Mapping Financial Sector Vulnerability in a Non-Crisis Country

IMF Policy Discussion Papers, May 1, 1999

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Mapping Financial Sector Vulnerability in a Non-Crisis Country

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Bibliographic details

• Authors: Inci Ötker, Patrick Downes, Dewitt D Marston
• Published: May 1, 1999
• Series: IMF Policy Discussion Papers
• DOI: https://doi.org/10.5089/9781451973433.003

Overview

• The paper presents a forward-looking framework linking a qualitative evaluation of system-wide vulnerability (covering macro, sectoral, institutional, and systemic liquidity issues) with a quantitative assessment of the financial condition of significant financial institutions.
• The methodology is described as holistic and usable as an early warning/crisis-avoidance system to identify potential systemic problems—and problem institutions—requiring immediate attention.
• The framework can also pinpoint needed reforms in the legal, regulatory, and institutional infrastructure that can lessen the likelihood of a future crisis.

Methodology

• Combines qualitative evaluation and quantitative assessment.
• Uses vulnerability criteria and judgmental stress tests to assess financial sector health.
• Emphasizes forward-looking analysis rather than retrospective diagnosis.

Indicators of Soundness

• Develops twelve indicators of soundness.
• Indicators measure:
  • risk exposure
  • solvency
  • liquidity
  • profitability
  • supervisory assessment

Applications and Policy Implications

• Early warning/crisis-avoidance:
  • Identifies potential systemic problems.
  • Identifies problem institutions requiring immediate attention.
• Reform targeting:
  • Pinpoints needed reforms in legal, regulatory, and institutional infrastructure to reduce future crisis likelihood.
• Supervisory use:
  • Supports supervisory assessment through integrated qualitative and quantitative signals.

Key Publication Facts and Identifiers

• Pages: 30
• Volume: 1999
• Issue: 004
• Series: Policy Discussion Paper No. 1999/004
• DOI: https://doi.org/10.5089/9781451973433.003
• Stock No: PPIEA0041999
• ISBN: 9781451973433
• ISSN: 1564-5193

Mapping Financial Sector Vulnerability in a Non-Crisis Country — Inci Ötker, Patrick Downes, Dewitt D Marston; May 1, 1999.

Content in this bundle

• Mapping Financial Sector Vulnerability in a Non-Crisis Country - PDP/99/4
  • Mapping Financial Sector Vulnerability in a Non-Crisis Country - PDP/99/4 (Markdown version)
  • Mapping Financial Sector Vulnerability in a Non-Crisis Country - PDP/99/4 (PDF)