2021 Financial Sector Assessment Program Review—Towards A More Stable And Sustainable Financial System

the This review examined the Fund’s role and responsibilities in the Financial Sector Assessment Program (FSAP) as the global financial stability landscape has continued to evolve. The pandemic has highlighted the importance of assessing financial stability risks from vulnerabilities in the nonfinancial sectors, possibly long-lasting scarring effects, and digitalization. Climate change also has important implications for the financial sector. The review assessed how the FSAP has adapted to the transformation of financial systems and emerging new risks and provided proposals on enhancing the value of the FSAP for national authorities and further strengthening its contribution to Fund financial surveillance. The review was based on background staff analyses and surveys of country authorities and Executive Directors. The FSAP provides in-depth assessments of financial sectors and provides important input to Fund surveillance. Assessments of financial sectors are usually conducted jointly with the World Bank in emerging market and developing economies and by the Fund alone in advanced economies. These assessments provide valuable analysis and policy recommendations for surveillance and capacity development. A landmark change in the FSAP took place in 2010 when the IMF’s Executive Board mandated that jurisdictions with Systemically Important Financial Sectors (SIFS) participate in financial stability assessments as a part of Fund surveillance. Since 2013, the list of such jurisdictions has been set at 29— so-called S29. Since the program’s inception in 1999, 157 Fund members have undergone individual or regional FSAPs. In recent years, the Fund has been conducting 12–14 FSAPs per year. More than half has been voluntary assessments and for emerging market and developing economies. This review builds on past assessments of the program. The 2014 review emphasized systemic risk and deeper analysis of nonbank financial institutions and interconnectedness. It called for more work on macroprudential policies, more flexible use of international standards, and greater integration with bilateral surveillance. The 2019 evaluation of IMF financial surveillance by the Independent Evaluation Office called for further integration of FSAP and Article the frequency of more risk-based. This Decision sets out the scope and modalities of bilateral surveillance over the financial sector policies of members with systemically important financial sectors and of multilateral surveillance over the spillovers arising from such policies in accordance with Article IV, Sections 3(a) and (b) of the Fund’s Articles and the Fund’s Decision on Bilateral and Multilateral Surveillance – 2012 Integrated Surveillance Decision (Decision No. 15203-(12/72), adopted July 18, 2012 (the “ISD”). This Decision sets out the scope and modalities of bilateral surveillance over the financial sector policies of members with systemically important financial sectors and of multilateral surveillance over the spillovers arising from such policies in accordance with Article IV, Sections 3(a) and (b) of the Fund’s Articles and the Fund’s Decision on Bilateral and Multilateral Surveillance – 2012 Integrated Surveillance Decision (Decision No. 15203-(12/72), adopted July 18, 2012 (the “ISD”).