Financial Sector Assessment Program (FSAP)

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Bibliographic details

• Published: January 13, 2023

What an FSAP is

• The Financial Sector Assessment Program (FSAP) provides a comprehensive, in-depth analysis of the resilience of a country’s financial sector.
• The FSAP includes “stress tests” of financial institutions, an evaluation of the quality of supervision and regulation of the sector, and an assessment of the crisis management framework.
• To date, more than three-quarters of IMF’s member countries have undergone assessments.

Purpose and institutional roles

• The purpose of an FSAP is to help countries minimize the occurrence and severity of financial crises.
• The FSAP was launched in 1999 with two goals: to gauge the stability and soundness of a country’s financial sector and assess how the financial sector can contribute to growth and development.
• FSAPs are done jointly by IMF and World Bank staff in developing and emerging market countries and by the IMF alone in advanced economies.
  • The IMF specializes in the stability aspects.
  • The World Bank focuses on the developmental needs of the financial system.

Coverage of the FSAP stability assessment

• Whether joint or stand-alone, the stability assessment is produced by the IMF and covers three components:

1. the source, probability, and potential impact of the main risks to macro-financial stability in the near-term; 2. the country’s financial stability policy framework; and 3. the authorities’ capacity to manage and resolve a financial crisis should the risks materialize.

• The key findings of the stability assessment are summarized in the Financial System Stability Assessment (FSSA), prepared by the IMF team.
• The FSSA is a key input to IMF surveillance.

Integration into IMF policy advice and mandatory assessments

• FSAP findings provide input into the IMF’s broader surveillance and policy advice, known as Article IV consultations.
• When the FSAP began in 1999, assessments were voluntary.
• In 2010, the IMF made it mandatory for 25 countries with systemically important financial sectors to undergo FSAP assessments every five years.
• In 2013, the IMF’s Executive Board revised the methodology to place greater emphasis on interconnectedness, expanding the list of systemically important financial sector countries to 29.
• The 2021 FSAP Review found stakeholders highly valued the program and the Executive Board endorsed the 2013 methodology with minor adjustments, making mandatory financial stability assessment more risk-based.
  • The list of countries mandated to undergo FSAP assessments rose to 47.
  • Of these, 32 countries and the euro area are expected to participate once every five years.
  • The other 15—many of them emerging market economies—participate every 10 years.
• The 2021 FSAP Review emphasized further integration of FSAPs with Article IV consultations and the Comprehensive Surveillance Review.

References

• Financial Sector Assessment Program (FSAP)
• stability and soundness of a country’s financial sector
• IMF surveillance
• FSAP assessments every five years
• revised the methodology to place greater emphasis on interconnectedness
• 2021 FSAP Review
• Comprehensive Surveillance Review