The Financial Sector Assessment Program (FSAP) : Assessing Financial Stability and Development

The Financial Sector Assessment Program (FSAP)
The global financial crisis showed that the health and functioning of a country’s financial
sector has far-reaching implications for its own and other economies. The Financial Sector
Assessment Program (FSAP) is a comprehensive and in-depth analysis of a country’s
financial sector. FSAP assessments are the joint responsibility of the IMF and World Bank in
developing economies and emerging markets and of the IMF alone in advanced economies.
The FSAP includes two major components: a financial stability assessment, which is the
responsibility of the IMF, and a financial development assessment, the responsibility of the
World Bank. To date, more than three-quarters of the member countries have undergone
assessments.
Assessing financial stability and development

The goal of FSAP assessments is twofold: to gauge the stability and soundness of the
financial sector, and to assess its potential contribution to growth and development.
 To assess stability, FSAP teams examine the resilience of the banking and non-bank
financial sectors; conduct stress tests and analyze systemic risks, including linkages
among banks and nonbanks and domestic and cross-border spillovers; examine
microprudential and macroprudential frameworks; review the quality of bank and
nonbank supervision and financial market infrastructure oversight; and evaluate the
ability of central banks, regulators and supervisors, policymakers, backstops and
financial safety nets to respond effectively in case of systemic stress.
 To assess development aspects, FSAPs examine institutions, markets,

infrastructure, and inclusiveness; the quality of the legal framework and of payments
and settlements systems; obstacles to competitiveness and efficiency; progress in
financial inclusion; and access to retail payment digital technology.
They also examine the financial sector’s contribution to economic growth and
development. Issues related to the deepening of domestic capital markets are
particularly important in developing and low-income countries.
FSAP adapts to the post-crisis era

In 2009, the FSAP underwent the most significant changes since its inception a decade earlier,
largely in response to the global financial crisis. These changes included a clear definition of the
components of stability assessments (vulnerabilities and resilience of the financial system,
regulatory and supervisory framework, and financial safety nets), the introduction of Risk
Assessment Matrices (RAMs), and the possibility of modular FSAPs conducted separately by the
IMF or the World Bank, focusing on each institution’s chief responsibility.
The 2014 FSAP Review found that FSAPs conducted since 2009 improved in all dimensions
and featured stress tests that covered a broader set of risks, and, increasingly, analyzed
spillovers and macroprudential frameworks. The introduction of RAMs has led to a more
coherent discussion of risks and their likely impact. FSAPs are highly regarded by national
authorities, and countries have implemented a high share of their recommendations. In
addition, the rate of publication of Financial System Stability Assessment reports (FSSAs) is
high.
Communications Department  Washington, D.C. 20431  Telephone 202-623-7300  Fax 202-623-6278

Factsheet URL: http://www.imf.org/external/np/exr/facts/fsap.htm
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Integration of FSAP into IMF surveillance

FSAP findings provide valuable input to the IMF’s broader surveillance of countries’ economies,
known as Article IV consultations. The global financial crisis demonstrated the need for an even
more seamless integration of these two strands of the IMF’s work.
In September 2010, the IMF made it mandatory for 25 jurisdictions with systemically
important financial sectors to undergo assessments under the FSAP every five years. The
list of jurisdictions for these mandatory assessments was based on the size and
interconnectedness of their financial sectors. In December 2013, the IMF’s Executive
Board revised the methodology for determining jurisdictions with systemically important
financial sectors. The new methodology places greater emphasis on interconnectedness, and
its application led to an increase in the number of systemically important jurisdictions from 25
to 29. In addition, the 2014 FSAP Review discussed actions to be undertaken in FSAPs in
order to further facilitate the integration of its findings and recommendations in Article IV
surveillance, particularly the use of a macro-financial filter to select among the FSAP’s
extensive set of micro- and macroprudential findings and recommendations those to be
reported in FSSAs.
While the decision to require stability assessments under the FSAP aims to better safeguard
global financial stability, it also poses a challenge in terms of resource intensity and technical
rigor. Also, a balance must be maintained with FSAPs for non-systemic countries—particularly
low-income countries—in the context of a broadly unchanged resources. At present, several
steps are underway to strengthen the focus and coverage of the FSAPs, to make innovative
use of financial stability technical assistance spanning the various areas related to financial
stability and to ensure that the FSAPs provide accurate and timely support to financial sector
surveillance in Article IV consultations.
A list of upcoming FSAPs can be found at https://blog-imfdirect.imf.org/2017/01/05/countries-in-

the-imf-financial-spotlight-in-2017/
THIS INFORMATION IS CURRENT AS OF APRIL 2017

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The Financial Sector Assessment Program (FSAP)

Assessing financial stability and development

 To assess development aspects, FSAPs examine institutions, markets,

FSAP adapts to the post-crisis era

Communications Department  Washington, D.C. 20431  Telephone 202-623-7300  Fax 202-623-6278

Integration of FSAP into IMF surveillance

A list of upcoming FSAPs can be found at https://blog-imfdirect.imf.org/2017/01/05/countries-in-

THIS INFORMATION IS CURRENT AS OF APRIL 2017

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