Today, the Executive Board of the International Monetary Fund (IMF) announced that financial stability assessments under the Financial Sector Assessment Program (FSAP) will become a regular and mandatory part of the IMF’s surveillance for members with “systemically important financial sectors.”
The IMF has identified a total of 25 nations as having systemically important financial sectors, based on a methodology that combines the size and interconnectedness of each nation’s financial sector. In alphabetical order, the nations identified as having systemically important financial sectors are: Australia, Austria, Belgium, Brazil, Canada, China, France, Germany, Hong Kong SAR, Italy, Japan, India, Ireland, Luxembourg, Mexico, the Netherlands, Russia, Singapore, South Korea, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States. Each nation identified as having systemically important financial sectors will undergo a mandatory financial stability assessment every five years, and may undergo more frequent assessments, if appropriate, on a voluntary basis. The criteria established for selecting nations with systemically important financial sectors do not reflect a nation’s broader economic or political importance, and will be periodically reevaluated as financials sectors develop and their size and connections change over time.
The mandatory financial stability assessments will comprise three elements: (1) an evaluation of the source, probability, and potential impact of the main risks to macro-financial stability in the near term, based on an analysis of the structure and soundness of the financial system and its interlinkages with the rest of the economy; (2) an assessment of each nation’s financial stability policy framework, involving an evaluation of the effectiveness of financial sector supervision against international standards; and (3) an assessment of the authorities’ capacity to manage and resolve a financial crisis should the risks materialize, looking at the nation’s liquidity management framework, financial safety nets, crisis preparedness and crisis resolution frameworks.