Press Release: Statement at the Conclusion of an IMF Visit to El Salvador
IMF News, November 21, 2014
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Bibliographic details
- Published: November 21, 2014
Mission context and participants
- Press Release No. 14/533
- Date of release: November 21, 2014
- At the invitation of the Banco Central de Reserva (BCR), a team of experts from the Monetary and Capital Markets Department of the International Monetary Fund visited El Salvador to take part in a Forum on Financial Stability on November 19, 2014.
- The mission met with senior officials of the BCR, the Ministry of Finance, the Superintendency of the Financial System, and the Institute for the Guarantee of Deposits; with members of the Financial Commission of the Legislative Assembly; and with representatives the financial sector.
- IMF mission chief: Hunter Monroe.
- Statement caveat: The views expressed are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.
IMF assessment — progress since the 2010 FSAP
- Significant progress in many areas with the implementation of Financial Sector Assessment Program (FSAP) recommendations from 2010, including:
- Creation of a single financial supervisor with stronger powers and autonomy.
- Progress toward implementing risk-based supervision.
- Issuance by the BCR of many norms to fill remaining regulatory gaps.
- Development of a Comprehensive Liquidity Policy by the BCR and progress with its implementation, including:
- Creation of a lender of last resort facility.
- A draft framework for a pooled liquidity fund.
- Creation of a Systemic Risk Committee in 2013.
- Work underway on elaborating bank resolution manuals, taking into account lessons of a banking resolution simulation exercise completed in 2011.
- Under the single supervisor, securities supervision has benefited from additional powers and clearer processes, a stronger position within the financial sector, and signing the International Organization of Securities Commissions’ Multilateral Memorandum of Understanding.
Remaining weaknesses and key recommendations to strengthen financial stability
- Integrate and formalize risk-based supervision in the context of the existing regulatory framework.
- Broaden the regulatory perimeter.
- Amend the Banking Law to:
- Improve the definition of capital.
- Protect former and not only current supervisors.
- Reinforce the capacity of the BCR to provide liquidity assistance to commercial banks based upon a defined multi-year financing strategy.
- Create a pooled liquidity fund.
- Enact comprehensive resolution and crisis management legislation following a thorough diagnostic review.
- Create a permanent Financial Sector Stability Committee with authority to:
- Decide systemic cases.
- Issue prudential norms for systemic institutions.
- Require recovery and resolution plans even in “normal” times.
- Address other important areas for improvement in the general banking resolution framework.
- Overhaul the legal and regulatory framework for the securities market to:
- Provide fundamental elements of corporate governance, transparency and enforcement.
- Remove the requirement to relist foreign securities domestically.
- Link the payments and settlements systems to allow Delivery versus Payment.
- Develop the secondary market and the yield curve.
- Relax limits on pension portfolios.
Mission closing remark
- “The mission expresses its appreciation for the opportunity to share its views and for the open and constructive dialogue during its visit, which underscore the commitment of the authorities and other forum participants to strengthening financial stability.”
Press Release No. 14/533 — November 21, 2014