Countries in the IMF Financial Spotlight in 2019

IMF Blog, January 16, 2019

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The IMF will complete 14 assessments under the Financial Sector Assessment Program (FSAP) in 2019.
Eight mandatory assessments: Australia, Austria, Canada, France, Italy, Poland, Singapore, and Switzerland.
Six voluntary assessments: Algeria, Bahamas, Kuwait, FYR Macedonia, Malta, and Thailand.
The FSAP is an in-depth analysis of a country’s financial sector and serves as the principal tool for assessing countries’ financial stability.
The IMF conducts about 12 to 14 assessments each year.
Since 2010, the world’s top financial sectors undergo a mandatory financial check-up every five years.
In developing economies and emerging markets, the IMF conducts the assessments jointly with the World Bank, with the IMF focusing on financial stability and the World Bank focusing on financial development issues.
In addition to the 14 assessments to be completed in 2019, 11–13 new assessments are planned to begin this year.
- Planned mandatory assessments to begin in 2019: Denmark, Hong Kong SAR, Korea, Norway, and the United States.
- Planned voluntary assessments to begin in 2019: Chile, Egypt, Latvia, Philippines, South Africa, and Trinidad and Tobago.

Australia
- Context: 27 years of uninterrupted economic growth; rise in household debt and a buildup of real estate exposure in a concentrated banking system.
- Assessment focus: risks and vulnerabilities in the financial system; effectiveness of banking, insurance, and financial market supervision; crisis management arrangements; review of the macroprudential policy framework.

Canada
- Context: large and sophisticated financial system; strong growth; limited losses from the 2015–16 oil price shock; outperformed international peers.
- Assessment focus: resiliency of banks and mortgage insurers amid highly indebted households and rapidly rising house prices; emerging risks from nonbank and market activities such as insurance and securitization; potential systemic liquidity issues; financial stability implications of interconnectedness domestically and cross-border; need to enhance systemic risk oversight and coordination among key regulatory agencies.

France
- Context: large and sophisticated financial system positioned to play a meaningful role in the wider European system given recent moves toward the euro area banking union and the capital markets union.
- Assessment focus: stress testing; contagion risks across borders and across sectors such as banking and insurance; adequacy of oversight across banking, insurance, and investment fund sectors; macroprudential policy framework given risks from corporate leverage and cross-border activities; implementation of new insurance supervision and resolution frameworks.

Italy
- Context: recent increases in bank capital and improvements in asset quality; vulnerabilities re-emerged with recent rise in government bond yields and a slowing economy.
- Assessment focus: banks’ risks and vulnerabilities including corporate sector loans and exposure to government bonds; financial oversight for banks, securities markets, and insurance companies; macroprudential framework; effectiveness of crisis-management and corporate insolvency frameworks.

Singapore
- Context: financial system highly integrated into international financial markets; critical financial hub in the region; recent rapid economic growth underpinned by openness, prudent and forward-looking policies, and strong institutions; national aim to transform into a global technological innovation hub including for fintech.
- Assessment focus: stability aspects of extensive cross-border linkages; challenges posed by current and prospective financial innovation.

Switzerland
- Context: since its 2014 assessment, the economy rebounded and the country made considerable progress to strengthen bank resilience; established as a fintech hub.
- Assessment focus: too-big-to-fail banking regime; effectiveness of banking resolution; macroprudential framework; fintech developments; supervisory effectiveness including intrusiveness into banks’ risk management and internal controls.

Thailand
- Context: banks account for a sizable share of the financial sector and appear sound; financial vulnerabilities arise from high household debt and investment weaknesses among small- and medium enterprises.
- Assessment focus: resilience of deposit-taking institutions to adverse macrofinancial shocks; strength of oversight of banks, insurance companies, and specialized financial institutions such as state-owned large deposit-taking institutions; assessment of the macroprudential and crisis-management frameworks.

The FSAP program in 2019 combines mandatory reviews of major financial centers with voluntary assessments for a mix of oil exporters, small states, and emerging markets.
Emphasis across assessments includes:
- Stress testing and contagion analysis across borders and sectors.
- Evaluation of macroprudential frameworks and crisis-management arrangements.
- Supervision and oversight effectiveness across banking, insurance, securities, and emerging segments such as fintech.
- Assessment of systemic interconnectedness domestically and cross-border, and implications for liquidity and stability.

Source: Countries in the IMF Financial Spotlight in 2019 (IMF blog, January 16, 2019).