamline the FSAP and improve transparency of standards assessments.

Caveats to proposals
- Modular approach risks diluting quality if taken too far.
- Frequency of updates would still be constrained by resources.
- As long as FSAP remains voluntary, seamless integration with the Fund’s surveillance will remain elusive.

Alternative under current constraints
- Expand financial stability work in Article IV consultations.
  - Already occurring gradually as financial sector expertise is built in Area Departments.
  - A decisive push would require a substantial increase of MCM resources for Article IV participation or Area Department mission support.
  - Under current resource envelope, such a shift could only take place at the expense of other MCM activities, including the FSAP, capacity building, and multilateral surveillance.
- Therefore, reforms to make the FSAP more flexible would both improve integration with surveillance and ensure continued strength of the program.

### Improving the analytical toolkit and building financial sector expertise
- RES work underway grouped under four headings (Appendix Table 6 referenced for recent papers and conferences):
  - Fundamentals of macro-financial linkages
    - Systematic overview of links between financial sector and real economy; effect on macroeconomic policies; role of financial sector in initiating, amplifying, or muting disturbances; potential cross-border spillovers.
  - Boom-bust cycles in financial and macro variables
    - Examines characteristics of credit booms, linkages between credit booms and crises, and optimal policy responses.
  - Implications of financial globalization
    - Measurement of financial globalization; impact on economic growth and macroeconomic volatility; policies to promote benefits of globalization.
  - Financial system performance and governance
    - Focus on competition, foreign bank entry, financial conglomerates, diversification, corporate governance and corporate performance, measures of corporate vulnerabilities, and impact of regulation on financial stability.

- MCM methodological developments and applications (areas of important progress)
  - Credit risk
    - Stress-testing built on new approaches to modeling credit portfolio loss distributions to better quantify impact of macroeconomic shocks on banks’ economic capital amid limited data series and default correlations that vary over the credit cycle.
  - Liquidity risk
    - Methods incorporate non-traditional funding liquidity risks (e.g., through securitization), market liquidity risks (e.g., “fire sales”), and off-balance sheet concentration risk (e.g., excessive credit lines to a single counterparty).
  - Second-round effects
    - New models capture correlations between financial institutions reflecting contagion channels or similar exposures (e.g., joint probability of default); contagion models better capture extreme shock transmission across financial systems.
  - Risk-adjusted balance sheets
    - The contingent claims approach (CCA) used increasingly for scenario analysis; frameworks integrating the CCA approach with macroeconomic models have been applied in several cases.
  - Summary fragility measures
    - Methodologies for risk modeling and system-level stress testing can produce summary measures of financial stability on a time series basis and are being applied to national banking systems, cross-border and cross-sector correlations, and counterparty risk exposures.

### Statistics, data initiatives, and training
- STA initiatives to strengthen financial sector analysis and transparency
  - Supplementary Report Forms for monetary and financial statistics to improve balance sheet analysis and linkages.
  - STA is working to initiate regular collection and dissemination of Financial Soundness Indicators (FSIs) for banks, client sectors, and financial and real estate markets for around 50 IMF member countries in the second quarter of 2009, with subsequent expansion to other member countries.
  - STA is working on the possibility of broadening the SDDS on financial indicators to provide early warning signals and monitoring information comparable across countries.
  - Identified data needs: improved availability, timeliness, and frequency of data on nonbank financial institutions; housing-related statistics; understanding of credit risk transfers; information on financial operations of large nonfinancial corporates with significant domestic and cross-border links.
  - To advance statistical work, assess data gaps, and leverage resources and expertise, STA is chairing an Inter-Agency Group on Finance Statistics (involving the BIS, the ECB, Eurostat, OECD, the UN, and the World Bank).

- Dissemination and training
  - New training programs developed by the IMF Institute (INS) and MCM aimed at increasing staff familiarity with financial sector surveillance diagnostic tools and indicators; priority to make courses operationally relevant.
  - Course: Foundations of Macro-Financial Surveillance
    - Presents analytical tools used by practitioners to assess financial risks and vulnerabilities; covers balance sheet analysis, financial soundness indicators, regulatory policy issues, cross-border supervision and cooperation, macro-financial linkages, and application to improve Fund surveillance.
  - Course: Extracting Information from Financial Data
    - Introduces market indicators for diagnostic and policy design purposes; core analysis of yield curves, options prices, and spreads; expected increasing application of market indicators in surveillance as staff become familiar with strengths and limitations.

- Resource constraints on training and staffing
  - Internal staff training is time-intensive and competes for the time of staff with financial systems experience.
  - Recruiting, staff mobility, and external training can help but take time to deliver results.
    - Recruitment: Fund increasingly seeks economists with training and experience in financial economics, financial sector policy, and financial regulation and governance; HRD advertised internally and externally for financial experts (Economist, December 20, 2008).
    - Swap arrangements and temporary assignments (TAPs) provide on-the-job training; uptake limited (one senior staff on TAP to MCM) largely due to increased work pressures in Area Departments.
    - Management lifted restrictions to facilitate external assignments to the private financial sector under leave without pay (LWOP) arrangements.
    - Staff have opportunities to enhance skills via programs supporting external study.

### Issues for discussion (questions posed to Directors)
- Especially in light of the financial crisis, has the focus and depth of analysis of macro-financial issues in Article IV surveillance been appropriate, and in what areas would there be scope for further improvement?
- Given budget constraints, is the Fund’s limited financial expertise appropriately targeted between Article IV surveillance, FSAPs, and other areas, including programs, capacity building, multilateral surveillance, and methodological development?
- Where do Directors see the priorities for reshaping the FSAP and integrating it more effectively into bilateral surveillance?
  - Is there a need to reconsider the voluntary nature of the program and the manner in which assessments are prioritized in the forthcoming FSAP review?
  - Is there merit in introducing more modular FSAP assessments, stronger offsite monitoring, and risk-based ROSCs, currently under discussion with the Bank?
- What are the appropriate vehicles for regional and thematic financial sector assessments, and do Directors view these as a useful approach to bridging the gap between multilateral and bilateral surveillance?

*Source: _011609 - 20.      Since its inception a decade ago, the FSAP has achieved significant success.*

### Appendix Table 2.  MCM Staff Participation in International Working Groups

### Appendix Table 2. MCM Staff Participation in International Working Groups

### MCM participation in international working groups (listed groups and subgroups)
- FSF
  - Joint FSF-CGFS Working Group on the Role of Valuation and Leverage on Procyclicality
    - Team 1: Leverage
    - Team 2: Fair Value
  - FSF—Consultative Group Meeting on Risks and Vulnerabilities
  - FSF Working Group on Provisioning
    - Technical Team
    - Technical Team Sub-groups
  - FSF Working Group on Capital Procyclicality
- Standard Setters
  - Basel Committee's International Liaison Group (ILG)
    - Working Group on Capital (ILGC)
  - Basel Committee on Banking Supervision (BCBS) Research Task Force (RTF)
    - RTF Working Group on Transmission Channels between the Financial Sector and the Real Economy
  - Bank for International Settlements (BIS)-Basel Accord Implementation Sub-group on Model Validation (BIS-AIGV)
  - Committee on Payment and Settlement Systems (CPSS) Working Group on Standards
  - International Association of Insurance Supervisors (IAIS) Technical Committee
    - Solvency and Actuarial Sub-Committee
    - Task Force on the Revision of the Insurance Core Principles
  - International Accounting Standards Committee (IASC) Foundation’s Standards Advisory Council (acts as an advisory body for the International Accounting Standards Foundation on issues of the standard setting agenda)
  - International Organization of Securities Commissions (IOSCO) Emerging Market Committee (EMC)
    - Project on Securitization in Emerging Markets and Effect of Current Crisis
  - IOSCO Implementation Task Force
    - Working Groups
- Other international fora
  - International Working Group of Sovereign Wealth Funds
  - Organization of Economic Cooperation & Development (OECD) Working Party on Public Debt Management
  - OECD-World Bank-IMF Forum on Bond Markets
  - OECD African Debt Forum
  - Technical Advisory Group (TAG) under the Debt Management Facility (DMF) of the World Bank
  - OECD Investment Committee

*Italicized source attribution: Appendix Table 2. MCM Staff Participation in International Working Groups*

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### Table 3. Integration of Financial Sector Issues in Bilateral Surveillance—Recent Activities in Selected Countries

### Overview of country-level financial sector integration in surveillance
- The table lists country-specific activities (FSAP Update, Article IV Consultations, Selected Issues Papers, mission statements) and corresponding outputs (e.g., Article IV Consultation Staff Report, FSSA Report, Selected Issues Paper, Working Papers, Occasional Paper).
- Key thematic emphases across countries include: bank resilience to shocks, liquidity risks, cross-border supervisory coordination, crisis preparedness and contingency planning, Basel II implementation, deposit insurance, bank resolution, macro-financial linkages, and effects of global financial turmoil.

### Selected country activities and outputs (country — activities — output)
- Australia
  - Activities: The 2008 Article IV Consultation focused on bank resilience to shocks, including increased funding costs as a result of the global financial turmoil.
  - Output: Article IV Consultation Staff Report, Selected Issues Paper
- Austria
  - Activities: FSAP Update (June 2008)—assessment on impact of global funding pressures, liquidity risks, cross-border effects.
  - Output: FSSA Update Report
- Barbados
  - Activities: Box 4 in the Article IV Consultation report dedicated to FSAP Update recommendations; full FSSA report discussed by the Board with the staff report.
  - Output: Article IV Consultation Staff Report, FSSA Report
- Belize
  - Activities: 2008 Article IV Consultation key topic—liquidity management reform.
  - Output: Article IV Consultation Staff Report
- Bolivia
  - Activities: 2007 and 2008 Article IV Consultations included dedicated section on financial sector issues; 2007 report contained Box on state of banking system; Selected Issues Paper chapters on monetary policy transmission mechanism and debt management.
  - Output: Article IV Consultation Staff Report, Selected Issues Paper
- Bosnia and Herzegovina
  - Activities: 2008 Article IV Consultation included section on financial sector issues—risk management, information sharing, crisis preparedness.
  - Output: Article IV Consultation Staff Report
- Cameroon
  - Activities: 2007 Article IV Consultation (June 2007) included Selected Issues Paper on the financial sector; research agenda presented in workshop and contributed to CEMAC conference during regional surveillance mission.
  - Output: 2007 Article IV Consultation Staff Report, Selected Issues Paper
- Canada
  - Activities: FSAP Update (January 2008) assessed banking system resilience to U.S. subprime shocks; reviewed restructuring of non-bank Asset Backed Commercial Paper; 2008 Article IV addressed quantitative impacts of U.S. financial shocks on Canada.
  - Output: FSSA Report, Selected Issues Paper with a chapter quantifying the spillovers from the U.S. financial shocks
- Chile
  - Activities: 2008 Article IV Consultation assessed global liquidity effects, evaluated sovereign wealth funds asset allocation and investment practices, identified obstacles to deepening local capital markets.
  - Output: Article IV Consultation Staff Report, Selected Issues Paper
- Costa Rica
  - Activities: FSAP Update discussed by the Board with 2007 Article IV Consultation staff report in February 2008.
  - Output: Article IV Consultation Staff Report, FSSA Report
- Croatia
  - Activities: FSAP Update (May 2008) focused on rapid credit growth risks, supervisory/regulatory framework, home-host coordination, Basel II implementation, liquidity and risk management, contingency planning.
  - Output: FSSA Report
- Czech Republic
  - Activities: 2008 Article IV Consultation (November 2008) assessed risks to financial sector, adequacy of risk management and financial safety nets including corrective action, deposit insurance, crisis management, cross-border collaboration.
  - Output: 2008 Article IV Consultation Staff Report
- Denmark
  - Activities: 2008 Consultation (October 2008) included analysis of impact of global financial crisis on Denmark.
  - Output: Article IV Consultation Staff Report, Mission Concluding Statement
- Egypt
  - Activities: FSAP Update (November 2007); 2008 Article IV Consultation (concluded November 2008) focused on liquidity and credit risks, corporate sector vulnerabilities.
  - Output: Article IV Consultation Staff Report, Mission Preliminary Conclusions
- Estonia
  - Activities: 2008 FSAP Update focused on balance sheet risks economy-wide, banks' liquidity risks from parent financing dependence, supervisory and crisis management frameworks; these were core to 2008 Article IV Consultation discussion.
  - Output: Article IV Consultation Staff Report, Selected Issues Paper, Mission Concluding Statement, FSSA Report
- Finland
  - Activities: 2008 Article IV Consultation (Board discussion scheduled for January 2009) focused on financial sector soundness and risks from global turmoil; covered banking, insurance, pension system, European coordination in deposit insurance and cross-border supervision.
  - Output: Article IV Consultation Staff Report (contains appendix analyzing financial-real sector linkages)
- Germany
  - Activities: 2008 Article IV Consultation (November 2008) focused on deposit insurance, spillovers from emerging markets, supervision, banking sector restructuring following two bank rescues.
  - Output: Article IV Consultation Staff Report
- Haiti
  - Activities: 2007 Article IV Consultation discussed banking sector developments and weaknesses; FSAP conclusions discussed in staff report for the Second Review under the PRGF; findings followed up in the PRGF-supported program helping frame program conditionality.
  - Output: Article IV Consultation Staff Report, Staff Report for Second Review Under the PRGF
- Hungary
  - Activities: 2008 Article IV Consultation (June 2008) assessed adequacy of risk management and financial safety nets including deposit insurance, crisis management, cross-border collaboration.
  - Output: Article IV Consultation Staff Report
- Iceland
  - Activities: FSAP Update (June 2008) assessed policy frameworks for supervision and regulation, cross-border coordination, crisis management and problem bank resolution, market infrastructure (systemic liquidity management; payment and settlements systems).
  - Output: FSSA Report, Article IV Consultation Staff Report
- India
  - Activities: 2008 Article IV Consultation (December 2008) assessed impact of global financial crisis on capital flows and domestic macro-financial indicators, liquidity and credit risks in banking, threats from corporate sector vulnerabilities.
  - Output: Article IV Consultation Staff Report, Selected Issues Paper
- Israel
  - Activities: 2007 Article IV Consultation (February 2008) focused on banking and insurance supervision frameworks, progress toward Basel II, on-site and off-site supervision processes.
  - Output: Article IV Consultation Staff Report, Selected Issues Paper
- Italy
  - Activities: 2008 Article IV Consultation (November 2008) assessed strengths and vulnerabilities of financial system in crisis, financial safety net, official response and further steps, evaluated impact on real economy.
  - Output: Working Papers No. 08/74 and IMF Working Paper No. 08/91, Article IV Consultation Staff Report
- Jamaica
  - Activities: 2007 and 2008 Article IV Consultations explored implementation of 2006 FSAP recommendations: strengthening capacity and coordination across supervisory agencies for consolidated supervision; legal reforms for regulatory frameworks. 2008 consultation examined macro risks from Ponzi-type unregulated schemes. 2008 Interim Article IV focused on spillover risks exposing leveraged securities sector to interest rate and rollover risk.
  - Output: 2007 Article IV Consultation Staff Report, 2008 Article IV Consultation Staff Report
- Japan
  - Activities: 2008 Article IV Consultation assessed exposure and impact of global crisis on financial intermediaries, new transmission channels, lessons for risk management and prudential oversight; staff visit scheduled for January 2009 to examine corporate and financial sector vulnerabilities and crisis management framework.
  - Output: Article IV Consultation Staff Report, Selected Issues Paper
- Kazakhstan
  - Activities: Recent months including 2008 Article IV Consultation, Fund focused on crisis preparedness.
  - Output: Article IV Consultation Staff Report
- Kenya, Tanzania, Uganda (regional)
  - Activities: 2008 Article IV Consultation regional Selected Issues Paper assessed capital markets status in Kenya, Uganda and Tanzania; derived empirical estimates of capital market integration; examined challenges of monetary and foreign exchange policy in unified EAC financial market.
  - Output: Selected Issues Paper: Progress Toward Harmonization of Capital Account Regulations and Capital Market Integration in the East African Community
- Korea
  - Activities: 2008 Article IV Consultation focused on financial sector risks related to wholesale financing and external debt of banks; lessons for regulation to keep pace with financial innovation and OTC market liquidity.
  - Output: Article IV Consultation Staff Report, Selected Issues Paper
- Lesotho
  - Activities: 2007 Article IV Consultation helped authorities evaluate large Ponzi schemes and potential impacts; consultation provided technical basis to mobilize political support to address issue.
  - Output: Article IV Consultation Staff Report
- Lithuania
  - Activities: FSAP Update prioritized crisis management framework—cross-border coordination, emergency liquidity assistance, deposit insurance, bank resolution. 2008 Article IV (February 2008) assessed impact of cooling housing market and slowdown in GDP growth on financial sector. December 2008 staff visit focused on resilience to shocks and contingency plans for bank restructuring.
  - Output: FSSA Report, 2008 Article IV Consultation Mission Concluding Statement
- FYR Macedonia
  - Activities: 2008 Article IV Consultation (December 2008) drew extensively on FSAP Update earlier in year.
  - Output: Article IV Consultation Staff Report, Selected Issues Papers, FSSA Report (forthcoming)
- Malawi
  - Activities: 2007/2008 FSAP examined mechanisms to recapitalize central bank; authorities recapitalized central bank in early 2008 and began operational restructuring; issue reported in staff report for Fourth and Fifth reviews under the PRGF.
  - Output: Article IV Consultation Staff Report, Article IV Consultation and Third Review, Staff Report Fourth and Fifth Reviews
- Mexico
  - Activities: 2007 Article IV Consultation (November 2007) reviewed financial system developments amid global turmoil, potential spillovers, financial sector reforms, local capital markets, status of FSAP Update recommendations; highlighted challenge of containing risks while stimulating financial development, analysis of rapid growth of mortgage-backed securities.
  - Output: Article IV Consultation Staff Report, Selected Issues Paper
- Moldova
  - Activities: FSAP Update (April 2008) assessed liquidity management policy frameworks, banking supervision and regulation, payment and settlements systems, vulnerability to credit, liquidity, and exchange rate risks.
  - Output: FSSA Report
- Morocco
  - Activities: FSAP Update (November 2007) considered spillovers from global turmoil and concluded they were limited due to low and long duration external public debt and minimal external financing needs of banking system.
  - Output: FSSA Report
- Mozambique
  - Activities: 2007 Article IV Consultation assessed financial sector reform strategy; discussed in Selected Issues Paper.
  - Output: Selected Issues Paper
- Netherlands
  - Activities: 2008 Article IV Consultation (March 2008) focused on financial sector soundness and risks from global turmoil; examined cross-country supervision related to takeover of a large Dutch bank by an international consortium.
  - Output: Article IV Consultation Staff Report
- Peru
  - Activities: 2008 Article IV Consultation and Fourth Review under the SBA focused on measures to preserve orderly financial deepening and crisis preparedness.
  - Output: Mission Concluding Statement, Article IV Consultation Staff Report
- Pakistan
  - Activities: Advice provided on crisis preparedness based on analyses of banking vulnerabilities and financial market volatility.
  - Output: Article IV Consultation Staff Report
- Paraguay
  - Activities: 2007 Article IV Consultation (June 2007) included extensive section on financial system weaknesses; Stand By Arrangement (expired August 2008) included nine measures on financial sector reforms addressing central bank recapitalization, payment system, supervision and regulation of cooperatives and commercial banks.
  - Output: Article IV Consultation Staff Report, Selected Issues Paper
- Portugal
  - Activities: 2008 Article IV Consultation focused on enhancing financial stability framework via stronger supervision of liquidity, proactive use of stress tests, improved deposit insurance fund within EU-wide revision.
  - Output: Article IV Consultation Staff Report
- Singapore
  - Activities: 2008 Article IV Consultation looked at interdependencies between Singaporean and regional financial institutions.
  - Output: Article IV Consultation Staff Report, Selected Issues Paper
- South Africa
  - Activities: FSAP Update (May 2008) and 2008 Article IV Consultation (June 2008) addressed declining portfolio inflows, global food and fuel shocks, global financial turmoil; focused on elevated household debt service burdens, resilience to sudden stop in capital inflows, use of scope under Basel II for adequate capital buffers, integrated forward-looking financial stability analysis based on bank-level data, monitoring liquidity and funding risks, strengthening contingency planning and liquidity assistance including crisis simulation.
  - Output: Article IV Consultations Staff Report, FSSA Report
- Sweden
  - Activities: 2008 Article IV Consultation (August 2008) assessed banking sector risks from exposures to the Baltics.
  - Output: Article IV Consultation Staff Report
- Switzerland
  - Activities: 2008 Article IV Consultation focused heavily on liquidity management to limit knock-on effects of the financial crisis, efforts to increase buffers, and supervisory capabilities of Federal Authority for Market Oversight (FINMA).
  - Output: Article IV Consultation Staff Report
- Trinidad and Tobago
  - Activities: 2008 Article IV Consultation (January 2009) focused extensively on potential spillovers from global financial crisis, financial-real sector linkages, and policies to strengthen crisis preparedness in the regional context given Trinidad and Tobago's role as a regional financial center.
  - Output: Article IV Consultation Staff Report
- Uganda
  - Activities: 2008 Article IV Consultation included discussions on financial sector issues.
  - Output: Article IV Consultation Staff Report
- Ukraine
  - Activities: FSAP Update (July 2007) focused on rising credit risks from high credit growth, balance sheet mismatches, liquidity risks, weaknesses in banking supervision and bank resolution framework. 2008 Article IV Consultation (March 2008) discussed contingency planning amid evolving challenges.
  - Output: FSSA Update Report, Article IV Consultation Staff Report
- United Arab Emirates
  - Activities: 2008 Article IV Consultation focused on impact of global financial crisis on domestic financial system, emphasis on liquidity issues and design of crisis-response for banking sector.
  - Output: Article IV Consultations Staff Report
- United Kingdom
  - Activities: 2008 Article IV Consultation (July 2008) assessed U.K.'s financial stability framework, proposals to improve supervisory setup after Northern Rock failure, liquidity regulation, special framework for bank resolution.
  - Output: Article IV Consultation Staff Report
- United States
  - Activities: 2008 Article IV Consultation (July 2008) focused on financial sector and interaction with housing downturn with extensive MCM support; used tools developed by staff such as a financial conditions index and a measure of systemic banking stress to assess financial stability; estimated macro-financial linkages; reviewed impact of subprime crisis on real economy; discussed government support for housing and financial markets; reviewed financial regulation arrangements.
  - Output: Article IV Consultation Staff Report, Selected Issues Paper on banking vulnerability, financial conditions index, macro-financial linkages
- Uruguay
  - Activities: 2007 Article IV Consultation was a pilot for integration of financial sector issues into surveillance. Selected Issues Paper includes various studies on financial and monetary issues and was published as an Occasional Paper.
  - Output: Article IV Consultation Staff Report, Selected Issues Paper, Occasional Paper 263 “Macroeconomic Implications of Financial Dollarization - The Case of Uruguay" (2008)

*Italicized source attribution: Table 3. Integration of Financial Sector Issues in Bilateral Surveillance—Recent Activities in Selected Countries*

### Appendix Table 4. FSAP Country Coverage, FY00–09

### Appendix Table 4. FSAP Country Coverage, FY00–09

### Coverage — All member countries
- All member countries: 64.9 67.6 63.7 64.1 16.8 20.5 9.3 12.5

### Coverage — By regions
- AFR: 47.7 54.5 84.8 86.7 11.4 13.6 43.9 46.7
- APD: 27.3 30.3 68.5 70.4 3.0 3.0 0.0 0.2
- EUR (Euro area / region): 95.3 95.3 99.9 99.9 20.9 32.6 7.0 15.6
- MCD: 71.0 74.2 92.3 92.5 29.0 32.3 31.4 34.8
- WHD: 79.4 79.4 21.7 21.7 20.6 23.5 13.8 13.8

### Coverage — By systemic importance
- G-20: 78.9 78.9 56.5 56.5 15.8 21.1 6.2 8.8
- Other: 63.3 66.9 90.6 92.8 16.9 21.1 21.0 26.6

### Coverage — By level of development (3/)
- Advanced economies: 86.8 86.8 63.3 63.3 15.8 18.4 5.8 6.7
- Emerging markets: 69.1 70.2 61.2 63.2 22.3 29.8 23.1 35.1
- Developing economies: 41.5 50.9 88.0 89.2 7.5 7.5 2.2 2.2

### Notes and methodological points
- 2/ Numbers reflect initial assessments and updates completed as of November 2008. Regional FSAPs in ECCU and CEMAC are not counted, but all their member countries are counted as covered. WAEMU members are counted only if they have had an individual assessment following the regional FSAP. Countries covered both by an individual FSAP and a regional FSAP, or by two updates, are counted in the year of the first assessment.
- 3/ Level of development is based on the World Bank's classification of countries by income and the following criteria: all high income countries are classified as advanced; upper middle income and lower middle income as emerging; and low income as developing.
- Initial Assessments: Weighted by GDP 1/ and Simple share
- Updates: Simple share and Weighted by GDP 1/
- 1/ Weighted by the FSAP countries' GDP in total GDP of the respective category.

*Source: MCM's FSAP tracking database and staff calculations.*

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