Legal Infrastructure
The efficient functioning of the legal system is indispensable for effective financial intermediation (e. g., see La Porta et al. 1997, 1998, and Levine, Loayza, and Beck 2000). Although discussed …
Large and Complex Financial Institutions16
The activities of large and complex financial institutions (LCFIs)17 raise issues of crosssectoral and cross-border transfer of financial risks that are especially relevant to a comprehensive assessment of the strengths …
Assessing Regulatory Practice and Effectiveness
The regulatory regime for OFIs should help meet regulatory objectives—effective competition, good conduct of business and financial integrity, and prudent operations—while ensuring that regulations reflect the specific operational characteristics of …
Special Recommendations for Combating the Financing of Terrorism
SRI Ratify and implement relevant UN conventions and resolutions. SRII Criminalize terrorist financing. SRIII Implement measures to freeze and confiscate terrorist assets. SRIV Have a suspicious transaction reporting requirement that …
Effect on Development
By providing independent information to investors, rating agencies facilitate access to financing in domestic and international markets and, thereby, enhance growth opportunities. Credit ratings provide a relative ranking of an …
Confidentiality and Other Distribution
Assessment of financial system vulnerabilities necessarily involves discussion with the authorities of sensitive information on prudential policies and financial soundness. To ensure that sensitive information that is provided by national …
Macroprudential Surveillance Framework
Surveillance of the soundness of the financial sector as a whole—which is macroprudential surveillance—complements the surveillance of individual financial institutions by supervisors—which is microprudential surveillance. Macroprudential surveillance derives from the …
Enterprise Finance
An assessment of demand for and access to financial and especially credit services by enterprises relies on financial information from firms and on surveys and anecdotal evidence from financial institutions, …
Difficulties That Can Have a Pervasive Effect on Assessments
An underresourced supervisory body will have difficulty with many of the ratings if it is not able to conduct an effective onsite inspection activity because a number of the criteria …
Postal Savings Banks
A PSB has the ability to reach a very large number of depositors for savings and time deposits in generally small amounts, and to provide payments and transfer or remittance …
Corporate Governance
Governance of the financial sector has emerged as an important factor in financial stability. Particularly in the transition economies where the legal and regulatory infrastructure is still in need of …
Annex 10.B Methodology for Assessing Accounting and Auditing
At the inception of the assessment, policy makers identify the relevant stakeholders who have an interest in accounting and auditing matters. The stakeholders may include securities market regulators, banking regulators, …
Special Topics in Financial Stability Analysis
This section deals with selected topics in financial stability, namely, • The analysis of international financial centers and offshore financial centers and of financial stability • Key stability issues in …
Deposit Insurance
A second key element of the financial safety net is a deposit insurance system (DIS). Although deposit insurance can cause excessive risk taking, a careful design of deposit insurance—complemented by …
Accountability and Judicial Review
Banking authorities are subject to various forms of accountability. First, they will need to explain the way in which they conduct their affairs and perform their mandate to the government, …
AML-CFT Standards—Scope and Coverage
In 1990, the FATF issued a report containing a set of 40 recommendations, which provided a comprehensive plan of action needed to fight against money laundering. Since then, the recommendations …
. Focus of A&A Assessments
Assessments of A&A standards address financial reporting by public interest entities, which are defined as such because of their business, size, and number of employees or because their corporate status …
Foreign Exchange Reserve Management
Countries hold official reserves to meet a range of objectives that will vary from country to country. Typically, reserves are held to limit external vulnerability by maintaining foreign currency liquidity …
Scope and Coverage of Financial Services
The financial system provides five key services: (a) savings facilities, (b) credit allocation and monitoring of borrowers, (c) payments, (d) risk mitigation, and (e) liquidity services. Savings mobilization can be …
Information Infrastructures
Asymmetric information between borrowers and lenders and, thus, the transaction costs can be reduced if there is readily available information on the financial condition of borrowers and especially on their …
Consolidated Supervision
Consolidated supervision is a supervisory tool that was developed in response to the growing trend in financial institutions of diversifying their activities across national borders and sectoral boundaries through ownership …
Selected Issues on the Regulation and Supervision of Leasing Companies [7] [8]
companies over banks is that they own the leased asset. However, physical repossession can still prove difficult. For instance, the mobility of the leased asset has made repossession even more …
Assessing the Legal Infrastructure for Financial Systems
The legal infrastructure plays a pivotal role in the operation of financial markets, as well as in the efficient intermediation of capital flows and domestic savings. Banks and other financial …
Effect on Financial Stability
Rating agencies contribute to enhancing financial stability through two channels. First, by summarizing a large and diverse amount of information for the benefit of investors and by acting as a …
Review and Clearance of FSAP Documents
All FSAP documents are subject to rigorous internal review and clearance processes within the Bank and the Fund on the basis of guidance and procedures that are specific to each …
Analysis of Financial Soundness Indicators
FSIs are used to monitor the financial system’s vulnerability to shocks and its capacity to absorb the resulting losses. Work on FSIs has produced a set of core FSIs and …
Households, Firms, and Microenterprises
While reliable data for a quantitative assessment of SMEs’ access to financial services are hard to come by, it is even more difficult to quantitatively assess households’, firms’, and microenterprises’ …
Key Assessment Experience
The experience of assessments to date indicates that the insurance sector generally shows a weaker level of observance of international standards than does the banking sector.30 Most usually, the reason …
Development Finance Institutions
In many countries, Development Finance Institutions (DFIs) have been established and funded by the Government to develop and promote certain strategic sectors of the economy (e. g., highly capital intensive …
Consumer Protection
Consumers are an important stakeholder in the financial market. In fact, they are the reason for the existence of markets and, thus, they sustain markets. It is imperative that the …
Annex 10.C Financial Sector Governance—Selected Issues
Financial sector governance refers to (a) corporate governance of financial institutions and other market participants (e. g., issuers, service providers), as well as governance arrangements for financial sector regulatory agencies, …
Capital Account Liberalization
Capital account controls can have a significant effect on the way that external shocks are transmitted to the domestic financial system and on how domestic financial developments affect the macro-economy. …
Investor and Policyholder Protection Schemes
Related to the second element of safety net, deposit insurance, are investor and policyholder compensation schemes, which are designed to promote investor confidence in the functioning of financial markets and …
Coordination among Banking Authorities
If one is to deal with an insolvent bank effectively, the following are essential: timely cooperation and coordination between the various banking authorities and other public bodies concerned (e. g., …
Preconditions for Effective Implementation of AML-CFT Standards [15] [16]
• High ethical and professional requirements for police officers, prosecutors, judges, and so forth, as well as measures and mechanisms to ensure that those requirements are observed • A system …
