Financial Soundness Indicators and the Characteristics of Financial Cycles PDF Download
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Author: Ms.Natasha Xingyuan Che
Publisher: International Monetary Fund
ISBN: 1484386957
Category : Business & Economics
Languages : en
Pages : 26
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Book Description
Better “financial soundness” of banks could help mitigate the volatility of financial cycles by reducing banks’ risk exposure. But trying to improve financial soundness in the midst of a downturn can do the opposite—further aggravating the contraction of credit. Consistent with this notion, the paper found that better initial scores in certain financial soundness indicators (FSIs) are associated with milder and shorter downturns; and improving FSIs during a downturn worsens the shrinkage of credit and amplifies the cycle. In this context, our results suggest that policy makers should be mindful about the timing of regulating changes in banks’ FSIs.
Author: Ms.Natasha Xingyuan Che
Publisher: International Monetary Fund
ISBN: 1484386957
Category : Business & Economics
Languages : en
Pages : 26
Get Book
Book Description
Better “financial soundness” of banks could help mitigate the volatility of financial cycles by reducing banks’ risk exposure. But trying to improve financial soundness in the midst of a downturn can do the opposite—further aggravating the contraction of credit. Consistent with this notion, the paper found that better initial scores in certain financial soundness indicators (FSIs) are associated with milder and shorter downturns; and improving FSIs during a downturn worsens the shrinkage of credit and amplifies the cycle. In this context, our results suggest that policy makers should be mindful about the timing of regulating changes in banks’ FSIs.
Author: International Monetary Fund
Publisher: International Monetary Fund
ISBN: 1589063856
Category : Business & Economics
Languages : en
Pages : 302
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Book Description
Financial Soundness Indicators (FSIs) are measures that indicate the current financial health and soundness of a country's financial institutions, and their corporate and household counterparts. FSIs include both aggregated individual institution data and indicators that are representative of the markets in which the financial institutions operate. FSIs are calculated and disseminated for the purpose of supporting macroprudential analysis--the assessment and surveillance of the strengths and vulnerabilities of financial systems--with a view to strengthening financial stability and limiting the likelihood of financial crises. Financial Soundness Indicators: Compilation Guide is intended to give guidance on the concepts, sources, and compilation and dissemination techniques underlying FSIs; to encourage the use and cross-country comparison of these data; and, thereby, to support national and international surveillance of financial systems.
Author: Rita Babihuga
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 36
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Book Description
This paper analyzes the relationship between selected macroeconomic and financial soundness indicators (FSIs) using a newly assembled panel dataset of FSIs for 96 countries covering the period 1998-2005. The analysis covers key macroeconomic indicators and FSIs of capital adequacy, asset quality and profitability. The paper finds that FSIs fluctuate strongly with both the business cycle and the inflation rate. Short term interest rates and the real exchange rate also emerge as important determinants. There is also a considerable degree of heterogeneity in the relationship between macroeconomic indicators and FSIs across the sample of countries. Several country and industry specific characteristics including country income levels, financial depth, market concentration, and the quality of regulatory supervision are found to be significant in explaining this cross country heterogeneity.
Author: Matias Costa Navajas
Publisher: International Monetary Fund
ISBN: 1484327616
Category : Business & Economics
Languages : en
Pages : 38
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Book Description
The paper tests the effectiveness of financial soundness indicators (FSIs) as harbingers of banking crises, using multivariate logit models to see whether FSIs, broad macroeconomic indicators, and institutional indicators can indeed predict crisis occurrences. The analysis draws upon a data set of homogeneous indicators comparable across countries over the period 2005 to 2012, leveraging the IMF’s FSI database. Results indicate significant correlation between some FSIs and the occurrence of systemic banking crises, and suggest that some indicators are precursors to the occurrence of banking crises.
Author: Ms. Sally Chen
Publisher: International Monetary Fund
ISBN: 1513582305
Category : Business & Economics
Languages : en
Pages : 79
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Book Description
Can the upturns and downturns in financial variables serve as early warning indicators of banking crises? Using data from 59 advanced and emerging economies, we show that financial overheating can be detected in real time. Equity prices and output gap are the best leading indicators in advanced markets; in emerging markets, these are equity and property prices and credit gap. Moreover, aggregating this information flags financial crisis many years before the crisis. Lastly, we find that the length of financial cycles is of medium-term frequency, calling into question the longer frequency widely used in the estimation of countercyclical capital buffers.
Author: Mr.Jaromir Benes
Publisher: International Monetary Fund
ISBN: 1484330498
Category : Business & Economics
Languages : en
Pages : 26
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Book Description
This paper presents a new version of MAPMOD (Mark II) to study the effectiveness of macroprudential regulations. We extend the original model by explicitly modeling the housing market. We show how household demand for housing, house prices, and bank mortgages are intertwined in what we call a deadly embrace. Without macroprudential policies, this deadly embrace naturally leads to housing boom and bust cycles, which can be very costly for the economy, as shown by the Global Financial Crisis of 2008-09.
Author: International Monetary Fund. Monetary and Capital Markets Department
Publisher: International Monetary Fund
ISBN: 1498321119
Category : Business & Economics
Languages : en
Pages : 85
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Book Description
This Financial System Stability Assessment paper discusses that Canada has enjoyed favorable macroeconomic outcomes over the past decades, and its vibrant financial system continues to grow robustly. However, macrofinancial vulnerabilities—notably, elevated household debt and housing market imbalances—remain substantial, posing financial stability concerns. Various parts of the financial system are directly exposed to the housing market and/or linked through housing finance. The financial system would be able to manage severe macrofinancial shocks. Major deposit-taking institutions would remain resilient, but mortgage insurers would need additional capital in a severe adverse scenario. Housing finance is broadly resilient, notwithstanding some weaknesses in the small non-prime mortgage lending segment. Although banks’ overall capital buffers are adequate, additional required capital for mortgage exposures, along with measures to increase risk-based differentiation in mortgage pricing, would be desirable. This would help ensure adequate through-the cycle buffers, improve mortgage risk-pricing, and limit procyclical effects induced by housing market corrections.
Author: Ms.Sònia Muñoz
Publisher: International Monetary Fund
ISBN: 1463929927
Category : Business & Economics
Languages : en
Pages : 52
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Book Description
The global financial crisis has renewed policymakers' interest in improving the policy framework for financial stability, and an open question is to what extent and in what form should financial stability reports be part of it. We examine the recent experience with central banks' financial stability reports, and find?despite some progress in recent years?that forward-looking perspective and analysis of financial interconnectedness are often lacking. We also find that higher-quality reports tend to be associated with more stable financial environments. However, there is only a weak empirical link between financial stability report publication per se and financial stability. This suggests room for improvement in terms of the quality of financial stability reports.
Author: Nigel Davies
Publisher: International Monetary Fund
ISBN: 1451856008
Category : Business & Economics
Languages : en
Pages : 45
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Book Description
This paper explores insurance as a source of financial system vulnerability. It provides a brief overview of the insurance industry and reviews the risks it faces, as well as several recent failures of insurance companies that had systemic implications. Assimilation of banking-type activities by life insurers appears to be the key systemic vulnerability. Building on this experience and the experience gained under the FSAP, the paper proposes key indicators that should be compiled and used for surveillance of financial soundness of insurance companies and the insurance sector as a whole.
Author: Patrick A. Imam
Publisher: International Monetary Fund
ISBN: 1484359143
Category : Business & Economics
Languages : en
Pages : 40
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Book Description
This enhanced review of Senegal’s financial sector is one of several pilot reviews called for by the Executive Board in May 2012. The purpose of the reviews is to go beyond the traditional surveillance focus on banking system soundness and solvency by analyzing in more depth the interplay between financial development, macroeconomic and financial stability, and effectiveness of macroeconomic policies in low-income countries. Senegal is a member of the West African Economic and Monetary Union; a number of key macroeconomic and financial policies are designed and implemented at the union level. This study focuses on Senegal-specific issues. Another pilot study, to be prepared in the context of the next annual consultation on regional policies in early 2013, will focus on union-wide issues.
