Follow-Up Issues—FSAP Updates, On-Going Surveillance, and TA
Although comprehensive FSAP assessments and reassessments can take place once in 8 to 9 years, additional tools are used to monitor the financial sector on a more continuous basis, to update FSAP findings in a more selective way, and to provide needed TA. In the Fund, efforts have been under way to develop and promote compilation of financial soundness indicators. Monitoring those indicators on a regular basis—along with other information, particularly market-based indicators—can be used as input in ongoing financial sector surveillance.
In many cases, FSAP updates have been used to focus on key development and stability issues and to update the assessments of one or two selected standards to update the ROSCs. On some occasions, factual updates of developments in implementation of standards have been prepared in the context of Article IV missions, pending the completion of FSAP reassessments, updates, or both. The scope and content of FSAP updates have varied, but they primarily reflect the scope of reforms undertaken by the authorities since the previous FSAP assessments. In some cases, areas of standards that were not assessed in detail in the previous assessment (e. g., AML-CFT) were assessed. In all cases, the macroprudential analysis was updated, with occasional updating of stress tests and with selective updates of previously assessed standards. The updates help to show the extent to which the overall stability has improved or weakened.
TA is a key tool to assist countries to follow up on FSAP recommendations and to strengthen financial stability policies and implement orderly development programs. Both the Bank and Fund have stressed the importance of effective and systemic follow-up to support countries in implementing key FSAP and ROSC recommendations. Both the Bank and Fund have collaborated with a group of bilateral donors to establish a multidonor facility called Financial Sector Reform and Strengthening Initiative (FIRST). FIRST is a joint initiative that provides grants to low – and middle-income countries for financial sector projects with the key objectives of facilitating systematic follow-up of the recommendations from the Bank-Fund FSAP and ROSCs. In addition, FIRST supports eligible countries in strengthening their financial systems and implementing recognized standards and codes in advance of participation in FSAP and ROSC programs.