Countries in the IMF Financial Spotlight in 2017
IMF Blog, January 5, 2017
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- Authors: iMFdirect
- Published: January 5, 2017
Overview
- The Financial Sector Assessment Program remains the IMF’s principal tool for assessing countries’ financial stability.
- In 2017, IMF teams will assess a range of financial systems: large ones such as China and Japan, medium-sized ones like Luxembourg, Spain, and Turkey, and small ones such as Guyana and Zambia.
- The IMF tailors country stability assessments to analyze issues of particular interest or concern in each country.
IMF focus and policy recommendations for 2017 assessments
- Primary areas of focus:
- Systemic risks
- Health of banks
- Contagion and spillover risks
- For each economy, the IMF will make policy recommendations on how to:
- Strengthen the monitoring of risks to the financial system as a whole
- Improve financial oversight and the macroprudential framework for financial system safety
- Prepare for stressful financial conditions
- The IMF will use tools such as stress tests and spillover analysis where relevant.
Country highlights and assessment priorities
- China
- Since the global financial crisis, growth has relied increasingly on credit, especially in the corporate sector, including state-owned enterprises, and in recent months also on mortgage lending.
- Tensions between sustaining growth and the need to contain indebtedness, together with certain financial sector innovations, have led to increased financial sector complexity and the risk of gaps in supervision.
- The IMF will examine these issues from a systemic point of view.
- Indonesia
- Financial conglomerates account for 70 percent of the assets of financial institutions.
- The IMF will look closely at the oversight of financial conglomerates, and seek to identify areas for improvement in the newly implemented integrated supervisory framework, and the recently adopted law on crisis management and resolution.
- Japan
- Since the 2012 assessment, the profitability of financial institutions’ domestic operations has weakened.
- Large banks and insurers have expanded overseas in search of higher yields; smaller banks have increased exposure to real estate and small and medium-sized enterprises.
- The IMF will assess vulnerabilities associated with international expansion of banks and insurers, and longer-term prospects in the context of demographic changes and low growth.
- Luxembourg
- Home to a key international central securities depository and the world’s second largest investment fund industry.
- The profitability of the banking industry is tied to the general health of these funds.
- The IMF will use stress tests and spillover analysis to assess the ability of Luxembourg’s financial institutions to absorb liquidity and/or solvency shocks.
- Saudi Arabia
- An extended period of low oil prices is affecting the Saudi economy.
- The bank-dominated financial sector has so far been resilient.
- The IMF will explore completing the financial reform agenda and improving the functioning of the interbank market to help banks diversify funding sources over the longer term.
- Spain
- The assessment will look at progress and improvements made since the crisis.
- The IMF will tackle banks’ ability to adjust to low profits due to their business models, and their ability to manage the post-crisis recovery.
- The IMF will examine emerging needs of the institutional framework and apply enhanced methods to capture cross-border financial shocks and account for linkages between the economy and the financial system as a whole.
- Zambia
- Declining economic growth due to sharply lower copper prices and an unsustainable fiscal deficit provides a challenging backdrop.
- The IMF will focus on how to maintain financial stability, including the adequacy of supervisory resources.
- The IMF will examine adherence to international norms of the legal and regulatory framework for financial sector oversight.
Economies whose financial stability the IMF will assess during 2017
- Bahrain
- Bulgaria*
- China*
- Guyana*
- India*
- Indonesia*
- Netherlands
- New Zealand
- Saudi Arabia*
- Turkey*
- Zambia*
- *These economies will be assessed jointly with the World Bank.
Recent completions (2016)
- In 2016, the IMF concluded assessments of the financial sectors in Belarus, Finland, Germany, Ireland, Lebanon, Madagascar, Mauritius, Mexico, Montenegro, Russia, Sweden, and the United Kingdom.
Source: Countries in the IMF Financial Spotlight in 2017 — iMFdirect, January 5, 2017
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