Building Frameworks for Financial Stability in Asia

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Building Frameworks for Financial Stability in Asia

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Challenge

• Financial stability in Asia is a key policy priority.
• Over the past 20 years, Asia has been the fastest growing region in the world, now making up around 30 percent of the world’s GDP.
• As the region grows, Asian financial sectors have become bigger, more complex, and closely intertwined.
• Experience from the 1998 Asian Financial Crisis spurred strong reforms to manage financial sector growth and address risks to financial stability.
• Cross-border financial institutions and activities make monitoring associated risks more challenging.
• Critical priorities identified:
  • Consolidating monitoring and supervision of financial conglomerates to detect systemic risks.
  • Ensuring harmonized institutional and regulatory frameworks across jurisdictions.
  • Strengthening regional information sharing.
  • Establishing arrangements for failing financial institutions that are intertwined across borders.

Approach

• The IMF has extended knowledge sharing to address system-wide risks through macroprudential oversight.
• An increasing number of emerging and developing markets in Asia are instituting systematic approaches to monitoring financial stability.
• Key elements of country-level capacity building:
  • Establishing dedicated financial stability functions.
  • Building internal systems and technical skills for macroprudential oversight.
• The IMF works with countries on four principal components of an effective financial stability framework: organizational structure, monitoring, analysis, and policy.
• An effective financial stability framework leads to:
  • Policy responses that are targeted, clearly defined and communicated.
  • Coordination with all relevant agencies.
  • Support from crisis management and resolution arrangements.
  • Defined accountability and clarified responsibilities during periods of stress and instability.

Impact

• Emerging economies making measurable progress include Indonesia, the Philippines, and Thailand.
• Specific institutional developments:
  • The Bank of Thailand inaugurated its own Financial Stability Unit.
  • The Philippines’ Central Bank (BSP) is in the process of setting up a dedicated financial stability function.
  • The Bank of Indonesia is developing capacity for systemic risk assessment, macroprudential oversight, and stress testing.
• Outlook:
  • Emerging market and developing countries in Asia are expected to continue advancing their approaches to safeguarding financial stability.
  • The IMF will continue to support and work with these countries to advance their stability agendas.

Content in this bundle

• Partnerships for Capacity Development
  • Partnerships for Capacity Development (Markdown version)
  • Partnerships for Capacity Development (PDF)
• Regional Capacity Development Centers
  • Regional Capacity Development Centers (Markdown version)
  • Regional Capacity Development Centers (PDF)

References

• IMF Capacity Development
• Digital Training Catalog
• Capacity Development Strategy
• Country Stories
• Global - Developing Sectoral Accounts and Balance Sheets in Colombia, Indonesia, and Peru