Review of The Institutional View on The Liberalization and Management of Capital Flows — Background Note on Assessing Systemic Financial Stability Risks Due to FX Mismatches
Policy Papers, March 30, 2022
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- Review of The Institutional View on The Liberalization and Management of Capital Flows — Background Note on Assessing Systemic Financial Stability Risks Due to FX Mismatches
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Bibliographic details
- Published: March 30, 2022
- Series: Policy Papers
- DOI: https://doi.org/10.5089/9798400206016.007
Purpose and scope
- Outlines the approach of the proposed revision to the Institutional View (IV) for assessing whether systemic financial stability risks are elevated due to foreign currency (FX) mismatches.
- Builds on staff guidance regarding risk assessments in bilateral surveillance and allows flexibility to draw on future advances in best practice.
- Proposes a two-step approach to assess systemic risks from FX mismatches.
- Organization: Section II outlines sources of systemic risks from FX debt and potential amplification channels; Section III outlines the risk assessment approach in practice; Section IV concludes.
Key thematic focuses
- Currencies
- Financial sector policy and analysis
- Financial statements
- Foreign exchange
- Monetary policy
- Money
- Political economy
- Public financial management (PFM)
- Systemic risk
- Systemic risk assessment
Principal proposal
- Two-step approach to assess systemic risks from FX mismatches:
- (Step details are described in the note; the note proposes applying a structured two-step assessment when determining if systemic financial stability risks are elevated because of FX mismatches.)
Methodological foundations
- Leverages existing staff guidance on risk assessments in bilateral surveillance.
- Retains flexibility to incorporate future advances in best practice for risk assessment.
Content in this bundle
- Policy Paper