Country Reports
2020
August 12, 2020
Norway: Financial Sector Assessment Program-Technical Note-Cybersecurity Risk Supervision and Oversight
Description: The Norwegian financial system has a long history of incorporating new technology. Norway is at the forefront of digitization and has tight interdependencies within its financial system, making it particularly vulnerable to evolving cyber threats. Norway is increasingly a cashless society, with surveys and data collection suggesting that only 10 percent of point-of-sale and person-to-person transactions in 2019 were made using cash.1 Most payments made in Norway are digital (e.g., 475 card transactions per capita per annum)2 and there is an increase in new market entrants providing a broad range of services. Thus, good cybersecurity is a prerequisite for financial stability in Norway.
August 12, 2020
Norway: Financial Sector Assessment Program-Technical Note-Insurance Sector Oversight
Description: The Norwegian insurance sector is well-capitalized. In recent years, the authorities have taken steps to recapitalize weak insurers and to boost capital for the overall industry. Risk-resilience has been strengthened by stronger retention of profits leading to accumulation of reserves, better risk management, and higher capital in the run-up to the implementation of the Solvency II regulatory regime.
August 12, 2020
Norway: Financial Sector Assessment Program-Technical Note-Systemic Liquidity
Description: Norwegian banks and other financial institutions rely heavily on capital markets for liquidity and risk management. Liquidity conditions in the Norwegian financial sector are affected by central bank operations and the lending and funding activities of financial institutions, both domestically and abroad. Nearly 40 percent of the funding of Norwegian banks is obtained from market sources, using commercial paper, covered bonds, and senior unsecured bonds issued both domestically and abroad. Correspondingly, money markets, foreign exchange (FX) swap markets and bond markets are crucial to the credit intermediation process and a dislocation in these markets—the inability of financial institutions to roll over, or obtain new, funding—could have significant consequences for financial stability. Against this background, this note analyzes core funding markets for Norwegian banks and assesses Norges Bank’s capacity to manage systemic liquidity conditions and counteract liquidity shocks in normal times and in times of stress.
August 10, 2020
Arab Republic of Egypt: Request for a 12-Month Stand-By Arrangement-Press Release; Staff Report; and Statement by the Executive Director for the Arab Republic of Egypt
Description: Egypt’s hard-won macroeconomic stability achieved during the three-year arrangement under the Extended Fund Facility (EFF) now faces a significant disruption due to the COVID-19 pandemic. Growth is expected to slow in both FY2019/20 and FY2020/21 as tourism has been halted and domestic activity curtailed. The external accounts have come under pressure due to capital outflows and the shock to tourism and remittances. The authorities responded with a broad package to scale up the health system’s capacity and policies to support the people and the economy.
August 10, 2020
United States: 2020 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for United States
Description: The U.S. is in the midst of an unprecedented social and economic shock. The longest expansion in U.S. history has been derailed by the unanticipated advent of COVID-19. To preserve lives and support public health, it was necessary to put in place a broad-based shutdown of the U.S. economy in March. Despite the gradual easing of state lockdown restrictions and lifting of stay-at-home orders starting in late April, the collateral economic damage has been enormous. First, and foremost, as of July 16, more than 136,000 Americans have tragically lost their lives and many more have become seriously ill. Almost fifteen million Americans have lost their jobs, many small and large businesses are under financial stress, and future prospects are highly uncertain. Reopening decisions will have to be handled carefully to mitigate the economic costs while containing the ongoing rise in COVID-19 infection rates. It will likely take a prolonged period to repair the economy and to return activity to pre-pandemic levels. All in all, globally there will be difficult months and years ahead and it is of particular concern that the number of COVID-19 cases in the U.S. is still rising.
August 10, 2020
United States: Financial Sector Assessment Program-Technical Note-Banking Supervision and Regulation
Description: This technical note leverages on the 2015 FSAP which concluded that the United States (U.S.) had a high degree of compliance with the Basel Core Principles (BCPs). The FSAP reviewed the progress achieved in addressing the main weaknesses previously identified and the main supervisory and regulatory developments since then. The key focus are the steps taken by the U.S. authorities in recent years to recalibrate and further tailor the banking regulatory and supervisory framework and the role of stress tests in the supervision process. The FSAP team has not covered the impact of COVID-19 outbreak on banks supervision and has not discussed with authorities the related policy response. The FSAP recommendations are meant to be considered once the impact of the pandemic on the economy and the banking sector becomes clearer.
August 10, 2020
United States: Financial Sector Assessment Program-Technical Note-Systemic Risk Oversight and Systemic Liquidity
Description: The heterogeneity of the United States (U.S.) financial markets and complex regulatory and supervisory institutional setup in the United States underscore the importance of enhancing systemic risk oversight and building effective macroprudential tools. An effective framework would encompass identification and prioritization of system-wide risks and vulnerabilities to spur timely policy action. Structures that ensure interagency sharing of information, identify possible emerging regulatory gaps, obtain a good overview of systemic risks, and develop a cooperative framework to address identified threats to financial stability would be necessary components of such a framework. This Technical Note reviews those processes in the United States, as well as examining the issues of systemic liquidity.
August 10, 2020
United States: Financial System Stability Assessment
Description: Much of the Financial Sector Assessment Program (FSAP) work was conducted prior to the COVID-19 pandemic. The lockdown of the economy has led to a massive growth shock. Following the precipitous fall, risk asset prices have rebounded, and financial conditions eased. The vulnerability analysis has been updated and largely captures this shock. Recommendations on strengthening policy and institutional frameworks remain pertinent. The approach to financial regulation and supervision was risk-focused given the high degree of compliance against international standards assessed during the 2015 FSAP.
August 10, 2020
United States: Financial Sector Assessment Program-Technical Note-Supervision of Financial Market Infrastructures, Resilience of Central Counterparties and Innovative Technologies
Description: The Unites States financial system includes several systemically important financial market infrastructures (FMIs); they are regulated, supervised, and overseen by multiple authorities. The U.S. FMIs are crucial to U.S. dollar clearing, i.e. the payment systems Fedwire Funds Service and The Clearing House Interbank Payments System (CHIPS), and for the clearing and settlement of U.S. Treasuries, i.e., the Fedwire Securities Service and the Fixed Income Clearing Corporation (FICC). Central counterparties (CCPs) that clear exchange-traded or over-the-counter (OTC) corporate securities or derivatives are of key importance to the safe and efficient functioning of these (global) markets. Disruption of critical operations at one of the large U.S. FMIs may spread to its participants, other FMIs, markets, and throughout the U.S. and global financial systems. The Financial Stability Oversight Council (FSOC) designated eight financial market utilities (FMUs) to be systemically important.1 These designated FMUs are regulated, supervised and overseen by the Federal Reserve Board (FRB), the Securities and Exchange Commission (SEC), or the Commodity Futures Trading Commission (CFTC), depending on their activities. In addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA) authorized the FRB to promote uniform standards for the management of risks by systemically important FMUs.
August 10, 2020
United States: Financial Sector Assessment Program-Technical Note-Securities—Fund Management; Equity and Derivatives Trading; and Virtual Assets and Virtual Asset Service Providers
Description: This technical note considers the regulation and supervision of fund management and equity and derivatives trading in the United States (U.S.). As one of the main destinations for household savings and a key provider of funding to U.S. corporates, investment funds play a major role in the U.S. financial system. Distortions to equity trading could cause significant loss of confidence in markets, while international post-crisis reforms for OTC derivatives have underlined the importance of greater transparency and the value of central clearing. U.S. companies have also traditionally raised more finance through equity and other capital markets than through bank lending, and so capital markets are of greater structural significance in the U.S. than in some other jurisdictions.