Category Financial Sector Assessment

Bank for International Settlements (BIS)

BIS publishes on its Web site the following databases that are of interest for financial sec­tor assessments: consolidated banking statistics, international banking statistics, securities statistics, derivatives statistics, and payment and settlement system statistics.

Consolidated banking statistics include consolidated data on foreign and international claims by maturity and sector and by nationality of reporting bank. The data cover the

following:

• Years covered: 1983 onward, quarterly frequency

• Countries covered: BIS reporting banks’ claims on all countries

International banking statistics include locational statistics on external positions of BIS reporting banks by sector and by currency. Their coverage is as follows:

• Years covered: 1977 onward, quarterly frequency

• Cou...

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Banking Resolution and Insolvency—Emerging World Bank and International Monetary Fund Guidelines

G.1 Bank Insolvency Framework: Objectives and Scope

G.1.1 Objectives

In early 2002, the World Bank and the International Monetary Fund (IMF) in coordina­tion with the Bank for International Settlements (BIS), Basel Committee on Banking Supervision (BCBS), Financial Stability Institute (FSI), Financial Stability Forum (FSF), and some regional financial institutions, launched the Global Bank Insolvency Initiative (GBII). Its main objectives are as follows:

• To identify the appropriate legal, institutional, and regulatory framework to address banks in distress (Bank Insolvency Framework)

• To progressively create an international consensus regarding the framework, including best practices and alternatives

• To design a methodology for the assessment of the countries’ framework and to un...

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Execution, Scope, and Coverage

The first question to consider in implementing a system-focused stress test is who crunches the numbers: the supervisory agency or central bank, or the institutions them­selves? Ideally, individual institutions should be as heavily involved in the process as possible—regardless of whether a top-down or bottom-up approach is used—because individual institutions will typically have the best access to data and knowledge of their own portfolios. For institutions with sophisticated risk management systems or significant international operations, most will have systems and stress-testing procedures in place as part of their internal risk monitoring processes...

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Key Objectives

The purpose of restructuring is to ensure the continuation of the bank’s business, in whole or in part, as an economic unit (“going concern”) on a financially sound basis. A country’s laws need to establish the objectives and basic principles to be followed by the authorities in restructuring a bank in the context of insolvency proceedings.

G.5.3 Basic Principles

Drawing on international experience and practices, certain principles for bank restructur­ing are outlined in the following paragraphs.

G.5.3.1 Limit Moral Hazard

In a sound and efficient financial system, only well-administered institutions should remain in business...

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Selected Organizational Issues

The FSAP Procedures Guide covers both assessments and updates. In addition, assessments (countries and economies that have not yet participated in the program) and reassessments (when the passage of time or the pace of the reform process in a country indicates that comprehensive updating of the initial FSAP assessment is desirable) are complemented by focused updates (including updating of stability and standards and codes assessments)...

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Summary of FSAP Experience25

Stress tests have been performed for every country participating in the FSAP. The tests are designed to provide a quantitative measure of the vulnerability of the financial system to different shocks and to complement the insights gathered from other components of the assessment. This analysis includes elements of the legal, institutional, regulatory, and supervisory framework; observance of key financial sector standards and codes; analysis of the financial system structure and key vulnerabilities; and empirical analysis of financial soundness indicators.

Data availability is a key factor in determining the approach and sophistication of stress tests performed as part of the FSAP...

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