COVID-19
The IMF is fully committed to supporting our member countries, particularly the most vulnerable; we have the tools to help; and we are coordinating closely with our partner institutions.
The paper updates IMF staff views on deposit insurance policy issues, which were last comprehensively addressed in 2006 before the global financial crisis and prior to the international standard. Effective deposit insurance systems must be integrated into the financial safety net, have strong governance arrangements, and adequate funding with a public backstop. Coverage should protect most retail deposits and membership must be mandatory for all banks. Funding targets should be informed by expert judgment, and foreign currency deposits should be insured if widely used. The paper recommends that deposit insurance funds should be available to support the resolution of banks (subject to safeguards), enabling prompt depositor compensation and the continuity of depositor services. It also recommends close coordination with resolution authorities and adopting depositor preference. Key challenges include the need for shorter depositor payout timeframes, the evolution of fintech products, and ensuring credible funding arrangements.
The costs of fragility are high, but judicious economic policies can help foster trust and support economic stability and growth
Capital markets integration, expanding opportunities for workers, and bigger consumer markets will allow companies to grow faster
Building foreign exchange reserves requires sound policies and takes time, but global efforts to lower the cost of holding them can help
There are few elegant, easy, or politically attractive ways to reduce debt
Diversification has become harder since 2020 as stocks and bonds tend to move in tandem during sharp selloffs, adding to financial stability concerns
But risks are rising, including from the concentration of tech investment and the negative effects of trade disruptions, which may build over time
