Country Reports
2020
August 4, 2020
Italy: Financial Sector Assessment Program-Technical Note-Systemic Risk Oversight Framework and Macroprudential Policy
Description: Macroprudential oversight in Italy combines local elements with the European framework. At a local level, financial stability is a shared responsibility between Banca d’Italia (BdI), which is the national central bank and the prudential authority for banks and other financial institutions, the markets authority, Commissione Nazionale per le Società e la Borsa (CONSOB), the insurance supervisor, Istituto per la Vigilanza Sulle Assicurazioni (IVASS), and the pension funds supervisor, Commissione di Vigilanza sui Fondi Pensione (COVIP).2 Each authority exercises its responsibility within a combination of sectoral and activity boundaries and the BdI plays a leading role in surveillance and coordination. Within the European framework, the BdI is both the national competent authority and the designated authority for the macroprudential tools considered under the Capital Requirements Regulation (CRR) and the Capital Requirements Directive IV (CRD IV), which are implemented and activated following the processes described in these regulatory texts and the guidelines provided by the European Central Bank (ECB) – within the competences assigned to it by the SSM Regulation - and the European Systemic Risk Board (ESRB). The ubiquitous role of the BdI on both fronts eases the challenges posed by the coexistence of these two frameworks.
August 4, 2020
Italy: Financial Sector Assessment Program-Technical Note-Financial Safety Net and Crisis Management Arrangements
Description: The Italian financial safety net and crisis-management framework has been substantially strengthened since the 2013 FSAP. Among others, the authorities have enhanced the early intervention framework, introduced a new resolution regime (including recovery and resolution planning requirements), and introduced reforms of the two deposit guarantee schemes (DGS) that are active in Italy. Further enhancements at the Banking Union level, as outlined in the 2018 Financial System Stability Assessment for the euro area (IMF Country Report No. 18/226)—including the introduction of an adequately funded common deposit guarantee scheme, a harmonized bank liquidation framework and a finetuning of state aid rules—would yield further benefits for Italy.
August 4, 2020
Italy: Financial Sector Assessment Program-Technical Note-Tackling Non-Performing Assets
Description: Banks’ asset quality has substantially improved in recent years but remains well below European peers. Non-performing loans (NPLs) fell from 16½ percent in 2015 to about 8.1 percent at end-June 2019, achieved mainly through €145 billion of private NPL sales. This is a substantial reduction by any standard, though NPLs remain well above the 3.0 percent average of the main European Union (EU) banks as of June 2019. New NPL formation has fallen to pre-crisis levels. Provisioning coverage was 52.5 percent as of June 2019, placing Italy 7.6 percentage points above the average of the main EU banks.
August 4, 2020
Italy: Financial Sector Assessment Program-Technical Note-Banking Regulation and Supervision and Bank Governance
Description: This note presents a targeted review of selected aspects concerning the regulation and supervision of banks in Italy and their governance framework. The review was carried out as part of the 2019 Italy Financial Sector Assessment Program (FSAP) and was based on the regulatory framework in place and the supervisory practices employed as of March 2019. Since the regulation and supervision of significant banking institutions (SIs), including Italian SIs, was extensively covered as part of the 2018 Euro Area FSAP, this note focuses on the prudential regulation and supervision of less significant institutions (LSIs). In addition, the note reviewed regulatory and supervisory areas not covered by the wider EU regulatory framework, such as the supervision of anti-money laundering and countering the financing of terrorism (AML/CFT) and related party transactions, which apply to both SIs and LSIs in Italy.
August 4, 2020
Democratic Republic of São Tomé and Príncipe: First Review Under the Extended Credit Facility and Request for Augmentation of Access, Rephasing of Access, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for the Democratic Republic of São Tomé and Príncipe
Description: The pandemic is taking a heavy toll on the fragile island nation of São Tomé and Príncipe. Tourist arrivals came to an abrupt halt in mid-March, externally financed projects are being delayed, and supply shipments are disrupted. In response to the local outbreak, emergency confinement measures have been in place since March to contain infection. The authorities began phasing out these measures in late June, aiming for a full reopening of the economy by end-July. A disbursement supported by the Rapid Credit Facility (SDR 9.028 million) was approved in April 2020. The authorities request an augmentation of the ECF program by 10 percent of quota (SDR 1.48 million).
August 4, 2020
Republic of Moldova: Technical Assistance Report—Government Finance Statistics Mission (October 2-8, 2019)
Description: In response to a request from the European Department, a Public-Sector Debt Statistics (PSDS) technical assistance (TA) mission was conducted in Chisinau during October 2–8, 2019. The mission funded by the Data for Decisions (D4D) multi-donor trust fund and followed up on a D4D Public Sector Debt Statistics (PSDS) workshop held in Vienna, Austria during July 2019, where participants from Moldova identified data gaps with current compilation of debt statistics. The mission primarily worked with the Ministry of Finance (MOF) Public Debt Department (PDD), but also had discussions with the Budget and Treasury Department. Outside the MOF, the mission had meetings with the Public Property Agency (PPA), the Municipality of Chisinau and the National Bank of Moldova (NBM). Finally, the mission also held a joint meeting with representatives of a separate IMF TA Mission on sectoral accounts with Treasury and attended the concluding meeting of that mission with the NBM.
July 30, 2020
Kingdom of Eswatini: Request for Purchase Under the Rapid Financing Instrument-Press Release; Staff Report; and Statement by the Executive Director for the Kingdom of Eswatini
Description: The COVID-19 pandemic is having a severe impact on Eswatini’s economy at a time when the country is already facing deep economic challenges, and the government has begun fiscal consolidation efforts. A national lockdown to contain the spread of the virus, disruptions in supply chains, and lower external demand for key exports are curtailing economic activity. While the authorities’ policy response has been timely and proactive, the economic shock and containment policies are triggering a severe recession with significant social costs, and have created urgent balance of payments needs. The pandemic is unfolding in a context of high prevalence of HIV/AIDS and a stretched health care system, which increase Eswatini’s vulnerability.
July 30, 2020
Kingdom of Lesotho: Requests for Disbursement Under the Rapid Credit Facility and Purchase Under the Rapid Financing Instrument-Press Release; Staff Report; and Statement by the Executive Director for the Kingdom of Lesotho
Description: The COVID-19 pandemic is having a severe impact on Lesotho’s economy. Supply chains for major industries have been disrupted and a national shutdown to contain the virus curtailed economic activity with adverse social impacts. The economy is expected to be further hit by declining external demand for textiles and diamonds, shrinking remittances, and delays to major construction projects. The authorities are taking measures to contain the virus and are implementing plans to mitigate its health and economic consequences. The economic shock, as well as the additional required spending, have generated urgent balance-of-payments (BOP) needs. Lesotho does not have an arrangement with the Fund.
July 28, 2020
South Africa: Request for Purchase Under the Rapid Financing Instrument-Press Release; Staff Report; and Statement by the Executive Director for South Africa
Description: The COVID-19 outbreak is leading to a sharp economic contraction and creating significant financing needs in South Africa. The IMF approved US$4.3 billion in emergency financial assistance under the Rapid Financing Instrument (RFI) to support the authorities’ efforts in addressing the challenging health situation and severe economic impact of the COVID-19 shock. Once the pandemic is behind, there is a pressing need to ensure public debt sustainability and implement structural reforms to support the recovery and achieve sustainable and inclusive growth.
July 27, 2020
Burundi: Request for Debt Relief Under the Catastrophe Containment and Relief Trust-Press Release; Staff Report; and Statement by the Executive Director for Burundi
Description: Economic impact. COVID-19 is having an adverse economic impact on Burundi. The pandemic is affecting Burundi through an evolving domestic outbreak and economic spillovers from the global and regional environment, including from the containment measures introduced in trading partners and neighboring countries. Economic growth projections for 2020 have been revised down by 5.3 percentage points to -3.2 percent in 2020. The pandemic has exacerbated pre-existing economic challenges and creates an external financing need of 4.7 percent of GDP in 2020 and 2021, mainly as a result of lower exports in line with lower foreign demand due to lower global growth and transportation bottlenecks from containment measures in other countries; elevated imports needs related in part to the planned fiscal spending aimed at responding to the pandemic; and reduced remittances inflows. The pandemic has also created a fiscal financing need of 6.9 percent of GDP, which will need to be met mainly from external sources.