{
  "title": "West African Economic and Monetary Union: Financial Sector Assessment Program-Technical Note on Systemic Risks and Macroprudential Policy Framework",
  "publication": "IMF Staff Country Reports, September 23, 2022",
  "sourceUrl": "https://www.imf.org/en/publications/cr/issues/2022/09/22/west-african-economic-and-monetary-union-financial-sector-assessment-program-technical-note-523712",
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  "summary": "Since the 2008 Financial Sector Assessment Program (FSAP), the financial sector of the West African Economic and Monetary Union (WAEMU) has undergone major changes that have altered its risk profile.",
  "sections": [
    {
      "heading": "Key findings",
      "content": "- Since the 2008 Financial Sector Assessment Program (FSAP), the WAEMU financial sector has undergone major changes that have altered its risk profile.\n- Three structural changes have played a key role since the 2008 FSAP:\n  - (i) the financial sector has grown significantly;\n  - (ii) regional banking groups have become dominant;\n  - (iii) the high concentration of bank portfolios in sovereign exposures, which accounted for an average of 31 percent of banking assets at end-2020, are almost triple the level observed in 2004.\n- These structural changes have altered the structure of systemic risks and vulnerabilities in the WAEMU banking system."
    },
    {
      "heading": "Systemic vulnerabilities and risk drivers",
      "content": "- Predominant sovereign exposures in bank portfolios increase balance-sheet sensitivity to sovereign risk shocks.\n- Dominance of regional banking groups changes contagion channels and amplifies cross-border transmission of shocks.\n- Rapid financial sector growth expands the absolute size of potential systemic losses and heightens the need for effective macroprudential surveillance."
    },
    {
      "heading": "Policy implications and recommended priorities",
      "content": "- There is a raised need for implementing reforms to strengthen the effectiveness of the macroprudential policy framework.\n- Reforms are also needed to strengthen banking supervision frameworks to address the changed structure of systemic risks and vulnerabilities.\n- Relevant policy tools and metrics noted in the assessment include Basel-type liquidity ratios and a verifiable liquidity indicator."
    },
    {
      "heading": "Subjects and keywords appearing in the assessment",
      "content": "- Subjects: Commercial banks, Financial institutions, Financial sector policy and analysis, Financial sector risk, Financial sector stability, International organization, Macroprudential policy, Monetary policy, Systemic risk\n- Keywords: bank assets, bank portfolio, Basel-type liquidity ratios, Commercial banks, contagion risk, Europe, Financial sector risk, Financial sector stability, Global, IMF-World Bank Financial Sector Assessment Program, Macroprudential policy, North Africa, risk profile, Sub-Saharan Africa, Systemic risk, verifiable liquidity indicator, WAEMU bank holding, West Africa\n\nWest African Economic and Monetary Union: Financial Sector Assessment Program-Technical Note on Systemic Risks and Macroprudential Policy Framework — September 23, 2022.\n\n---\n\n Content in this bundle\n\n- 1wauea2022007\n  - 1wauea2022007 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 1wauea2022007 (PDF){rel=\"external\" type=\"application/pdf\"}"
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    "Published: September 23, 2022",
    "Series: IMF Staff Country Reports",
    "DOI: https://doi.org/10.5089/9798400220937.002",
    "Since the 2008 Financial Sector Assessment Program (FSAP), the WAEMU financial sector has undergone major changes that have altered its risk profile.",
    "Three structural changes have played a key role since the 2008 FSAP:",
    "These structural changes have altered the structure of systemic risks and vulnerabilities in the WAEMU banking system.",
    "Predominant sovereign exposures in bank portfolios increase balance-sheet sensitivity to sovereign risk shocks.",
    "Dominance of regional banking groups changes contagion channels and amplifies cross-border transmission of shocks.",
    "Rapid financial sector growth expands the absolute size of potential systemic losses and heightens the need for effective macroprudential surveillance.",
    "There is a raised need for implementing reforms to strengthen the effectiveness of the macroprudential policy framework.",
    "Reforms are also needed to strengthen banking supervision frameworks to address the changed structure of systemic risks and vulnerabilities.",
    "Relevant policy tools and metrics noted in the assessment include Basel-type liquidity ratios and a verifiable liquidity indicator.",
    "Subjects: Commercial banks, Financial institutions, Financial sector policy and analysis, Financial sector risk, Financial sector stability, International organization, Macroprudential policy, Monetary policy, Systemic risk",
    "Keywords: bank assets, bank portfolio, Basel-type liquidity ratios, Commercial banks, contagion risk, Europe, Financial sector risk, Financial sector stability, Global, IMF-World Bank Financial Sector Assessment Program, Macroprudential policy, North Africa, risk profile, Sub-Saharan Africa, Systemic risk, verifiable liquidity indicator, WAEMU bank holding, West Africa",
    "**1wauea2022007**"
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