The IMF Financial Sector Assessment Program (FSAP)
FSAP is a joint IMF and World Bank project, which aims to increase the effectiveness of efforts to promote the soundness of financial systems in member countries. Supported by experts from a range of national agencies and standard-setting bodies, work under the program has the following aims:
- To identify the strengths and vulnerabilities of a country’s financial system
- To determine how key sources of risk are being managed
- To ascertain the financial sector’s developmental and technical assistance needs
- To help prioritise policy responses
Central to the FSAP project are the Financial System Stability Assessments (FSSAs). These are reports on individual member countries, in which a team of experts drawn from the IMF, the World Bank and a range of different national authorities investigate the adequacy of a country’s systems and governance structures against the IMF/World Bank guidelines in a number of areas. The country is assessed against the following core principles:
- Core principles for effective banking supervision
- Insurance core principles
- Objectives and principles of securities regulation
- Core principles for systemically important payment systems
- Code of good practices on transparency of monetary and financial policies
- Recommendations for securities settlement systems
- Standards for anti-money laundering
- Countering terrorist financing
More details on the FSAP/FSSA process can be found in the following IMF document: Financial Sector Assessment Program - Review, Lessons, and Issues Going Forward.
The UK Financial System Stability Assessment
The Chancellor of the Exchequer offered UK participation in the Financial Sector Assessment Program on 25 October 2000 ( see press release ). The resulting IMF report, the Financial System Stability Assessment (FSSA), includes both a report by IMF staff on Financial System Stability and Summary Assessments of Observance of Financial Sector Standards and Codes.
FSAP undertook an 18-month review of the UK, which was completed in February 2003. The IMF conducted assessments against the Core Principles mentioned above. The resulting FSSA was published on 3 March 2003 (see press release). The report commented:
“The UK’s large and sophisticated financial sector features fundamentally sound and highly developed financial institutions, markets and infrastructure. It is supported by a financial stability policy framework that has been significantly strengthened in a number of ways in recent years, and that in many respects is at the forefront internationally.”
“Clearly a great deal of thought has gone into making the institutional structure work - how to sharpen focus, accountabilities and transparency…[and] at the same time to encourage and facilitate coordination between the main players”.
The Chancellor commenting on the report said:
“The IMF’s positive assessment of the UK’s financial stability policy is recognition of the excellent work undertaken in recent years by the Treasury, FSA and Bank of England. The FSAP process has been a valuable tool in highlighting areas of good practice and those in which more work needs to be done. The IMF FSAP is a constructive means by which sound financial stability policies can be assessed and promoted. I encourage other countries to submit their systems to the programme.”
Further FSAP publications
In addition to the assessment already published, the IMF agreed to publish further volumes of its work on the UK FSAP programme. As such the following documents are now available on the IMF website.
FSAP Technical Notes:
1. Systemic Liquidity Arrangements in the United Kingdom
2. Public Debt Management in the United Kingdom
3. The Institutional Framework for UK Financial Stability Policy
4. Financial Stability Implications of London’s Role as a Global Markets Trading Center
FSAP Detailed Assessments of Standards and Codes
The Technical Notes documents provide background to the mission’s overall assessment, as set out in the original FSSA. The volume on Detailed Assessments of Standards and Codes includes detailed assessments of observance of the core principles mentioned above.
The UK is the first IMF member to publish background FSAP Technical Notes under the extended IMF-World Bank FSAP publication procedures agreed in March 2003, and is also one of the first members to publish its Detailed Standards Assessments. The UK agreed to this publication because it believes in transparency of the issues addressed and believes that publication promotes best practice in financial institutions, systems and markets. It is also hoped that this further publication will encourage other countries to follow the UK’s lead in agreeing to an FSAP assessment as well as releasing more of their FSAP documents.
The documents and publications relevant to financial stability can be found below in Adobe Acrobat Portable Document Format (PDF). If you do not have Adobe Acrobat installed on your computer you can download the software free of charge from the Adobe website .
For alternative ways to read PDF documents and further information on website accessibility visit the HM Treasury accessibility page.