To keep pace with rapid changes in global finance, the IMF is improving its ability to monitor countries’ financial stability. It plans to make its reports more focused and candid after drawing lessons from the global crisis.
To keep pace with rapid changes in global finance, the IMF is improving its ability to monitor countries’ financial stability and plans to make its reports more focused and candid after drawing lessons from the global crisis.
What began as a financial crisis in 2007 quickly spread to the global economy, and the IMF has been working to further its understanding of how the financial sector affects the rest of a country’s economy.
In a recent interview, IMF Managing Director Dominique Strauss-Kahn said that surveillance “is our core business.”
The IMF conducts surveillance through annual reviews of countries’ economies, known as Article IV consultations. In addition, a country may request an analysis of its financial sector through the IMF’s Financial Sector Assessment Programme.
The revised programme will introduce more flexibility to tailor the scope and timing of assessments to country needs. The IMF will have the option of conducting more targeted assessments, focused specifically on financial stability. These updates will concentrate on the underlying soundness of the financial system, the strength of the public institutions charged with supervising the financial system, and the effectiveness of policies for dealing with financial crises. This approach will allow for more frequent and timely updates on financial sector stability.
In the light of the recent financial crisis and country experiences, the IMF said its financial sector stability assessments will include:
• A sharper focus on countries’ crisis management, including stress-testing, facilities for providing central bank liquidity and plans for dealing with failed banks.
• Improved analysis of cross-border risks, including financial linkages such as ownership patterns, financial flows between countries and links between financial markets that can quickly transmit events from one country to another.
• New tools and methods to expand the programme and to look at the big-picture connections between financial institutions and markets.
• Regulatory reform initiatives, including the scope of regulation, systemic institutions and the strength of risk management.
• Improved cross-country comparability of assessments and greater attention to cross-border risks and vulnerabilities.
• A risk-based review of a country’s adherence to international financial standards to allow the IMF to focus on potential problem areas.
© International Monetary Fund
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