Country Reports
2020
August 10, 2020
United States: Financial Sector Assessment Program-Technical Note-Supervision of Financial Market Infrastructures, Resilience of Central Counterparties and Innovative Technologies
Description: The Unites States financial system includes several systemically important financial market infrastructures (FMIs); they are regulated, supervised, and overseen by multiple authorities. The U.S. FMIs are crucial to U.S. dollar clearing, i.e. the payment systems Fedwire Funds Service and The Clearing House Interbank Payments System (CHIPS), and for the clearing and settlement of U.S. Treasuries, i.e., the Fedwire Securities Service and the Fixed Income Clearing Corporation (FICC). Central counterparties (CCPs) that clear exchange-traded or over-the-counter (OTC) corporate securities or derivatives are of key importance to the safe and efficient functioning of these (global) markets. Disruption of critical operations at one of the large U.S. FMIs may spread to its participants, other FMIs, markets, and throughout the U.S. and global financial systems. The Financial Stability Oversight Council (FSOC) designated eight financial market utilities (FMUs) to be systemically important.1 These designated FMUs are regulated, supervised and overseen by the Federal Reserve Board (FRB), the Securities and Exchange Commission (SEC), or the Commodity Futures Trading Commission (CFTC), depending on their activities. In addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA) authorized the FRB to promote uniform standards for the management of risks by systemically important FMUs.
August 10, 2020
United States: Financial Sector Assessment Program-Technical Note-Securities—Fund Management; Equity and Derivatives Trading; and Virtual Assets and Virtual Asset Service Providers
Description: This technical note considers the regulation and supervision of fund management and equity and derivatives trading in the United States (U.S.). As one of the main destinations for household savings and a key provider of funding to U.S. corporates, investment funds play a major role in the U.S. financial system. Distortions to equity trading could cause significant loss of confidence in markets, while international post-crisis reforms for OTC derivatives have underlined the importance of greater transparency and the value of central clearing. U.S. companies have also traditionally raised more finance through equity and other capital markets than through bank lending, and so capital markets are of greater structural significance in the U.S. than in some other jurisdictions.
August 10, 2020
United States: Financial Sector Assessment Program-Technical Note-Risk Analysis and Stress Testing the Financial Sector
Description: The U.S. financial system is very large, well-diversified, and home to numerous financial institutions which are significant at a global scale. Eight Global Systemically Important Banks (G-SIBs) are incorporated in the U.S., as well as several other large financial institutions, such as asset managers, insurers, and money market funds. Assets of the financial system amounted to about US$100 trillion at end-2019 and accounted for 500 percent of GDP. While the eight G-SIBs dominate the U.S. banking landscape, banking system assets represent only about 22 percent of total financial system assets. The systemic risk assessment (including stress testing) of this FSAP reflect the highly diversified nature of the U.S. financial system and focuses on banks, mutual and money market funds, insurance companies as well as cross-institutional and cross-sectoral linkages and exposures.
August 10, 2020
United States: Financial Sector Assessment Program-Technical Note-Insurance Supervision and Regulation
Description: This Technical Note (TN) is a targeted review of cross-cutting themes building on the detailed assessment of the Insurance Core Principles (ICPs) conducted in 2015. The targeted review was chosen, in part, due to the performance of the U.S. insurance regulatory system in the 2015 detailed assessment where it was assessed that the U.S. observed 8 ICPs, largely observed 13 ICPs and partly observed 5 ICPs. The analysis relied on a targeted self-assessment against a subset of ICPs covering valuation and solvency, risk management, conduct, winding-up, corporate governance and enforcement, and the objectives, powers and responsibility of supervisors. The choice of subjects covered in this review is based on those aspects most significant to financial stability and a follow-up on key recommendations from the 2015 detailed assessment. The focus of the analysis has been on the state-based system of regulation and supervision, reflecting the existing institutional setup.
August 10, 2020
United States: Financial Sector Assessment Program-Technical Note-Financial Crisis Preparedness and Deposit Insurance
Description: The U.S. authorities should preserve the considerable progress in the resiliency, recoverability, and resolvability of financial companies and insured depository institutions (IDIs), and intensify financial crisis preparedness efforts. After a decade of resolution planning, the development of the U.S. resolution regime is more advanced than in other major economies. This regime, together with the strong track record of the deposit insurance system (DIS) for banks and the federal banking agencies’ (FBAs) preparation for resolution, provide a strong foundation for crisis preparedness. Bank holding companies (BHCs) have integrated recovery and resolution planning (RRP) into business-as-usual (BAU) activities, increasing their resiliency; this process has deepened the FBAs’ understanding of the BHCs’ business models and RRP capabilities. The FBAs should continue their own annual resolution planning and mitigate the recent changes that reduced the BHCs’ RRP. These efforts should be complemented by further interagency crisis preparedness, including particularly with the U.S. Department of the Treasury (UST), given its essential role in critical aspects of crisis responses. Finally, further refinements relating to cross-border resolution also deserve attention.
August 5, 2020
Chad: Request for Disbursement under the Rapid Credit Facility and Cancellation of the Extended Credit Facility Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Chad
Description: Chad’s economy has been severely impacted by the twin Covid-19 pandemic and terms of trade shocks. A national lockdown to contain the spread of the virus, disruptions in supply chains, and a drop in international oil prices are curtailing economic activity and weakening the outlook. While the authorities’ policy response has been timely and proactive, the economic shock and containment policies are triggering a severe recession, resulting in significant social costs and urgent balance of payment and budget financing needs. These are estimated at 7.0 percent of non-oil GDP compared to 4.6 percent in IMF Country Report No. 20/134. The pandemic is unfolding in a context of rising regional and domestic insecurity and an already weak health care system, which are exacerbating Chad’s vulnerabilities.
August 5, 2020
Sweden: Technical Assistance Report-Proposed Amendments to the Riksbank Act
Description: At the request of the central bank of Sweden (the Riksbank), the Monetary and Capital Markets Department (MCM) provided technical assistance (TA) on central bank operations by means of a desk review of the proposed amendments suggested by the independent committee to the Swedish Riksbank Act, during the period February 2019 and June 2020. The desk review was led by Mr. Ashraf Khan, and conducted jointly with Mr. Asad Qureshi, Mr. Romain Veyrune, and Mr. Rudy Wytenburg. Additional input was also provided by Ms. Ioana Luca of the IMF’s Legal Department and colleagues from the IMF’s European Department, Sweden Team. The purpose of the desk review was to provide advice to the Riksbank on key issues relating to central bank operations, with a particular focus on the central bank’s governance, independence, instruments, and internal organization. It should be noted that the review findings, comments, and recommendations in this report are not representative of views of the IMF or of its Executive Board and are intended for the purpose of contributing to the public discussion in Sweden in the context of the draft Riksbank Act. The comments are also not intended to be complete, nor represent a detailed legal review of the Act. Instead, as noted above, the comments reflect selected key issues from a central bank operations’ perspective.
August 5, 2020
Vietnam: Technical Assistance Report-Government Finance Statistics (June 10–14, 2019)
Description: The main purpose of the mission was to continue TA to assist with upgrading the compilation and dissemination of fiscal data and GFS in Vietnam in line with the international standard, the Government Finance Statistics Manual 2014 (GFSM 2014).
August 4, 2020
Italy: Financial Sector Assessment Program-Technical Note-Insurance Sector Regulation and Supervision
Description: This technical note (TN) provides an update and an assessment of the supervisory framework and practices for the Italian insurance sector since the last assessment concluded in 2013. The mission conducted a target review focusing on the implementation of Solvency II, the financial resilience of insurers, the effectiveness of supervision, and previously identified weaknesses without a full assessment of Italy’s observance with the International Association of Insurance Supervisors (IAIS) Insurance Core Principles (ICPs). Implementation of the European Union (EU) Solvency II Directive in 2016 has significantly strengthened regulation and supervision since the last FSAP, introducing risk-based capital standards, comprehensive insurance group supervision and new requirements on governance, risk management and controls. The supervision of intermediaries has also been strengthened in line with the EU Insurance Distribution Directive in 2018.
August 4, 2020
Italy: Financial Sector Assessment Program-Technical Note-Systemic Risk Analysis and Stress Testing of the Banking and Corporate Sectors
Description: The Financial Sector Assessment Program (FSAP) took place against the backdrop of an ongoing recovery of the financial system. Since the global financial crisis (GFC), financial regulation has been substantially enhanced by the implementation of euro area-wide (EA-wide) regulatory and supervisory frameworks. Furthermore, the Italian authorities have implemented important measures that improved governance, facilitated capitalization, raised prudential requirements, and improved asset quality. In response, Italian banks have made substantial progress tackling legacy non-performing loans (NPLs) and improving solvency ratios.