{
  "title": "Countries in the IMF Financial Stability Spotlight in 2022",
  "publication": "IMF Blog, February 3, 2022",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2022/02/03/countries-in-the-imf-financial-stability-spotlight-in-2022",
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  "summary": "The Financial Sector Assessment Program is a key pillar of IMF surveillance. It undertakes a deep-dive into potential systemic risks to financial stability, including by conducting “stress tests” to gauge the ability of financial institutions to withstand adverse shocks to the economy.",
  "sections": [
    {
      "heading": "FSAP purpose and approach",
      "content": "- The Financial Sector Assessment Program (FSAP) is described as a key pillar of IMF surveillance that:\n  - undertakes deep-dives into potential systemic risks to financial stability;\n  - conducts “stress tests” to gauge the ability of financial institutions to withstand adverse shocks to the economy;\n  - evaluates the strength of supervisory and regulatory frameworks to mitigate risks;\n  - assesses the adequacy of crisis management tools and safety nets.\n- FSAPs consider country-specific features and tailor their analysis.\n- The IMF assesses advanced economies itself and evaluates other economies jointly with the World Bank."
    },
    {
      "heading": "Context and cross-cutting themes in 2022",
      "content": "- Many countries entered the pandemic with strong bank capital and supervisory frameworks, but uncertainties remain regarding the underlying state of banks and other intermediaries as economies recover.\n- Cross-cutting themes highlighted across FSAPs include:\n  - climate change and transition risks;\n  - cyber security;\n  - fintech and regulatory aspects of financial technology;\n  - macroprudential policy frameworks and crisis management arrangements;\n  - financial inclusion and capital markets development;\n  - effects of phasing out extraordinary COVID-19 support and potential global tightening of financial conditions."
    },
    {
      "heading": "Coverage and cadence",
      "content": "- This year’s assessments address seven economies with systemically important financial sectors: Germany, United Kingdom, Mexico, Russia, Turkey and Ireland, which are reviewed every five years, and South Africa, which is assessed once every 10 years.\n- Additional assessments requested by the countries themselves include: Colombia, Uruguay and the West African Economic and Monetary Union."
    },
    {
      "heading": "Country-specific assessment focuses (selected highlights)",
      "content": "- Colombia\n  - Assess soundness and resilience of banks to adverse economic shocks.\n  - Perform interconnectedness and contagion analysis and corporate stress testing.\n  - Explore transition risks from climate change.\n  - Evaluate bank oversight, macroprudential policy, and safety-net arrangements.\n  - World Bank focus: role of the state, competition, digital financial inclusion, insurance supervision, insolvency regimes and creditor rights.\n\n- Germany\n  - Financial sector dominated by banks; includes two globally systemic lenders, a large insurer, and a major global central counterparty.\n  - Assess financial stability implications of low banking profitability and price misalignments in the real estate sector.\n  - Analyze risks from a global resurgence of COVID-19, inflationary pressures, and shifts in market sentiment against some high-debt euro area countries.\n  - Assess institutional framework for macroprudential policy, targeted banking and insurance regulation and supervision reviews, financial crisis management, deposit insurance, institutional protection schemes, and a deep dive of systemic financial infrastructure.\n  - Profile climate transition risks and cover financial technology regulatory aspects.\n\n- Ireland\n  - Market-based financial (MBF) sector is the largest component and is now the second largest in Europe, behind Luxembourg.\n  - FSAP themes: post-Brexit landscape, climate change, phasing out of COVID-19 support.\n  - Examine supervision of banking, insurance, and MBF; conduct stress testing; assess macroprudential frameworks and financial safety net and crisis management; analyze MBF interconnectedness.\n  - Assess insolvency and creditor rights given comparatively low collateral recovery rates in Ireland.\n\n- Mexico\n  - Examination amid risks from continued pandemic disruptions and possible sharp tightening in global financial conditions or capital flow volatility.\n  - Assess resilience to system-wide liquidity shocks; financial sector oversight and crisis management.\n  - Evaluate challenges and opportunities from climate change, cyber security, and fintech.\n\n- Russia\n  - Bank-dominated, largely state-owned and concentrated system.\n  - Key risks: intensified economic sanctions, reliance on emission-intensive exports, rapid credit growth in riskier retail segments, and dominant banks expanding non-core businesses.\n  - FSAP to examine progress in macroprudential tools, banking regulation and supervision, securities oversight, and crisis management and resolution.\n  - Systemic risk assessment includes bank solvency and liquidity stress tests and impact of various climate policy scenarios.\n\n- South Africa\n  - Home to Africa’s largest financial sector with big cross-border banking groups and a well-developed investment fund and insurance sector.\n  - Assessment will examine financial strength amid subdued economic growth and large fiscal deficits, aggravated by weak state-owned enterprise finances and the ongoing pandemic.\n  - Cover banking, insurance, securities markets; pension and cyber risk supervision; crisis management and resolution; fintech; financial inclusion; climate risk; and capital markets development.\n\n- Turkey\n  - Bank-dominated system that has grown rapidly in recent years.\n  - FSAP to examine systemic risks amid a challenging macroeconomic environment.\n  - Analyze resilience of banking and corporate sectors to adverse shocks and bank-corporate-sovereign interlinkages.\n  - Evaluate banking supervision and regulation, macroprudential framework, systemic liquidity management, crisis management, and cyber risks.\n\n- Uruguay\n  - Small, open economy with a heavily dollarized financial system and high participation of state banks.\n  - System withstood the pandemic in part due to extensive policy support.\n  - Focus on resilience to a pandemic resurgence and possible rise in global borrowing costs.\n  - Evaluate bank supervision (jointly with the World Bank), macroprudential policy including measures to tackle dollarization, crisis-management arrangements, and financial integrity.\n  - World Bank to focus on the role of the state and prospects for developing capital markets.\n\n- United Kingdom\n  - FSAP discussed with national authorities alongside Article IV consultation conclusions in December.\n  - Recognized swift policy actions at pandemic onset to restore market liquidity and maintain financial stability.\n  - Soundness of UK banks and insurers has increased since the 2008 Global Financial Crisis; they are well placed to face near-term challenges.\n  - Assessed financial stability framework as resilient and noted opportunities for enhancements, many of which are cross-border and require international cooperation (including bridging data gaps in the nonbank financial institutions subsector).\n  - Highlighted UK leadership on managing future risks such as climate and cyber resilience and the importance of preserving the primacy of financial stability objectives.\n\n- West African Economic and Monetary Union (Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo)\n  - Rapid banking sector growth with dominant intra- and extra-regional banking groups; government debt is a critical part of banks’ portfolios.\n  - FSAP developing tail-risk scenarios for economic growth and inflation amid uncertainty about global inflation and growth.\n  - Assess systemic liquidity management and macroprudential policy; examine banking regulation and supervision; crisis management and bank resolution; access to finance; payment systems; climate risk; capital markets development; and the role of state-owned banks.\n\nSource: Countries in the IMF Financial Stability Spotlight in 2022 (February 3, 2022).\n\n---\n\n Content in this bundle\n\n- Country Report\n  - Country Report (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Country Report (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- Financial Sector Assessment Program\n- every 10 years\n- https://www.imf.org/wp-content/uploads/2022/02/Map-FSAP-2022-1.jpg\n- conclusions of the Article IV\n\nSource: https://www.imf.org/en/blogs/articles/2022/02/03/countries-in-the-imf-financial-stability-spotlight-in-2022"
    }
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    "Authors: The Editors",
    "Published: February 3, 2022",
    "The Financial Sector Assessment Program (FSAP) is described as a key pillar of IMF surveillance that:",
    "FSAPs consider country-specific features and tailor their analysis.",
    "The IMF assesses advanced economies itself and evaluates other economies jointly with the World Bank.",
    "Many countries entered the pandemic with strong bank capital and supervisory frameworks, but uncertainties remain regarding the underlying state of banks and other intermediaries as economies recover.",
    "Cross-cutting themes highlighted across FSAPs include:",
    "This year’s assessments address seven economies with systemically important financial sectors: Germany, United Kingdom, Mexico, Russia, Turkey and Ireland, which are reviewed every five years, and South Africa, which is assessed once every 10 years.",
    "Additional assessments requested by the countries themselves include: Colombia, Uruguay and the West African Economic and Monetary Union.",
    "Colombia",
    "Germany",
    "Ireland",
    "Mexico",
    "Russia",
    "South Africa",
    "Turkey",
    "Uruguay",
    "United Kingdom",
    "West African Economic and Monetary Union (Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo)",
    "**Country Report**",
    "[Financial Sector Assessment Program](https://www.imf.org/en/Publications/fssa)",
    "[every 10 years](https://www.imf.org/en/Publications/Policy-Papers/Issues/2021/05/28/2021-Financial-Sector-Assessment-Program-Review-Towards-A-More-Stable-And-Sustainable-460517)",
    "[https://www.imf.org/wp-content/uploads/2022/02/Map-FSAP-2022-1.jpg](https://www.imf.org/wp-content/uploads/2022/02/Map-FSAP-2022-1.jpg)",
    "[conclusions of the Article IV](https://www.imf.org/en/News/Articles/2021/12/14/united-kingdom-staff-concluding-statement-of-the-2021-article-iv-mission)"
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