By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE)-The executive board of the International Monetary Fund (IMF) on Monday said its encouraging further improvements in the risk assessment, including by expanding the coverage of stress tests to the non-bank sector.
This is coming on the heels of completion of a periodic review of the Financial Sector Assessment Program (FSAP) on September 15.
The IMF board also advised on enhancing the quality of Risk Assessment Matrices (RAMs) and their integration with the assessments; and strengthening the analysis of interconnectedness, cross-border exposures, and spillovers.
Also, the IMF supported more systematic evaluations of institutional arrangements for micro- and macroprudential supervision and financial safety nets, although a few them observed the lack of an established international best practice for macroprudential policies.
As part of the IMF’s board assessment on the current review of FSAP, it was agreed that the reforms introduced in 2009 have strengthened the focus, effectiveness, and traction of FSAPs. ‘’A clearer definition of the content has proved effective in disciplining and focusing assessments, and the delineation of responsibilities of the Fund and the Bank in developing and emerging market countries has strengthened institutional accountability,’’ the Fund said.
It affirmed that the analysis of vulnerabilities has benefitted from the introduction of the RAM; the expansion of stress tests to cover a broader set of risks; the ongoing progress in the analysis of spillovers; and the coverage of macroprudential frameworks and financial safety nets.
The IMF directors said that key standards and codes are a valuable tool for an exhaustive and comprehensive assessment of financial supervision. ‘’Many saw scope for streamlining and targeting these assessments in a manner consistent with the FSAP’s focus on systemic risk and, more broadly, the Fund’s macrofinancial surveillance mandate,’’ it said.
However, they warned that partial assessments might pose risk and create gaps in the evaluation of financial sector supervision.
The Fund directors further affirmed that the success of the FSAP depends on the cooperation of all counterparts, notably policy-makers and supervisors, as well as on the availability of high-quality data. ‘’A more systematic provision on a voluntary basis of data that go beyond the requirements of regular surveillance is an important determinant of the success of the FSAP and, more broadly, macrofinancial surveillance,’’ the IMF said.
The current review focused on the Fund’s role and responsibilities in the FSAP, namely the financial stability assessment, the contributions of FSAPs to surveillance, and the program’s broader traction and impact.
