Stability exams needed for 25 top economies


Wed, Sep 29, 2010 - Page 10

The IMF said on Monday it would require 25 major economies to undergo financial stability exams every five years in a bid to avert global financial crises.

The IMF’s executive board approved the move to switch from voluntary assessments to mandatory in-depth reviews for the world’s top 25 financial sectors, the IMF said in a statement.

The 25 economies were chosen based on the size of their financial sectors and their links with financial sectors in other countries, the 187-nation institution said.

In addition to the developed powerhouses such as the US, Japan, Canada, Germany and other western European countries, the new mandatory review affects developing and emerging economies such as China, Hong Kong, Brazil, India, Mexico and Russia.

The group represents almost 90 percent of the global financial system and 80 percent of global economic activity, the IMF said.

The stability assessments are a component of the IMF’s Financial Sector Assessment Program, which the Washington-based agency had offered on a voluntary basis to member countries.

The executive board decision makes the stability review mandatory for the 25 economies with “systemically important financial sectors” in an effort to contain financial risks as the global economy recovers from a severe financial crisis, the IMF said.

“The board’s decision ... will buttress our ability to exercise surveillance over a key aspect of the global economic machinery — the financial system,” John Lipsky, first deputy managing director of the IMF, said in the statement.

The IMF’s Financial Sector Assessment Program, created after the Asian financial crisis in the late 1990s, aims at detecting risks to a healthy financial sector in a particular country. The first programs were done in 2001.

The results are published by countries on a voluntary basis. The US faced criticism for its unwillingness to undergo an assessment until late last year.