## Countries in the IMF Financial Stability Spotlight in 2022

_IMF Blog, February 3, 2022_

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**Canonical URL:** [Countries in the IMF Financial Stability Spotlight in 2022](https://www.imf.org/en/blogs/articles/2022/02/03/countries-in-the-imf-financial-stability-spotlight-in-2022)

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## Bibliographic details
- Authors: The Editors
- Published: February 3, 2022

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### FSAP purpose and approach
- The Financial Sector Assessment Program (FSAP) is described as a key pillar of IMF surveillance that:
  - undertakes deep-dives into potential systemic risks to financial stability;
  - conducts “stress tests” to gauge the ability of financial institutions to withstand adverse shocks to the economy;
  - evaluates the strength of supervisory and regulatory frameworks to mitigate risks;
  - assesses the adequacy of crisis management tools and safety nets.
- FSAPs consider country-specific features and tailor their analysis.
- The IMF assesses advanced economies itself and evaluates other economies jointly with the World Bank.

### Context and cross-cutting themes in 2022
- 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:
  - climate change and transition risks;
  - cyber security;
  - fintech and regulatory aspects of financial technology;
  - macroprudential policy frameworks and crisis management arrangements;
  - financial inclusion and capital markets development;
  - effects of phasing out extraordinary COVID-19 support and potential global tightening of financial conditions.

### Coverage and cadence
- 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.

### Country-specific assessment focuses (selected highlights)
- Colombia
  - Assess soundness and resilience of banks to adverse economic shocks.
  - Perform interconnectedness and contagion analysis and corporate stress testing.
  - Explore transition risks from climate change.
  - Evaluate bank oversight, macroprudential policy, and safety-net arrangements.
  - World Bank focus: role of the state, competition, digital financial inclusion, insurance supervision, insolvency regimes and creditor rights.

- Germany
  - Financial sector dominated by banks; includes two globally systemic lenders, a large insurer, and a major global central counterparty.
  - Assess financial stability implications of low banking profitability and price misalignments in the real estate sector.
  - Analyze risks from a global resurgence of COVID-19, inflationary pressures, and shifts in market sentiment against some high-debt euro area countries.
  - 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.
  - Profile climate transition risks and cover financial technology regulatory aspects.

- Ireland
  - Market-based financial (MBF) sector is the largest component and is now the second largest in Europe, behind Luxembourg.
  - FSAP themes: post-Brexit landscape, climate change, phasing out of COVID-19 support.
  - Examine supervision of banking, insurance, and MBF; conduct stress testing; assess macroprudential frameworks and financial safety net and crisis management; analyze MBF interconnectedness.
  - Assess insolvency and creditor rights given comparatively low collateral recovery rates in Ireland.

- Mexico
  - Examination amid risks from continued pandemic disruptions and possible sharp tightening in global financial conditions or capital flow volatility.
  - Assess resilience to system-wide liquidity shocks; financial sector oversight and crisis management.
  - Evaluate challenges and opportunities from climate change, cyber security, and fintech.

- Russia
  - Bank-dominated, largely state-owned and concentrated system.
  - Key risks: intensified economic sanctions, reliance on emission-intensive exports, rapid credit growth in riskier retail segments, and dominant banks expanding non-core businesses.
  - FSAP to examine progress in macroprudential tools, banking regulation and supervision, securities oversight, and crisis management and resolution.
  - Systemic risk assessment includes bank solvency and liquidity stress tests and impact of various climate policy scenarios.

- South Africa
  - Home to Africa’s largest financial sector with big cross-border banking groups and a well-developed investment fund and insurance sector.
  - Assessment will examine financial strength amid subdued economic growth and large fiscal deficits, aggravated by weak state-owned enterprise finances and the ongoing pandemic.
  - Cover banking, insurance, securities markets; pension and cyber risk supervision; crisis management and resolution; fintech; financial inclusion; climate risk; and capital markets development.

- Turkey
  - Bank-dominated system that has grown rapidly in recent years.
  - FSAP to examine systemic risks amid a challenging macroeconomic environment.
  - Analyze resilience of banking and corporate sectors to adverse shocks and bank-corporate-sovereign interlinkages.
  - Evaluate banking supervision and regulation, macroprudential framework, systemic liquidity management, crisis management, and cyber risks.

- Uruguay
  - Small, open economy with a heavily dollarized financial system and high participation of state banks.
  - System withstood the pandemic in part due to extensive policy support.
  - Focus on resilience to a pandemic resurgence and possible rise in global borrowing costs.
  - Evaluate bank supervision (jointly with the World Bank), macroprudential policy including measures to tackle dollarization, crisis-management arrangements, and financial integrity.
  - World Bank to focus on the role of the state and prospects for developing capital markets.

- United Kingdom
  - FSAP discussed with national authorities alongside Article IV consultation conclusions in December.
  - Recognized swift policy actions at pandemic onset to restore market liquidity and maintain financial stability.
  - Soundness of UK banks and insurers has increased since the 2008 Global Financial Crisis; they are well placed to face near-term challenges.
  - 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).
  - Highlighted UK leadership on managing future risks such as climate and cyber resilience and the importance of preserving the primacy of financial stability objectives.

- West African Economic and Monetary Union (Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo)
  - Rapid banking sector growth with dominant intra- and extra-regional banking groups; government debt is a critical part of banks’ portfolios.
  - FSAP developing tail-risk scenarios for economic growth and inflation amid uncertainty about global inflation and growth.
  - 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.

*Source: Countries in the IMF Financial Stability Spotlight in 2022 (February 3, 2022).*

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## Content in this bundle

- **Country Report**
  - [Country Report (Markdown version)](/external/pubs/ft/scr/2016/cr16258.pdf.md){rel="alternate" type="text/markdown"}
  - [Country Report (PDF)](/external/pubs/ft/scr/2016/cr16258.pdf){rel="external" type="application/pdf"}

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## References

- [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)

_Source: https://www.imf.org/en/blogs/articles/2022/02/03/countries-in-the-imf-financial-stability-spotlight-in-2022_