The Financial Sector Assessment Program: …...2013/11/15 · 1 A BSTRACT The Financial Sector...

The Financial Sector Assessment Program:

Addressing the Needs of Emerging Markets

and Developing Economies (EMDEs)

Approved by Gloria M. Grandolini

Senior Director Finance and Markets Global Practice

August 27th, 2014

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Contents Page

Glossary ................................................................................................................................... iv

Abstract ......................................................................................................................................1

Acknowledgments......................................................................................................................2

Executive Summary ...................................................................................................................3

I. Strategic Context ....................................................................................................................5

II. Country Participation, Prioritization, and Publication ..........................................................7

III. Analytical Framework .......................................................................................................11

A. Main Findings from Historical FSAPs....................................................................11 B. Standards and Codes: Slow but Consistent Progress on Compliance .....................18

IV. Increased Complexity in Standards and Codes .................................................................21

V. Addressing the Needs of Emerging Markets and Developing Economies (EMDEs).........23 A. Development Modules ............................................................................................23

B. FSAP Follow-Up .....................................................................................................25

VI. Off-Site Monitoring as a Complement to Field Work .......................................................30

VII. Bank-Fund Cooperation ...................................................................................................33

VIII. The Views from the Authorities ......................................................................................36

IX. Costs and Resources ..........................................................................................................39

X. Proposals and Areas Seeking Guidance Going Forward ....................................................41

Appendix I: Country Participation in the FSAP ......................................................................45

Appendix II: FSB Key Standards for Sound Financial Systems .............................................45

Appendix III: Analysis of Compliance with International Standards ......................................48

Annex I: FSAP Content since 1999 – a Text Mining Exercise

Annex II: Survey of Country Authorities, 2014

ii

Boxes

Box 1: FSAP / ROSC Analytical Framework and Review Process .......................................12 Box 2: East African Community (EAC) Development Module ..............................................24 Box 3: FIRST ...........................................................................................................................28

Box 4: Successful follow-up experiences in Latin America ....................................................29 Box 5: Albania FSAP...............................................................................................................30 Box 6: Off-Site Internal Monitoring Products .........................................................................32 Box 7: Role of the Financial Sector Liaison Committee (FSLC) ............................................35 Box 8: Summary of Key Messages from the 2009 Board FSAP Review ...............................41

Figures

Figure 1: Completed FSAPs by region ......................................................................................8

Figure 2: FSAP participation by Income Group, FY08-14 .......................................................8 Figure 3: FSAP participation by Income Group (Total) ............................................................8 Figure 4: Regulatory and Supervisory areas covered by FSAP Technical Notes....................11 Figure 5: Areas covered by Technical Notes, since the inception of the Program ..................12

Figure 6: Focus on Risks in ECA …………………………………………………..…......…13

Figure 7: Focus on Risks in AFR ………………………………………………….….......13

Figure 8: Credit Risk………………………………………………………………….....…...14

Figure 9: Systemic Risk…………………… ...........................................................................14 Figure 10: Liquidity Risk…………………………………………………………………….14

Figure 11: Operational Risk .....................................................................................................14 Figure 12: The Nonbank Sector relative to the Banking Sector ..............................................15

Figure 13: Crisis Preparedness.................................................................................................15

Figure 14: Legal Protection .....................................................................................................16

Figure 15: Resources................................................................................................................16 Figure 16: FSAP Financial Inclusion Technical Notes by Focus and Region (2000 – 2013) .17 Figure 17: Recent Evolution of Detailed Assessment Reports under the FSAP .....................18

Figure 18: BCP (1999-2012) -- Average compliance over time..............................................19 Figure 19: IOSCO (2000-2011) – Average compliance over time ..........................................20

Figure 20: IAIS 17 (2000-2003) and IAIS 28 (2003-20012): Compliance dispersion ............20 Figure 21: Most frequent noun phrases of a sample of lending/finance projects mentioning the

FSAPs ......................................................................................................................................26

Figure 22: Distribution of Responses to FSAP Survey………………………….…….......…36

Figure 23: Institutions Represented .........................................................................................36 Figure 24: Adequacy of the FSAP Scope ................................................................................37 Figure 25: Progress of Implementation………………………………….…………………..…....…..…39

Figure 26: Reasons for partial implementation of FSAP recommendations ...........................39 Figure 27: BCP (1999 – 2012): Average compliance per core principle ................................49 Figure 28: IAIS (2000 – 2003): Average compliance per core principle ................................50 Figure 29: IAIS (2000 – 2003): Compliance dispersion ..........................................................50 Figure 30: IAIS (2003 – 2012): Average compliance per core principle ................................51

Figure 31: IAIS (2003 – 2012): Compliance dispersion ..........................................................52 Figure 32: IOSCO (2000 – 2011): Compliance per core principle ..........................................53

AppData/Local/Temp/Domino%20Web%20Access/FSAP%20Board%20Paper%202014%20V5_Aug%204_tracked.doc#_Toc394943271




iii

Tables

Table 1: Completed FSAPs by region .......................................................................................8 Table 2: Publication Trends .....................................................................................................10

Table 3: Average Number of Formal Standards Assessments Conducted During FSAP

Missions ...................................................................................................................................18 Table 4: Revisions of Standards and Codes .............................................................................21 Table 5: Stability and Development Modules .........................................................................23 Table 6: FSAP Technical Assistance and FIRST follow-up ...................................................27

Table 7: FSAP costs .................................................................................................................40 Table 8: Profile of Assessment Missions (FY09–14 averages) ...............................................40 Table 9: Financial Standards Assessment Completed and Underway .....................................47 Table 10: BCP (1999 – 2012): Strongest and weakest observed compliance .........................49

Table 11: IAIS (2000 – 2003): Strongest and weakest observed compliance .........................51 Table 12: IAIS (2003 – 2012): Strongest and weakest observed compliance .........................52 Table 13: IOSCO (2000 – 2011): Strongest and weakest observed compliance .....................53

iv

GLOSSARY

ADM Accountability and Decision-Making

AM Aide-Memoire

BCP Basel Core Principles for Effective Banking Supervision

CAS Country Assistance Strategy

CMU Country Management Unit

CPF Country Partnership Framework

CPS Country Partnership Strategy

CSC Country Sector Coordinator

DAR Detailed Assessment Reports

DPL Development Policy Loan

EAC East African Community

EMDEs Emerging Markets and Developing Economies

F&M Finance and Markets

FIRST Financial Sector Reform and Strengthening Initiative

FMI Financial Market Infrastructure

FSA Financial Sector Assessment

FSAP Financial Sector Assessment Program

FSB Financial Stability Board

FSLC Financial Sector Liaison Committee

GFSW Global Financial Systems Watch

GP Global Practice

HIC High-income Country

IAIS

ICP

International Association of Insurance Supervisors

Insurance Core Principles

ICR Insolvency and Creditor Rights

IFI International Financial Institution

IOSCO International Organization of Securities Commissions

LIC Low-income Country

MIC Middle-income Country

P&PF Policy and Procedure Framework

RAS Reimbursable Advisory Services

ROSC Report on Standards and Codes

SA Standards Assessments

SCD Systematic Country Diagnostic

SFI State Financial Institution

SME Small and Medium Enterprise

SSB Standard Setting Body

TN Technical Note

VP Vice Presidency

WBG World Bank Group

1

ABSTRACT

The Financial Sector Assessment Program (FSAP) is already in its 16th

year of implementation

with more than 250 joint Bank-Fund assessments since its inception. A Board review is due in

2014, in line with the practice that a Board review takes place every five years. This FSAP

Review paper has been coordinated with the Fund FSAP Review paper through the joint

Bank-Fund Financial Sector Liaison Committee (FSLC). The Bank paper focuses on the

FSAP as a vehicle to address the needs of Emerging Markets and Developing Economies

(EMDEs), while the Fund paper focuses on the FSAP as a key pillar of financial sector

surveillance. The FSAP plays a pivotal role for the financial sector work at the Bank, which in

turn is an essential component for achieving the twin goals of reducing extreme poverty and

sharing prosperity. As the cornerstone of financial sector analysis work at the Bank, the FSAP

provides an analytical framework for operations and Technical Assistance (TA), and a vehicle

for policy dialogue. There is also strong demand from client countries for the Program, with

the key reason being to obtain independent assessments of the financial sector. The FSAP is

also a key tool for the Bank’s global engagements in the financial sector, notably the Financial

Stability Board (FSB) and Standard Setting Bodies (SSBs). The paper provides a brief

description of the strategic context in which the FSAP will be implemented going forward

under the new Global Practice, and the role of Finance & Markets. This FSAP review provides

the latest information on country participation, prioritization, and publication. Using an

innovative text mining methodology, an analysis of more than 1,200 existing documents has

been conducted to identify the main issues and trends across time and regions. The paper also

reviews the different context under which the standards and codes are being assessed,

including the addition of new standards and increased complexity of the standards.

Furthermore, the paper highlights how the needs of EMDEs have been addressed through joint

IMF-World Bank FSAPs and through the implementation of development modules; as well as

follow-up implementation. Results of a survey of authorities that had an FSAP in the last five

years are presented. The paper also discusses the evolution of costs and human resources in

the program. Finally, the paper presents some proposals going forward for discussion.

2

ACKNOWLEDGMENTS

This paper was prepared by a Bank team led by Mario Guadamillas and included Aquiles A.

Almansi, Yen Nian Mooi, Elena P. Mekhova, Rafael Pardo and Liudmila Uvarova (all

GFMDR). The paper has been cleared by Peer Stein and Sebastian-A Molineus (both

GFMDR). Discussions were held with and comments received from regional VP offices,

including Jan Walliser and Khaled F. Sherif (AFR); Antonella Bassani and Sally Burningham

(EAP); Anna Bjerde (ECA); Gerardo M. Corrochano and Manuela V. Ferro (LAC); Gerard A.

Byam (MNA); and Akihiko Nishio (SAR). Comments were also received from Ana Maria

Aviles (MD-CFO office), Seynabou Sakho (MD office), Hester Marie DeCasper (GPVP

office); John A. Roome and Idah Z. Pswarayi-Riddihough (GPSOS); and Jeffrey Lewis (Chief

Economist, GPSCE). Asli Demirguc-Kunt (DECRG) and Maria Soledad Martinez Peria

(DECFP); Vijay Srinivas Tata (LEGAP); and Jeff Chelsky (OPSRE) also provided helpful

comments.

The team received inputs and comments from a broad number of GFMDR colleagues,

including Lily L. Chu, Samuel Maimbo and Virginia Brandon; Consolate K. Rusagara, Hanh

Thi Bic Le and Jatin Dawar; Pierre-Laurent Chatain and Erik Feyen; Jean Denis Pesme;

Alison Harwood and Ana Fiorella Carvajal; Michel Noel and Craig W. Thorburn; Massimo

Cirasino and Maria Teresa Chimienti; Douglas Pearce, Luis Trevino, Bujana Perolli and Leyla

Castillo; Aurora Ferrari; Alfonso García Mora and Eva M. Gutierrez; Irina Astrakhan, Cedric

Mousset, and Yira Mascaró; James Seward; Simon C. Bell and Gabriel G. Sensenbrenner; and

Henry K. Bagazonzya.

Finally, as mentioned in the abstract, the paper was coordinated with the IMF through FSLC,

and comments were received from Christopher Towe and Dimitri Demekas (both MCM).

3

EXECUTIVE SUMMARY

In an increasingly financially integrated world, new global risks have emerged with

important ramifications for financial development and stability in World Bank

Group (WBG) client countries going forward. Developing and promoting effective

regulatory, supervisory, and other financial sector norms and policies in WBG client

countries is therefore an important component of the Bank’s strategy. Through its global

engagements (e.g., the G20, FSB, and SSBs), the WBG is actively participating in defining

these policies and promoting the development of safe, efficient, and inclusive financial

systems.

The WBG is uniquely positioned to foster financial development. Financial

institutions, faced with the current environment, are forced to consider trade-offs between

using short-term and long-term instruments, as well as contemplate their presence in

domestic versus international markets. Increasingly, there is also a shift toward more

market-based financing solutions, as banks adjust their balance sheets and business

models. Efforts to build a sound development of market-based financing, together with a

more resilient banking system, will contribute to global financial stability as well as long-

term economic prosperity. These efforts will help towards achieving the WBG’s twin

goals of reducing extreme poverty and sharing prosperity in a sustainable manner.

The FSAP plays a pivotal role in the WBG’s work on the financial sector: i) it is the

cornerstone of financial sector analysis work at the WBG that provides a sound analytical

framework for operations and technical assistance (TA) in the sector; ii) it underpins the

engagement with country authorities and provides a vehicle for policy dialogue; iii) it is an

important vehicle for the WBG to present the perspectives of EMDEs in the global

engagements agenda. About 85 percent of the member countries have already participated

in the program or agreed to do so in the near future. For EMDEs, a chief reason for their

demand for FSAPs is the desire to obtain an independent assessment of the country’s

financial sector.

There has been significant progress since the last FSAP Board Review in 2009. The

quality and coverage adequacy of assessments have improved (according to a recent

survey of country authorities). The implementation of modular assessments has been very

successful. The FSAP has included new analytical tools (see Box 1), complemented by

off-site monitoring. The WBG has continued its efforts to support follow-up

implementation (e.g., through the FIRST Initiative programmatic window) and

implemented some cost-effective measures. Countries have also indicated a substantial

implementation of main recommendations.

Bank-Fund collaboration and coordination of FSAP-related activities remains the

4

key task for the Financial Sector Liaison Committee (FSLC) going forward.

Coordination is especially important when differences in Bank and Fund institutional

priorities arise. Moreover, there have been concerns on both sides that the new mandate by

the Fund for regular assessment of “systemic jurisdictions” may crowd out the ability for

the Program to deliver joint assessments in other jurisdictions. The FSLC should also

ensure that clearer delineation of institutional responsibilities for specific FSAP outputs

(e.g., technical notes and ROSCs) does not affect process effectiveness, and that the

jointness of the program is preserved.

In sum, there are some opportunities and challenges going forward: i) the need for

more effective response to demand from EMDEs; ii) the challenge of dealing with the

added complexity in the assessment of the standards and codes; iii) continuing to benefit

from the successful implementation of the modules, while keeping a collaborative

approach for the implementation of joint IMF-WB updates; iv) improving the Bank-Fund

collaboration through FSLC beyond FSAP coordination; v) the need to adapt internal

procedures to effectively implement the program and ensure follow up in the context of the

new Global Practices (GP) in the Bank. To this end, the FSAP is adapting its processes to

the new GP structure to ensure continuity of high quality and effective engagement with

countries. FSAP guidelines and procedures are being adapted in line with the

Accountability and Decision-Making (ADM) framework and consistent with the Policy

and Procedure Framework (P&PF).

In this context, this paper provides in depth background information, raises some

questions and presents several proposals for Board discussion and guidance:

Given the recent decrease in participation by low-income countries (LICs) due to

increased focus on countries with systemically important financial systems, to what

extent is a rebalancing of country prioritization needed?

Regarding standards and codes, to what extent are formal assessments the best

vehicle to support safe financial systems, or can more flexible approaches be

followed?

While the implementation of modules has been very successful, they should not be

used as a substitute (due to budget constraints) to full updates when the intended

scope is broad.

The FSLC has continued to coordinate FSAP-related activities productively;

however, there is room for broader financial sector work collaboration including

through enhanced knowledge sharing, technical assistance and policy development

coordination.

5

I. STRATEGIC CONTEXT

1. Financial sector development is an essential component for achieving the World

Bank Group’s (WBG) twin goals of reducing extreme poverty and sharing prosperity in a

sustainable manner. The two goals emphasize the importance of economic growth, inclusion,

and sustainability – including strong concerns for equity. As stated in the 2013 WBG Strategy,

“Developing countries’ strong economic performance is shifting the world’s economic center

of gravity, the private sector is driving employment growth and transforming living standards,

private investment has become the dominant mode of capital transfer worldwide, and financing

for development is coming from more diverse sources”. Higher levels of financial

development reduce the share of population living below the poverty line, as shown in

empirical research.1 Responsible financial systems also directly help the poor by protecting

incomes through the provision of savings and investment instruments, and minimizing risks

through insurance and pension systems. Financial sector development is also crucial in

supporting growth and promoting shared prosperity – income inequality falls faster in countries

with better-developed financial intermediaries.2 Financing gaps are a developmental challenge

for many countries. Small and Medium Enterprises (SMEs) face a $2 trillion financing gap,

and 2.5 billion adults worldwide lack access to financial services. In the public sector, low-

income governments require 7-9 percent of GDP’s worth of financing for infrastructure, with

$45 billion gap per annum in Africa, and $800 billion gap in Asia over the next ten years.3

2. Financial crises prevent countries from achieving the twin goals, as demonstrated

in the most recent episode, and highlight the importance of a well-regulated and

supervised financial sector. The most recent global financial crisis had pushed the incomes of

125 million people worldwide below the poverty line,4 with 22 million people losing their jobs

in 2008 alone.5 Developing and promoting effective regulatory, supervisory, and other

financial sector norms and policies in our client countries is therefore an important component

of the WBG’s strategy. Definitions of clear, comprehensive and well-thought international

standards for both financial and nonbank financial institutions are essential for this. Through its

global engagements (e.g., the G20, FSB, and SSBs), the WBG is actively participating in

1 Beck, Demirgüç-Kunt, and Levine (2007); Honohan (2004), Claessens and Feyen (2007).

2 Beck, Demirgüç-Kunt, and Levine (2007).

3 Sources: World Bank Development Report 2012; the IIF, IMF, McKinsey Global Institute, 2012; World Bank

Enterprise Surveys 2013; World Bank, FPD Enterprise Surveys, 2013; Global Financial Development Report

2012.

4 World Development Report, 2013.

5 Eurostat, December 2013.

6

defining these standards and promoting the development of safe, efficient, and inclusive

financial systems.

3. In an increasingly financially integrated world, new global risks have emerged

with important ramifications for financial development and stability in WBG client

countries going forward. In the wake of the global financial crisis, EMDE ties to international

markets have surged.6 At the same time, the international financial system continues to

experience bouts of stress and volatility as it adjusts to the new global financial regulatory

architecture, the realignment of bank business models,7 and shifts toward more market-based

financing solutions. New or exacerbated existing fragilities in financial systems of WBG client

countries affect currencies and reserves, interfere with the local credit cycle, distort asset

prices, and impact incentives for structural reform. Moreover, these fragilities are compounded

by shallow local markets and a lack of strong institutions, supervisory and surveillance

capacity, technical experience, and macroprudential tools.

4. The WBG is building “finance” as a core line of business, with a full suite of

diagnostic, finance, technical assistance, and risk mitigation instruments. The WBG is

very actively engaged in the global engagements agenda (e.g., G20 and FSB) on the design and

implementation of financial sector regulatory reforms. The WBG is also uniquely positioned

to foster financial development in client countries by supporting efforts for more effective

regulation and supervision; financial integrity; the development of capital markets and nonbank

financial institutions; stronger financial infrastructure; and financial inclusion. A full suite of

instruments will enable the WBG to more effectively help client countries deal with the

numerous challenges in the financial sector. All these efforts to build a sound development of

market-based financing, together with a more resilient banking system, will contribute to

global financial stability as well as long-term economic prosperity.

5. The Financial Sector Assessment Program (FSAP) is widely recognized as an

important instrument for diagnosing potential vulnerabilities and analyzing development

priorities in the financial sector. It was jointly developed by the World Bank and IMF in

1999 in the aftermath of Asian financial crisis. Since its inception, the Program has gained a

reputation among the international community and participating countries as an important

diagnostic tool for the financial sectors of Bank-Fund member countries. The Program

6 Since 2009, EMDE external debt securities have doubled to $2.7 trillion, fund allocations to EMDEs quadrupled

to $1.7 trillion, and foreign participation in some local bond markets increased up to 26 percent of volume

outstanding. And although international banks retrenched abruptly during the crisis, their claims on EMDEs are

over $6.5 trillion and growing.

7 Financial institutions, faced with the current environment, are forced to consider trade-offs between using short-

term and long-term instruments, as well as contemplate their presence in domestic versus international markets.

7

contributes to: i) identify strengths, risks, vulnerabilities and development opportunities in

financial systems; ii) assess the impact of macro-economic environment on financial sector

performance, and vice-versa; and iii) identify links among sub-sectors of the financial system

to determine the potential for systemic crises.

6. The FSAP plays a pivotal role in the WBG’s work on the financial sector:

i. It is the cornerstone of financial sector analysis work at the WBG that provides

a sound analytical framework for operations and TA in the sector. The FSAP’s

comprehensive coverage, integrated approach to assessments, and deep treatment of

issues in the financial sector provides the analytical foundational basis for much of

the sector’s operational and technical assistance work at the WBG.

ii. It underpins the engagement with country authorities and provides a vehicle

for policy dialogue. The close contact, cooperation, and discussions with the

authorities while conducting the assessments is often the precursor to deeper policy

dialogue that continues after the FSAP is completed. In some instances, the FSAP

provides the opening for new country engagements.

iii. The FSAP is an important vehicle for the WBG to present the perspectives of

EMDEs in the global engagements agenda. The Bank has been able to leverage

on the recognition of the FSAP as an important diagnostic instrument to actively

participate in international fora on changes to financial regulatory reform, e.g., the

G20, FSB, and the SSBs. For the Bank, having a seat at the global table enables it to

bring to the table perspectives on issues with implications for EMDEs. The Bank

has also been able to provide important feedback to standard-setters based on its

experience with the implementation of standards and codes.

II. COUNTRY PARTICIPATION, PRIORITIZATION, AND PUBLICATION

7. About 85 percent of the member countries have participated in the program or

agreed to do so in the near future. Since the inception of the Program, 254 FSAPs have taken

place, with participation from all the six regions of WBG client countries (see Appendix I). In

recent years, the regional distribution has been skewed towards the Eastern Europe & Central

Asia region due to the financial crisis. Table 1 and Figure 1 show the total number of FSAPs

by region.

8

Table 1: Completed FSAPs by region Figure 1: Completed FSAPs by region

AFR 50 32 16 2

EAP 17 12 2 3

ECA 60 28 25 7

LAC 45 23 21 1

MNA 32 16 12 4

SAR 8 4 3 1

non-Bank 42

254 115 79 18

Tota l Ini tia l

AssessmentUpdate Module

Source: WB FSAP Management Unit.

8. Relative participation of Low-Income Countries (LICs) compared to Middle-

Income Countries (MICs) and High-Income Countries (HICs) has been low, and

declining in recent years. This trend of declining participation from LICs is more pronounced

in recent years since the IMF mandated FSAPs for countries with systemically important

financial systems, beginning in 2010. For the years 2009 to 2014 cumulatively, 86 percent of

FSAPs has been in MICs/HICs while only 14 percent has been in LICs. LIC participation has

been declining, from around 23 percent in 2009 and 2010 to less than 10 percent in 2012 and

2013. In 2014, LIC participation has picked up slightly with 17 percent of all the FSAPs

undertaken being in the LIC countries.

Figure 2: FSAP participation by Income Group,

FY08-14

Figure 3: FSAP participation by Income Group

(Total)


9. Several criteria determine FSAP prioritization, the first one being the systemic

importance of a country’s financial system. FSAP prioritization memos are sent to Bank and

Fund Management twice a year prior to the Spring and Annual meetings, and inform

9

Management on the FSAP work program for the current and upcoming fiscal years.

Participation in the program is voluntary,8 but country requests are prioritized based on the

following criteria:9 (i) the systemic importance of the country; (ii) external sector weaknesses

or financial vulnerabilities; (iii) major reform programs that might benefit from a

comprehensive financial sector assessment; and (iv) features of the exchange rate and

monetary policy regime that make the financial system more vulnerable, such as inconsistency

with other macroeconomic policies. Maintaining a balance across regions and different levels

of financial sector development is also important, as is the time elapsed since the initial FSAP

or previous FSAP update (Section X discusses if a rebalancing of these prioritization criteria is

needed).

10. Country authorities have increasingly disclosed various parts of the final FSAP

reports to the public, especially Detailed Assessment Reports (DARs) more recently.10

Table 2 shows the evolution in the publication of the Financial Sector Assessments (FSAs),

DARs and Technical Notes (TNs). The variation in disclosure trends has been driven by

changes in the IMF and WBG access to information policies and international commitments, as

well as those established by the FSB.11 In addition, countries see FSAPs as a signal to the

international community. In a survey of country authorities, almost two-thirds of respondents

8 Except for 29 jurisdictions designated by the IMF as having systemically important financial systems. See IMF

Board paper on “Mandatory Financial Stability Assessments under the Financial Sector Assessment Program:

Update” November 15, 2013.

9 These criteria were defined based on Board discussions at the beginning of the program implementation. See for

example Financial Sector Assessment Program (FSAP) -- A Review: Lessons from the Pilot and Issues Going

Forward November 2000 that stated that “FSAP should be targeted to systemically significant market economies.

However, some Directors noted that countries that are not systemically important in international markets should

also have the opportunity to participate in the program to help them strengthen and develop their financial

sectors, avoid costly financial crises and, where relevant, prepare the ground for market liberalization and

greater access to the international capital markets”.

10 This trend is in line with the call for a more open publication policy by the 2009 FSAP Review: “The reach and

impact of FSAP assessments can be enhanced by a more open publication policy. At present, the Aide-Mémoires

produced by FSAP teams are confidential documents, while Technical Notes, FSSAs, and FSAs may be published

with the consent of the authorities. There is merit in the status of keeping Aide-Mémoires unchanged: these

documents often contain market-sensitive information, data on individual institutions, or detailed assessments of

compliance with international standards.”

11 To lead by example, as described in the FSB's Framework for Strengthening Adherence to International

Standards, FSB member jurisdictions have committed to: i) implementing international financial standards; ii)

undergoing an assessment under the IMF-World Bank FSAP every five years; iii) disclosing their degree of

adherence of international standards, notably by publishing the Detailed Assessments Reports (DARs) prepared

by the Bank and the Fund; and iv) undergoing periodic peer reviews using, among other evidence, reports

prepared as part of the FSAP. As some of the FSB initiatives go beyond its member jurisdictions this peer

pressure is also affecting many other countries.

10

indicated that communicating their country’s progress was a reason for disclosure of different

parts of the FSAP report. While higher publication rates of FSAP documents have brought

further transparency, increased peer pressure has also affected the candidness of the FSAP

dialogue with the authorities, especially regarding standards and codes assessments. Any

difference of views between country authorities and FSAP teams are ultimately resolved, if

needed, through FSLC.

Table 2: Publication Trends (Published documents as a percentage of issued documents)

FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14

FSA 10% 24% 64% 36% 37% 28% 17% 32% 62% 39% 6% 13% 56% 40%

DARs 0% 0% 0% 2% 14% 32% 45% 7% 30% 8% 67% 78% 75% 44%

TNs 0% 0% 0% 4% 11% 16% 25% 0% 1% 12% 9% 10% 16% 15%

Source: WB Databases.

11. Most countries have opted to provide FSAP teams with information on a

confidential basis; without precluding the publication of final FSAP documents if they

opt for disclosure. Under the Bank’s Access to Information Policy, effective July 2010, the

Bank commits to make publicly available any information in its possession that is not on a "list

of exceptions". FSAP documents may not be made publicly available on the basis of two

specific exceptions: (i) the information contained in the FSAPs is deliberative,12 and (ii) FSAPs

include and are prepared using information provided by member countries or third parties in

confidence.13 Most countries that undertook the FSAP have opted to establish that the

information was provided “in confidence”, prior to the FSAP assessment. As such, the

analyses generated as a result of, or in response to that information, have been kept confidential

until authorities agree to disclosure.14

12

Exception related to Deliberative Information on the World Bank Policy on Access to Information.

13 Exception related to Information Provided by Member Countries or Third Parties in Confidence on the World

Bank Policy on Access to Information.

14 The FSAP Management Unit in coordination with LEGVP and OPCS informed regional Sector Managers and

FSAP Team Leaders through official internal memos about the “Implications of new World Bank Access to

Information Policy for the FSAP and Detailed Assessments undertaken under the FSAP” (May 2010) and “Filing

of the FSAP documents and the World Bank Access to Information Policy” (December 2012) on processes to be

followed that are consistent with the Access to Information Policy.

11

III. ANALYTICAL FRAMEWORK

A. Main Findings from Historical FSAPs

12. FSAPs offer a comprehensive assessment on the whole financial sector (with the

exception of modules) and analyze a broad range of issues. These relate to financial sector

regulation and supervision, markets, and infrastructure in the context of a given

macroeconomic environment. The main issues identified are communicated to the authorities

at the end of the work in the field. These are then complemented by in-depth analyses on

several technical standards through the Detailed Assessments Reports (DARs), and technical

areas are covered through the Technical Notes (for details, see Box 1).

13. The Technical Notes from the last few years have shown an increased focus on

cross-border and cross-sectoral issues, as well as financial inclusion. The inventory of

Technical Notes (1,045 as of June 2014, not including DARs) shows that topics are varied and

diverse, and as expected, depend on country circumstances. In the aftermath of the global

financial crisis, there has been increased coverage of crisis-related areas in recent years. Recent

FSAPs also tended to be less bank-centric, with increased attention going to the nonbanking

financial sector (see Figure 4). Another area that has gained increased focus in recent years is

access to finance, which has become the second most covered topic after banking (see Figure

5).

Figure 4: Regulatory and Supervisory areas covered by FSAP Technical Notes


12

Figure 5: Areas covered by Technical Notes, since the inception of the Program


Box 1: FSAP / ROSC Analytical Framework and Review Process

The FSAP / ROSC makes use of a collection of tools, skills, and expertise of analytical methods with different

objectives to evaluate the diversity of areas covered on its assessments. The timing, detail, scope and depth of

these tools vary depending on the sector, assessment type, and stage of the evaluation. The selection of tools

and expertise is defined at the scoping level, tailoring the needs of the financial sector in review.

Assessment of standards and detailed technical notes of selected issues have been widely used since the

beginning of the program. A set of questionnaires, guidance notes, principles, and methodologies have also

been a part of the toolkit from the onset. Most recently, the introduction of Risk Assessment Matrices, new

assessment frameworks (e.g., crisis preparedness, governance, macroprudential, resolution) and new Guidance

Notes (e.g., on financial sector standards assessments,15

and on Financial Inclusion), and a more widespread use

of off-site tools (see Section VI) have strengthened the analytical content of the reports.

The Bank’s FSAP management unit has also worked on inventories and principle-by-principle-grading tables to

increase the comparability and standardization of the quality of the assessments across countries.

Furthermore, to ensure quality, clarity and consistency, the Bank has implemented a review and clearance

process for all the different documents that comprise the FSAP Report which consists of: a post-mission review

meeting to discuss main findings and exchanges comments with other experts and internal stakeholders; a

document by document peer review; and a layered clearance process depending on the type of document.

15

The guidance notes on financial sector standards assessments were developed jointly with the IMF and

published in January 2013.

13

14. An analysis16 of the main issues and trends covered in EMDE FSAPs shows

evolving perceptions about key financial sector issues across regions, including risks (for

more details see Annex I). This exercise thus intends to identify and illustrate global and

regional trends in the content of the wealth of information delivered through Aide-Memoires

(AMs), Technical Notes and Detailed Assessment Reports in FSAPs. A primary focus of FSAP

AMs has been to identify financial sector risks.17 The attention to risks, measured as the

fraction of each AM’s paragraphs discussing any types of risks, has varied considerably across

regions and over time. For example, attention given to risks in ECA has increased steadily

over time, particularly after the recent global financial crisis, while it varies more in AFR

(Figures 6 and 7).

Figure 6: Focus on Risks in ECA Figure 7: Focus on Risks in AFR


15. Bank credit risk has been consistently the most prominent among risk discussions,

while discussions on systemic risk temporarily increase after a crisis. Given the common

emphasis on banking sector issues in FSAPs, the attention on credit risks is expected.

Unsurprisingly, there was an increased focus on systemic risk immediately after crisis episodes

(e.g., the Asian Financial Crisis and the recent global financial crisis), and it smoothly declined

after. Figure 9 shows the weight given to systemic risk, as measured by the paragraphs

discussing systemic risks, as a fraction of all paragraphs on risks. As for liquidity risks, there

has been a fairly stable focus in general (Figure 10), but with a clear upward trend in ECA and

16

This analysis uses a text mining methodology on the Aide-Memoires, DARs and TNs delivered by FSAP

missions. Contrary to the usual “close reading” of individual documents, text mining consists in the “distant

reading”, with diverse text parsing and search algorithms, of an entire corpus. Using search algorithms with

natural language data requires, however, not only knowing what to search for precisely; it also requires a

comprehensive list of the different ways mission teams of diverse cultural or professional background might have

expressed identical, similar or related ideas.

17 Closer attention to risks in FSAPs includes, for example, new Risk Assessment Matrix (RAM), enhanced stress

testing, and spillover analyses developed by the IMF.

14

to some extent in LAC. Meanwhile, attention to operational risk has slowly but consistently

increased since the start of the Program (Figure 11).

Figure 8: Credit Risk Figure 9: Systemic Risk

Figure 10: Liquidity Risk Figure 11: Operational Risk


16. In recent years, there has been a marked increase in interest on the nonbank

sector. As shown in Figure 12, the fraction of Aide-Memoire paragraphs dedicated to the

discussion of the nonbank sector relative to the banking sector has increased. This is in line

with the higher number of TNs covering nonbank financial sector topics, including capital

markets, insurance, and pensions, among others. The greater focus on the nonbank sector

reflects an increased interest of country authorities in diversifying their financial sectors and

moving away from bank-centric financial systems.

15

Figure 12: The Nonbank Sector relative to the Banking Sector


17. There has also been increased interest on crisis preparedness. Figure 13 shows the

percentage of AMs which address crisis preparedness for selected regions.18 While nearly all

AMs have dealt with crisis preparedness since 2009, it is noteworthy that the increase in

interest has been observed since 2006. Strong interest has been observed in countries that have

recently experienced a crisis (e.g., in ECA) and countries with a history of financial crises

(LAC). Crisis preparedness issues included crisis simulations, systematic vulnerability

assessments, and macroprudential analysis.

Figure 13: Crisis Preparedness


18. The development of supervisory agencies, including the issues of resources and

legal protection, is a key component of FSAPs, usually drawing from accompanying

ROSCs. For example, Figure 14 illustrates the fraction of AMs delivered each year in ECA

and LCR that discuss the lack of adequate legal protection for supervisors. The issue of legal

protection has been raised in multiple recent FSAPs because assessors have observed that

current regulatory regimes did not provide enough protection to central bank and supervisory

18

The number of observations in the other regions are not sufficient to be statistically meaningful.

16

staff against lawsuits while discharging their duties in good faith. Insufficient legal protection

also compromises independence of the supervisory agencies. The lack of supervisory

resources was another issue that featured in AFR, EAP, and LCR FSAPs (Figure 15).

Countries were concerned about the inadequate resources in comparison with the

responsibilities, as well as lack of skills and capacity to carry out their duties. Supervisory

resources were often unable to keep up with the evolving complexity of the financial systems

and changing risks in relation to financial stability and integrity.

Figure 14: Legal Protection


Figure 15: Resources


19. Financial infrastructure topics have received constant attention throughout the

years, as demonstrated by the stable share of AM space over time. Payment systems issues

have received a constant focus as countries continue adapting and upgrading their payments

infrastructure following quick technological evolution. Large-value systems, and in particular

real-time gross settlement systems, have been at the core of financial infrastructure assessments

since the inception of the FSAP due to financial stability and monetary policy implications.

The interdependency between payment systems and securities settlement arrangements has

been largely recognized in financial infrastructure assessments, in that they consistently use

securities clearing and settlement concepts such as delivery-versus-payment. The recent

adoption of innovative payment schemes and channels that hold new potential in terms of

17

financial access (see following paragraph), and the emergence of nonbank payment service

providers shows the inclusion of new concepts in payment systems assessments, such as

electronic money and mobile payments. Credit reporting systems, another important pillar of

financial infrastructure, also show a stable trend which can be attributed to their indispensable

function as a tool for financial sector supervision, and an enabler of access to credit.

20. Seventy percent of countries which had an FSAP during 2000 – 2013 have

undertaken at least one financial inclusion focused assessment through TNs.19 From a

regional perspective, through the same period, the majority of countries have focused on access

to finance and SME finance, as well as financial infrastructure. Additionally, housing finance

and microfinance assessments have had a prominent role, in particular among the EAP, AFR,

and SAR regions (see Figure 16). While access to finance and SME finance are concepts that

have been used consistently over time in the context of development policies, additional related

concepts have gained more attention in recent years, including financial inclusion, mobile

payments, consumer protection, and financial literacy. For example, from the periods of 2000-

2006 to 2007-2013, the usage of concepts related to SME finance has increased by more than

200 percent, and the usage of ‘financial inclusion’ as a term has grown over ten times. These

findings reflect an evolution in the development of innovative delivery channels and products,

such as electronic money and mobile payments. There has also been an increased focus on

financial consumer protection, consumer empowerment and financial literacy, especially

following the 2008-2009 global financial crisis.

Figure 16: FSAP Financial Inclusion Technical Notes by Focus and Region (2000 – 2013)

(% of countries that performed an FSAP by region)

Source: World Bank Group, Financial Sector Assessment Program Reports and technical notes for different

years.

19

FSAP technical notes related to financial inclusion are focused on access to finance and SME finance, financial

infrastructure, housing finance, microfinance, and/or credit unions development.

18

B. Standards and Codes: Slow but Consistent Progress on Compliance

21. The average number of assessments of standards and codes conducted under the

FSAP has been increasing in recent years, notably of the financial regulatory and

supervisory standards (see Table 3 and Figure 17). For instance, Table 3 shows that an

average of four formal assessments per FSAP were done for initial assessments and 2.3 for

updates in FY2014, compared to only 1 and 1.1 respectively in FY2010. The FSAP covers

standards in the areas of banking (BCP), insurance (IAIS), and securities (IOSCO) regulation

and supervision. Financial integrity (FATF) remains a mandatory component of all FSAPs and

FSAP updates, as most recently confirmed by the IMF Board (April 2014). FSAPs also cover

financial markets infrastructure (CPSS-IOSCO), and are closely coordinated with accounting

and auditing, corporate governance and insolvency and creditor rights (ICR) assessments, all in

the area of institutional and market infrastructure. Assessments in the deposit insurance (IADI)

and resolution regimes (FSB Key Attributes, which is in pilot phase) have recently been added.

Appendix II includes the FSB list of international standards considered key for sound financial

systems.

Table 3: Average Number of Formal Standards Assessments Conducted During FSAP Missions

FY09 FY10 FY11 FY12 FY13 FY14

Initial Assessments 0.7 1.0 3.0 1.8 2.0 4.0

Updates 1.5 1.1 1.3 2.0 1.8 2.3 Modules & SA ROSCs 1.5 1.1 1.3 2.0 1.4 2.3

Source: World Bank FSAP Databases

Note: Excludes ROSCs undertaken outside FSAP missions, notably AML/CFT.

Figure 17: Recent Evolution of Detailed Assessment Reports under the FSAP

(Financial Regulation and Supervision)


19

22. Compliance with international standards of regulation and supervision by

EMDEs20 has shown slow but consistent progress. This is not an unexpected result, given the

complex and long-term institutional reforms that are needed to improve regulatory and

supervisory frameworks. Figures 18, 19, and 20 show a time series of compliance with BCP,

IOSCO and IAIS standards. The compliance was calculated using rating scales for each of the

core principles, where all three sets have similar but not identical rating scales (for details, see

Appendix III). Figure 18 shows that in 2012, using country averages,21 countries assessed on

the BCP were 64 percent largely compliant (LC) and 36 percent materially noncompliant

(MNC), with an overall average rating of all countries at 3.1 out of a fully compliant 4.

Similarly, Figure 19 shows an increasing trend in compliance for IOSCO, with a 4.1 average

rating for all the countries assessed in 2013. For IAIS, given the smaller sample available and

the change of principles in 2003, the average compliance was calculated for the periods of

2000-2003 and 2003-2012 (Figure 20). Progress was also shown, though the sample is less

statistically representative than for BCP and IOSCO.

Figure 18: BCP (1999-2012) -- Average compliance over time

C: Compliant, LC: Largely Compliant; MNC: Materially Noncompliant; NC: Noncompliant.


20

This analysis excludes the advanced economies, which are assessed only by the Fund. The timeframe of

analysis is since the inception of the FSAP program in 1999 till the end of 2013.

21 Country averages are calculated as the simple average from all the principle ratings.

20

Figure 19: IOSCO (2000-2011) – Average compliance over time

FI: Fully Implemented, BI: Broadly Implemented, PI: Partially Implemented, NI: Not Implemented.


Figure 20: IAIS 17 (2000-2003) and IAIS 28 (2003-20012): Compliance dispersion22

Y axis = number of countries

X axis = average compliance

Scale: 1: Not Observed, 2: Materially Not Observed, 3: Partially Observed, 4: Largely Observed, 5: Observed


23. The main areas identified as needing improvements are as follows: i) independence

and accountability of supervisors, that is affecting enforcement; ii) risks assessment and

management (operational, market, cross-border); iii) prudential standards; iv) group-wide

supervision; v) exposure to related parties; and vi) derivatives.

22

The separate charts reflect the change in the IAIS principles in 2003. There are also insufficient observations in

the IAIS database to make a calculation of an average rating meaningful.

21

IV. INCREASED COMPLEXITY IN STANDARDS AND CODES

24. The recent revision of standards and codes has added complexity to the

assessment process (see Table 4 for revisions). All the financial regulation and supervision

standards have been revised (BCP, IAIS, IOSCO) in the period preceding the last joint Bank-

Fund Board Reviews on the FSAP (September 2009) and the Standards and Codes Initiative

(February 2011).23 Several institutional and market infrastructure standards have also been

revised or added to. For example, the ICR standards were revised as of January 2011. The

AML/CFT Standard was revised in 2012. After the Standards and Codes Initiative Board

review in February 2011, deposit insurance and crisis resolution were the new areas added for

assessment under the FSAP. All these changes meant that the framework for conducting

standards assessments has significantly changed in the recent years.

Table 4: Revisions of Standards and Codes

Revised Standard Date of Board

submission

Main Revisions

IOSCO Principles December 2011 Enhancement of the role of securities regulators in

systemic risk and attraction of new entities into the

perimeter of regulation, such as hedge funds and credit

rating agencies.

IAIS Principles December 2011 Enhancement of risk-based solvency regime and

introduction of additional principles relating to macro-

surveillance and cross-border crisis management, as

well as greater recognition of proportionality in the

application of ICPs.

CPSS-IOSCO Principles

for FMIs

July 2012 Harmonization and strengthening of standards for

FMIs.

Basel Core Principles

(BCP)

December 2012 Strengthening of the requirements for supervisors, the

approaches to supervision, and supervisors’

expectations of banks with a greater focus on risk-

based supervision and the capacity for early

intervention and timely supervisory actions.

FATF Recommendations Under preparation Revision of standard and assessment methodology and

new opportunities and challenges with focus on risks

and assessment of effectiveness.

23

See IMF-WB, 2011 Review of the Standards and Codes Initiative.

22

ICR February 201124

2014 changes under

preparation.

2011 changes enabled assessors to take into account

the growing complexity of enterprises, and special

regimes for the treatment of corporate groups in

insolvency.

In 2014, there is an intention to convene the WBG's

Global Task Force on Effective Insolvency &

Creditor/Debtor Regimes, to consider additional

proposed updates to reflect international guidance that

has been incorporated in the UNCITRAL Legislative

Guide on Insolvency Law and other relevant texts of

UNCITRAL and other international bodies. Areas to

be considered are: (i) an elaboration of directors'

obligations in the period prior to insolvency; and (ii) a

proposed elaboration of the Principles relating to

Security Interests and collateral registries to reflect the

recommendations of the UNCITRAL Legislative

Guide on Security Interests, and (iii) whether any

updates are necessary to either the Principles or to the

assessment methodology to reflect developments in

international standards on the treatment of financial

contracts in insolvency in certain contexts.

25. Numerous factors, including the revision of the standards and FSB commitments,

have significantly changed the environment of conducting assessments. FSB member

jurisdictions25 now have a commitment to undertake an FSAP every five years and publish

Detailed Assessment Reports (DARs) of standards and codes. The pressure to publish formal

assessments has created new challenges, as assessors are faced with more resistance towards

assessment results. Furthermore, there has been use of some principles of the BCP, ICP, and

IOSCO standards for the FSB Initiative for International Cooperation and Information

Exchange. In addition to revisions to the standards as mentioned above, new standards were

added to the list of key FSB standards, adding complexity to the assessment process. The FSB

and SSBs have also launched peer review processes for implementation monitoring, some of

them based in the framework provided by the standards. In this new context, the use of the

standards and codes assessments undertaken by the Bank and Fund has broadened beyond the

institutions’ regular engagement. Without an increase in the level of resources, the increased

complexity in the assessment process and the new environment have added a significant

burden on the assessors.

24

The Board was notified through a reference in the 2011 Standards and Codes Initiative Review paper.

25 Out of the 24 FSB member jurisdictions, the Bank participates in joint FSAP assessments for nine of them

(Argentina, Brazil, China, India, Indonesia, Mexico, Republic of Korea, Russian Federation and Turkey).

23

V. ADDRESSING THE NEEDS OF EMERGING MARKETS AND DEVELOPING ECONOMIES

(EMDES)

26. The FSAP has aimed to serve the needs of WBG client countries through a better

targeted focus and more timely follow-up. Greater focus on EMDEs was achieved through

the implementation of development modules, which also allowed for more timely follow-up

and thematic approaches.

A. Development Modules

27. The September 2009 joint Board Paper introduced the option for modular FSAP

assessments, focusing on stability or development issues. The option for modules

complements the pre-existing initial FSAP assessments and updates. These modules were

intended to provide quick, flexible, and targeted responses to clients’ needs for diagnostics and

to bridge the gap of five to seven years between full assessments. Notwithstanding the benefits

and successes of the modular system, full updates done jointly with the IMF are crucial and

important for the client countries. As the scope of modules is more restricted and less

comprehensive than a full assessment, the modular FSAP is only but a complement and not a

substitute for the full FSAP.

28. Since 2009, the Bank has led and completed 10 development modules including a

regional one (East African Community), with 3 requests for FY15. Meanwhile, the IMF

has undertaken 9 stability modules with WB participation (see Table 5).

Table 5: Stability and Development Modules

FY Completed Stability Modules Development Modules

FY2011

Trinidad and Tobago Djibouti

Mongolia

Jordan

Syria

FY2012

Russian Federation

Czech Republic

FY2013

Slovenia Latvia

Sri Lanka Mongolia

Hungary Thailand

Singapore Mauritius

FY2014

Kazakhstan

Belarus

East African Community

Lebanon

Jamaica (ongoing)


24

29. The implementation of the modular FSAPs was in response to the 2009 FSAP

Review, and its flexibility has presented several benefits:

i. Greater depth in the treatment of subject areas. Development modules are an

opportunity to perform a deep dive on specific topics that are of interest or concern

for the authorities. An example of this was Thailand’s development module in FY

2013, which focused on State Financial Institutions (SFIs). In this Development

Module, the team conducted full in-depth assessments on all the eight SFIs in the

country.

ii. Timely follow-up. The flexibility of the modules allowed the Bank to respond

more quickly to the country authorities. One such example was the Jordan

Development Module conducted in FY 2010, which focused on SME finance,

insolvency, and credit reporting. These topics were selected as authorities wanted a

more comprehensive coverage on financial inclusion than what the full FSAP was

able to include. The follow-up included an MSME finance loan and TA on a

regional MSME facility. The Development Module helped to inform a series of

already-ongoing DPLs with macroeconomic and financial and private sector

development issues.

iii. Regional and thematic approaches, including cross-border linkages between

countries. Modular FSAPs were able to enhance its analysis on cross-border

perspectives, recognizing the increasing interconnectedness of the global financial

system. Development modules are able to focus more squarely on cross-border

issues, for example on regional integration, cross-border capital flows and the

spillover impact from the global or regional environment. The East African

Community (EAC) development module FSAP is one such example addressing

cross-border themes (see Box 2).

Box 2: East African Community (EAC) Development Module

The EAC Development Module FSAP was conducted in FY2014. It focused on the aspect of regional

integration, in particular on cross-border banking, payment systems, capital markets, supervision and

crisis management. This thematic focus was born out of the recognition that there were common issues

arising from the separate FSAPs conducted in each of the EAC countries.

While it was useful to view the issues from a regional lens, follow-up was more challenging on this

particular FSAP because of the absence of a single regional authority on the financial sector to engage

with as a key counterpart. Furthermore, there was an imbalance in the financial sector sizes and

conditions across the countries in this modular FSAP, making implementation of recommendations across

the different countries more challenging.

25

B. FSAP Follow-Up

30. The FSAP is an important instrument for the WBG, as it provides for policy

dialogue and a framework for the delivery of financial support and technical assistance

(TA). The FSAP is a key diagnostic tool that informs and provides the analytical foundation

for much of the WBG operational work in the financial sector. It also provides a framework for

the delivery of financial sector TA and other follow-up work by the institution, other donors,

multilaterals, and the countries themselves.

31. The 2009 FSAP Review called for linking FSAPs assessments more efficiently to

Bank follow-up lending/finance support and technical assistance. The FSAP management

unit was called to actively facilitate the ongoing dialogue about technical assistance and

follow-up work between regional and specialized staff, the FSLC, FIRST Initiative and client

counterparts. In this respect, the FSLC would also play a larger role to bring stakeholders

together and make decisions. The FSAP management unit would liaise with Country Directors

and FPD sector managers and support them with background information and

recommendations to help in discussions of the Systematic Country Diagnostics (SCDs) and

Country Partnership Framework (CPF) (Section X discusses this further in the context of the

new country engagement framework). In addition, the unit would liaise closely with FIRST

Initiative to ramp up efforts to connect assessment recommendations with efforts to provide

follow-up technical assistance. The goal was to ensure a more continuous approach to

diagnosing vulnerabilities and weaknesses in countries’ financial sectors and getting the right

resources and tools lined up to help.

32. The FSAP is an important analytical underpinning for WBG lending/finance

projects related to the financial sector. A sample of 198 projects mentioning the FSAP26 was

analyzed through a computer search. The computer searched for common noun phrases

("matters discussed") in the associated 221 documents from the projects. Figure 21 shows the

most frequent noun phrases revealing commonality between the "matters discussed" in the 198

projects and the FSAPs. This analysis does not identify if the actions supported in those

projects are consistent with FSAP diagnostics or recommendations.27

26

The sample was selected among 673 lending/finance projects (1,145 documents) fully or partially attributed to

financial sector.

27 The FSAP Management Unit in coordination with IEG is undertaking further work to analyze to what extent

lending/finance projects mentioning the FSAP are consistent with respective FSAP diagnostics and

recommendations.

26

Figure 21: Most frequent noun phrases of a sample of lending/finance projects mentioning the FSAPs


33. Much of the FSAP follow-up TA has been undertaken by the Financial Sector

Reform and Strengthening Initiative (FIRST).28 FIRST is a trust fund created in 2002 with

a primary mandate of supporting countries to implement FSAP recommendations, with the

objective of promoting sounder and more inclusive financial systems (for more information,

see Box 3). Types of activities funded include, for example, the development of new laws and

regulations, the development of financial sector strategies, and assisting countries in

sequencing reforms as a follow-up to FSAPs or in line with the countries’ broader economic

development agenda. As shown in Table 6, since its inception, FIRST projects have

supplemented Bank budget-funded TA projects. There were 282 approved FIRST projects in

the period FY2009 to FY2014, with about 60 percent linked to FSAPs and ROSCs. Of these

linked projects, 84 percent were implemented by the Bank and the rest by the Fund.

28

Current donors are: DFID, GTZ, IMF, Luxembourg, Ministry of Foreign Affairs of the Netherlands, SECO, and

the World Bank. CIDA and SIDA exited in 2014.

27

Table 6: FSAP Technical Assistance and FIRST follow-up

FY FSAP Follow-Up

TA

# Projects1

Cost

(in $ 000)

FIRST

# Projects

Amount

Committed

($ million)

FY01 2 110

FY02 3 254

FY03 14 722

FY04 15 1,873

FY05 5 150

FY06 6 459

FY07 5 204

FY08 4 235 16 4.1

FY09 8 980 13 2.7

FY10 2 169 16 2.8

FY11 5 726 24 4.9

FY12 7 643 46 10.4

FY13 1 146 22 4.9

FY14 2 15 23 8.3

1 TA fully FSAP-related. It does not consider lending operations nor broader TA work with FSAP-

related components.

Source: WB Business Warehouse & FIRST Database.

28

34. Successful follow-up from FSAP recommendations depends on several factors:

i. The motivation for reform and the country’s capability to deliver it. The FSAP

and the ROSC programs have elements of both assessment and advisory work.

Successful implementation depends critically on the motivation and capacity of

country counterparts and on the political economy context. Motivation factors vary

widely, including (e.g., in EU accession countries) peer pressure. The desire and

pace of follow-up efforts also depend on whether there is sufficient political will

and whether there is resistance of vested interests intent on maintaining the status

quo.

ii. CMU engagement. There has been more integration of FSAP findings in Country

Assistance Strategies (CAS) / Country Partnership Strategies (CPSs)29 when country

29

Used in the previous country engagement model. The new country engagement model, effective July 1st, 2014,

is discussed in Section X.

FIRST's mission is to support growth and poverty reduction in low- and middle-income countries

through the promotion of stable, deep and diverse financial sectors.

FIRST’s specific objectives are to:

Fund technical assistance in the areas of financial sector regulation, supervision and

development in response to country demands, provide support to countries to strengthen their

financial systems and/or implement standards and codes in advance of Financial Sector

Assessment Programs (FSAPs) or Reports on Standards and Codes (ROSCs), and facilitate

prioritization and systematic follow-up of related recommendations.

Assist recipients in implementing prioritized action plans addressing financial sector

development and the sequencing of reforms (e.g., as a follow-up to FSAPs), and advise

clients, especially in low-income countries, on the implementation of financial sector

development programs.

Promote coordination in the delivery of financial sector technical assistance and capacity

building, drawing particularly on private sector expertise.

Support research on and the dissemination of best practices and useful tools related to

financial sector reform and development in low- and middle-income countries.

Work with international standard-setting bodies and other relevant partners to broaden the

base of providers supporting countries’ efforts to implement standards and codes in

accordance with FSAP and ROSC recommendations and strengthen their financial systems.

In its third phase since inception, FIRST’s business model has evolved to adapt to the changing needs

of the clients and the context post global financial crisis. Phase 3 includes a programmatic facility that

supports comprehensive multi-sector, multi-year country reforms programs, with more impactful

development outcomes.

Box 3: FIRST

29

sector coordinators (CSCs) from the financial sector are more integrated in country

management units (CMUs). In Latin America, the FSAP findings were

instrumental in informing the CPS of several countries (see Box 4 on Follow-up

Experiences in Latin America). On the other hand, in instances where the financial

sector is not fully reflected in some CASs or CPSs, this does not necessarily limit

the Bank’s capacity to provide assistance in the sector. Beyond financing support,

the availability of funding from CMUs for follow-ups plays a crucial role in

deepening the dialogue between the Bank and the authorities. The CMU is thus

critical in driving FSAP follow-up, ranging from assistance in the identification of

more specific sector reform priorities to fitting detailed FSAP recommendations

into existing Bank programs in the country. It also helps leverage other funds, such

as FIRST funds or from other donors.

iii. Coordination of FSAP team with follow-up implementation team. With the

right country conditions, sufficient political will and desire of the authorities,

follow-ups are more successful when FSAP teams provide sufficient input or hand-

over to other colleagues who will pick up the endeavor (see Box 5 on the Albania

FSAP).

In Latin America, examples of extensive follow-up after the FSAP have included both lending and nonlending

support. Some examples are:

1) Jamaica: The FSAP was concluded in May 2014. The authorities expressed their interest to

implement the recommendations, utilizing a lending operation as well as other complementary

nonlending instruments. The CMU has assigned the relevant budget for the operation, and a team is

now preparing an operation based on recommendations in the areas of financial inclusion and MSME

access to finance.

2) El Salvador: Initial follow-up was focused on technical assistance on stability-related issues, and

more recently it has been focused on developmental issues. These efforts are funded by FIRST.

Technical assistance has been on the areas of crisis simulation exercises, crisis preparedness,

insurance supervision, mobile payments, and regional capital market integration.

3) Colombia: Follow-up was designed using the programmatic approach and included technical

assistance on capital market development and oversight, financial sector strategy, oversight on

conglomerates, financial inclusion issues, and housing finance.

4) Mexico: After the FSAP, country authorities request technical assistance support on insurance

supervision, the annuities market, a program for risk-based supervision. Based on FSAP

recommendations, authorities also recently approved the Financial Reform Law, and the Bank is

helping in the implementation.

These follow-up efforts are mostly funded through Bank budget, FIRST, and in some cases, through other trust

funds and reimbursable advisory services (RAS).

Box 4: Successful follow-up experiences in Latin America

30

VI. OFF-SITE MONITORING AS A COMPLEMENT TO FIELD WORK

35. The 2009 FSAP Review called for an enhanced off-site monitoring30 and analysis

to improve the continuity of monitoring and policy dialogue. This off-site component is

very important given the long intervals between updates of full assessments, which is on

average every five to seven years. The World Bank has been working on developing different

internal instruments including a global financial indicator panel database (FinStats), the

Financial Systems Monitor, the Global Financial Systems Watch, and a Country Watch List

(See Box 6 for more detailed descriptions of the products).

36. In 2010, the World Bank developed a comprehensive global financial indicator

panel database (FinStats) covering both developmental and stability dimensions. This

database is updated semi-annually and covers banks, nonbank financial institutions, and

markets. Along with it, the World Bank also created the FinStats benchmark model, which

allows for more effective cross-country comparisons to facilitate monitoring. The database and

benchmark model have an extensive user base in the WBG and the IMF and has been used in

various FSAPs and other financial sector diagnostic work.31

30

See 2009 FSAP Review: “Building up the off-site work would be a way to enhance the effectiveness of on-site

reviews and leverage the Bank’s contribution as regards its cross-country experience.”

31 Including Barbados, Brazil, Chile, Cambodia, Djibouti, El Salvador, Ghana, India, Malawi, Mozambique,

Oman, Papua New Guinea, Rwanda, South Africa, Syria, Tanzania, Vietnam, and Zambia.

Box 5: Albania FSAP

The Albania FSAP update conducted in FY2013 was an example of well-thought out synergies with other

work on the country. Of the full set of recommendations identified in the FSAP, the team selected a focused

set of priority and key recommendations. A subset of these priority recommendations was channeled to be

prior actions of a Development Policy Loan (DPL).

Of the remaining priority recommendations not covered by the DPL, three areas were identified as needing a

longer time and requiring more capacity-building – public debt management, insurance, and pensions.

Assistance for these three areas was covered through FIRST projects. The FSAP team was instrumental in

providing information useful for the preparation of project proposals for the FIRST applications.

Policy dialogue with the authorities had begun way ahead of the FSAP. The coverage and horizon of FSAP

recommendations were strategically thought out when informing the DPL and FIRST projects. This helped

to maximize synergies and efficiency in assisting the authorities to implement the FSAP recommendations.

31

37. The Financial Systems Monitor is a key product to monitor global financial

market trends relevant for EMDE financial sectors, and complements regional

monitoring efforts. In the wake of the global financial crisis, EMDEs have been confronted

with various major external financial market developments, including the overhaul of the

global regulatory framework, international funding market volatility, the massive deleveraging

of international banks and the realignment of their business models, and the spillover effects of

extraordinary monetary policy in developed markets. Such developments have had profound

consequences for the financial sectors of WBG client countries and require on-going

monitoring, particularly as EMDEs become more integrated with the global financial system.

To meet these monitoring needs, the World Bank launched the Financial Systems Monitor at

the height of the European sovereign debt crisis at the end of 2011. The Monitor is an in-depth

analytical report on key global financial sector developments and emerging financial sector

policy issues relevant for financial sectors in World Bank client countries, and complements

the monitoring efforts done in the regions.

38. The Global Financial Systems Watch (GFSW) complements the Monitor by

getting out analysis quickly as market-moving events unfold. The GFSW highlights the

impact that emerging trends in global financial markets could have on WBG clients or

operations. Both the Monitor and GFSW are products that have been helpful to FSAP teams,

especially those working on countries widely exposed to the external financial environment.

39. A Country Watch List was launched in 2011 for a restricted readership to provide

a quick snapshot on countries with a vulnerable financial sector. This readership

comprises FSAP task team leaders and senior staff, including senior management, country

directors and managers. The Watch List content is prepared by Bank regional financial sector

champions in consultation with various staff and is updated regularly. The list is not meant to

be a complete list of countries currently in crisis, nor is it meant to predict that countries

exhibiting even severe vulnerabilities will move to a full blown crisis.

32

FinStats is a ready‐to‐use financial indicator tool that allows users to benchmark and compare financial

sectors over time and relative to other countries. It was created to meet the primary data and benchmarking

needs of financial sector policy makers and analysts in support of FSAPs and other diagnostic work. It

provides:

an Excel-based dashboard application that allows users to compare different countries, as well as

generate graphs and tables;

a database of 42 financial indicators covering banking, debt markets, equity markets, nonbank financial

institutions, leasing and factoring, over a long time series; and

a benchmark indicator methodology that adjusts for structural factors to create country-specific

statistical benchmarks.

FinStats is widely used by both WBG and IMF staff for a broad range of financial sector diagnostic work

(e.g. FSAPs, DPLs, flagship reports, technical assistance) and has been downloaded over 1,700 times since

its creation in 2010.

The Financial Systems Monitor is a periodic report produced by the F&M Global Practice complemented

by monitoring efforts in the regions, which monitors, analyzes, and assesses developments in global and

regional financial systems relevant for financial sectors in client countries. It provides a summary of

important global financial market developments; information on the financial condition of key financial

institutions and systems; credit rating actions; and important changes in the regulatory framework affecting

the institutions and financial systems. It also provides a discussion on the policy implications of these

developments and key takeaways for policymakers and the Bank.

The Global Financial Systems Watch (GFSW) is a monthly analytical report produced by the F&M Global

Practice highlighting policy events, emerging developments and vulnerabilities in global financial markets

that impact WBG clients or operations. The GFSW complements the Financial Systems Monitoring work in

the F&M Global Practice as it tries to get market intelligence and policy developments out quickly to

colleagues as events unfold. The GFSW

provides an high-level summary overview of the key developments in global financial markets and

systems and important changes in the financial regulatory framework that would be of relevance for the

WBG and its clients; and

highlights issues, risks, vulnerabilities and potential pressures to keep staff and management informed.

The Financial Systems Monitor and the GFSW appear consistently as top downloads on the F&M Global

Practice intranet and have produced various positive spillover effects, including the strengthening of

regional monitoring efforts; cross-regional seminars and BBLs; WBG contributions to global engagements

(e.g., G20, FSB); briefs and speaking notes for Bank senior management; the Global Financial

Development Report, and policy and research papers.

The Country Watch List is meant for a restricted readership. It provides a quick snapshot of the financial

sector issues of countries that meet the following criteria:

financial sector vulnerabilities exist;

these vulnerabilities are perceived to be growing, looking out two to three years;

the Bank has an existing engagement and/or a potential role to play in the countries' financial sector.

Box 6: Off-Site Internal Monitoring Products

33

VII. BANK-FUND COOPERATION

40. An important vehicle for coordinating Bank-Fund work in issues related to the

financial sector is the Financial Sector Liaison Committee (FSLC). The Committee is co-

chaired by senior representatives of the Bank and the Fund; on the Fund side, its members

include staff from the IMF’s Monetary and Capital Markets Department (MCM) and the

Strategy, Policy and Review Department (SPR); and on the Bank side members comprise (as

of July 1st 2014) representatives of the Finance & Markets Global Practice, Macroeconomics &

Fiscal Management Global Practice, and Development Research Group.32

41. During the past five years, the FSLC has covered a broad range of issues and

responded to recommendations of the 2009 FSAP Review (see Box 7). In addition to

managing the joint aspects of the FSAP, the 2009 Review called on FSLC to ensure proper

governance of the modular FSAP assessments that were introduced in 2009, as well as to

continue acting as a contact point between the Bank and the Fund on other aspects of financial

sector work. In practice, the FSLC’s principal focus has been the coordination of the joint

aspects of the FSAP (scheduling, procedures, etc.). Nevertheless, it has also been active in

other aspects of the financial sector work carried out by the Bank and Fund, e.g., the FSLC has

been a forum for discussing issues raised by international standard-setters regarding standards

and codes and approaches to quality assurance of ROSCs.33

42. Smooth Bank-Fund collaboration and coordination of FSAP-related activities will

remain the key task for FSLC going forward. Coordination is especially important when

differences in Bank and Fund institutional priorities arise (e.g., the importance to the Fund of

timing missions with the Article IV consultations, and the priority that the Bank places on

using the FSAP as a platform for supporting assessed countries in follow-up implementation

through finance instruments and/or technical assistance). Moreover, there have been concerns

on both sides that the new mandate by the Fund for regular assessment of “systemic

jurisdictions” may crowd out the ability for the Program to deliver joint assessments in other

32

Before July 1st 2014, the members of FSLC comprised representatives from the Financial and Private Sector

Development (FPD) Vice Presidency (VP), the Poverty Reduction and Economic Management (PREM) VP, and

Development Economics (DEC).

33 During the reporting period (2009-2014) there were nine full FSLC meetings plus regular meetings of the FSLC

Secretariat. The meetings reviewed and discussed a wide range of topics on general management issues of the

program as well as new initiatives and papers such as: i) FSB peer reviews and its Initiative on International

Cooperation and Information Exchange (January 2010); ii) guidelines for modular and stand-alone ROSCs (July

2010); iii) FSB-IMF-WB joint report on financial stability issues of particular interest to emerging market and

developing economies (May 2011); iv) the IMF paper on Enhancing Financial Sector Surveillance in LICs:

Shallow Markets and Macrostability (February 2012); v) the 2013 WB Global Financial Development Report

(May 2012); vi) the IMF Surveillance in Low-Income Countries (November 2012); vii) coordination of the 2014

FSAP Review and approach for standards and codes under the FSAP (June 2014).

34

jurisdictions.34 The FSLC will continue to be the place where these issues will be managed at

the staff level as they emerge. The FSLC should also ensure that clearer delineation of

individual institutional responsibilities for specific FSAP outputs (e.g., technical notes and

ROSCs) does not affect process effectiveness, and that the jointness of the program is

preserved.

43. More broadly, the FSLC could also continue playing a role in ensuring

information sharing and coordination of other financial sector activities of the two

institutions. The existing framework has been successful in addressing issues as they arise, so

new and burdensome administrative requirements do not seem warranted. Nonetheless, there

remains a continued need to maximize institutional synergies:

FSAP modules: These have succeeded in providing greater clarity on the

responsibilities of the two institutions and greater flexibility to launch assessments.

However, modules should not be a substitute for joint updates when those are more

appropriate to cover country needs.35 The FSLC should continue to play an active role

in reviewing terms of reference before missions are fielded—to ensure consistent policy

positions—and to facilitate cross-support in cases where the expertise of the other

institution might be helpful.36

Knowledge sharing: given clearer delineation of individual institutional responsibility

for specific FSAP outputs (e.g., technical notes and ROSCs), it becomes very important

to maintain a strong platform for knowledge management and sharing.

34

See the Acting Chair’s Summing Up Integrating Stability Assessments Under the Financial Sector Assessment

Program into Article IV Surveillance, Executive Board Meeting 10/92, September 21, 2010: “Directors noted that

making financial stability assessments under the FSAP mandatory for systemically important financial sectors

should not lead to a diminished availability of FSAPs for members without systemically important financial

sectors. They emphasized that developmental assessments conducted by the World Bank in developing and

emerging markets should continue to be provided on a voluntary basis, at present. Given the interlinkages between

financial stability and financial development in these countries, Directors considered these developmental

assessments to be an important complement to the Fund’s stability analysis. They encouraged authorities to

continue volunteering for these assessments, and called for continued close cooperation between the Bank and the

Fund in this area.”

35 See the Acting Chair’s Summing Up Integrating Stability Assessments Under the Financial Sector Assessment

Program into Article IV Surveillance, Executive Board Meeting 10/92, September 21, 2010: “… They [Directors]

emphasized the need, in particular, to ensure that developing and emerging market countries would continue to

benefit from joint Bank-Fund assessments.”

36 See Statement from the World Bank on the IMF Board Paper: Integrating Stability Assessments Under the

FSAP into Article IV Surveillance, September 21st, 2010: “Where possible, countries facing the IMF’s mandatory

FSAP requirement should be encouraged to consider a full FSAP update, covering stability and development

issues. If this option is not possible, these countries should have the option to broaden the scope of assessment to

include key developmental aspects relevant to stability…”

35

Technical assistance: in previous years, the FSLC was active in helping establish a

basis for sharing information on the technical assistance that both institutions provided

in the financial sphere. The FSLC’s role in this area has waned more recently, at least

in part because coordination already occurs in the context of the FIRST initiative—

which is a multi-donor trust fund that supports Bank and Fund TA in a wide range of

areas—and more recently in the context of the Bank-Fund Debt Management Facility.

Nonetheless, there is scope for reviving the FSLC’s role in this area, especially in light

of the reorganization of the Bank’s work.

Policy development: Bank-Fund coordination on financial policy development already

takes place effectively on a case-by-case basis. The FSLC continues to take the lead in

coordinating work in the area of standards and codes, but when other areas arise where

coordination is needed or helpful, FSLC could take a greater role in acting as a clearing

house for such efforts.

Box 7: Role of the Financial Sector Liaison Committee (FSLC)

The 2009 FSAP Review called for a strengthened FSLC. Since its creation in 1999, the FSLC has had the

mandate to coordinate the two institutions’ financial sector agendas, focusing on the FSAP and financial sector

technical assistance. However, its structure, activities, and mandate set out at its creation (see Guidelines for

FSLC, 1999) became ill-suited to the rapidly changing global financial environment. For this reason the 2009

FSAP Review called for an enhanced FSLC to ensure that the FSAP is targeted and focused and that the

proposed changes improve the quality of the program. This would involve:

• setting country priorities, reflected in a memo sent to the top management of both institutions prior to

Spring and Annual Meetings;

• providing guidance on the analytical and policy framework for the program;

• reviewing FSAP requests from countries and, for updates, approve the proposed modality (joint “full”

missions or separate modular assessments);

• providing guidance regarding the scope and composition of assessment teams;

• serving as a vehicle for systematic information-sharing of results from stability and development

modules; and

• playing a key role in forming the strategy and overseeing the implementation of the off-site framework

that will provide continuity to the program.

New FSLC terms of reference and procedures were prepared to ensure an effective implementation of its

enhanced role.37

37

FSLC Terms of Reference agreed by FSLC meeting November 17th

2009. Guidelines for the implementation of

modules and stand-alone ROSCs were approved by FSLC in July 2010.

36

VIII. THE VIEWS FROM THE AUTHORITIES

44. A survey of FSAPs conducted in EMDEs since 2009 was undertaken, which

garnered a 68 percent response out of a sample of 60 country authorities.38 The survey

looked into the following dimensions: i) reasons for the FSAP request, ii) timeliness of the

response and the assessment; iii) process clarity and adequacy of the scope; iv) clarity,

candidness, prioritization, sequencing, and applicability of recommendations; v) handling of

confidential information and disclosure; and vi) follow-up implementation of

recommendations. The institutions represented were primarily from central banks (76 percent)

and bank superidentencies (15 percent), as well as Finance Ministries / Treasuries (7 percent).

Figures 22 and 23 show the distribution of regions and institutions represented in the survey.

Annex II presents the survey results in greater detail.

Figure 22: Distribution of Responses to FSAP Survey Figure 23: Institutions Represented

Source: Survey of Country Authorities, 2014. WB FSAP Management Unit.

45. The survey results were overall very positive and highlighted the importance and

strengths of the FSAP program. Most countries elected to undertake the FSAP to obtain an

independent assessment of their financial sector, as well as compliance with international

standards.39 Other important reasons include the desire to facilitate access to technical

assistance from IFIs or other donors, signifying the wide recognition of the FSAP as an

important tool for comprehensive assessment, and facilitating policy dialogue.

46. Country authorities were happy with the timeliness of the World Bank’s response,

communications, and scope of coverage. An overwhelming amount of more than 90

percent40 of respondents agreed with the scope of the FSAP and the clarity of process of

38

The response rate to Survey conducted for 2009 FSAP Review was just over 50 percent. The 2009 Survey

covered both advanced economies and EMDEs that had conducted an FSAP.

39 According to 2009 Survey, the major driver of requests for FSAP was to obtain an independent assessment of

country’s financial system.

40 Note: “Agree” and “Strongly Agree” responses were combined to get more unified data.

37

discussion and communication with the country authorities. All the respondents were

comfortable with the way in which confidential information was handled in the process.

47. The vast majority of respondents agreed that the FSAP provided adequate

coverage of financial sector (94 percent) and depth of analysis (86 percent).41 Country

authorities were broadly satisfied with the balance of financial sector stability issues with the

development priorities of their country and felt that the FSAP provided new analytical insights

into the country’s financial sector. A significant improvement was shown in the area of FSAP

analysis providing new analytical insights – from 60 percent in the 2009 Survey to 86 percent

in the current Survey. Nevertheless, there is room for improvement – only 58 percent of the

respondents felt that FSAP considered the unique circumstances of their country, with 30

percent neither agreeing nor disagreeing (See Figure 24).42

Figure 24: Adequacy of the FSAP Scope

0%

10%

20%

30%

40%

50%

60%

70%

80%

StronglyDisagree

Disagree Neitheragree nordisagree

Agree Stronglyagree

Don't know

94%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Stronglydisagree


Agree Stronglyagree

Don't know

86%

41

It is an improvement in comparison with the 2009 Survey, in which only about 70 percent agreed to the

adequate coverage.

42 However, in comparison with the 2009 Survey, the current ratings are higher. In 2009, only 54 percent

respondents thought that FSAP took into account the unique circumstances of countries.

The FSAP provided adequate coverage of financial

sector The FSAP provided adequate depth of analysis

38

0%

10%

20%

30%

40%

50%

60%

70%

80%

Stronglydisagree


Agree Stronglyagree

Don't know

58%

8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Stronglydisagree


Agree Stronglyagree

Don't know

72%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Stronglydisagree


Agree Stronglyagree

Don't know

86%


48. Country authorities viewed the quality of FSAP recommendations very positively;

and most have either implemented them or are in the process of doing so (see Figures 25

and 26). Respondents considered the FSAP recommendations to be clear, well-prioritized,

well-sequenced, and, in general, indicated that they were actionable with a reasonable effort on

the authorities’ part. Almost a third of the respondents indicated that the main

recommendations had been implemented, while 61 percent indicated that recommendations

were in a partial implementation phase. About 6 percent indicated that the recommendations

were not implemented. Where not all of the recommendations were implemented, the reasons

spanned timing issues (e.g., recent completion of the FSAP), limited technical capacity, lack of

political support, as well as disagreement with the recommendations.

The FSAP analysis balanced financial sector stability

issues with the development priorities of my country The FSAP analysis considered the unique

circumstances of my country

Overall, the FSAP analysis provided new analytical

insights into my country’s financial sector.

39

Figure 25: Progress of Implementation Figure 26: Reasons for partial implementation of FSAP

recommendations

(% of respondents)


IX. COSTS AND RESOURCES

49. The Bank has implemented some cost-effective measures since the 2009 FSAP

Board Review (see Table 7). From FY2010 to FY2014, the Bank’s costs of the FSAP have

been, on average, in the order of US$5 million per annum (including staff, consultants, travel

costs, and program coordination). The Bank’s cost-cutting measures had followed a period of

significant increase in demand, after the latest crisis was triggered – this was especially

noticeable in FY2010 and FY2011. The use of external consultants was gradually substituted

by internal resources. There were also travel expense savings due to the implementation of

Bank-wide travel policies. As a result of these factors, the percentage of variable costs over

total costs has decreased significantly. In the recent fiscal years (2012-2104), demand for

FSAPs has returned back to the average (about 15 requests per fiscal year). The allocation of

financial resources allows for the delivery of 15 FSAPs per fiscal year, but the new

international standards and increased complexity of existing standards is creating some

pressure on resources. Section X discusses options for more flexible approaches for the

assessments of standards and codes, to alleviate, among other issues, the pressure on resources.

40

Table 7: FSAP costs

FY2010 FY2011 FY2012 FY2013 FY2014

(Thousands of U.S. dollars)

Personnel (Total) 3,680 3,855 3,595 3,285 3,419

Secretariat 633 695 674 777 750

Internal Cross-Support 2,116 2,576 2,545 2,271 2,349

External Consultants 931 584 376 237 320

Travel 1,354 1,263 1,081 1,202 834

Other* 309 320 276 378 201

Memoranda

Fixed costs 2,749 3,271 3,219 3,048 3,099

Variable costs 2,594 2,167 1,733 1,817 1,355

Total 5,343 5,438 4,952 4,865 4,454

Source: World Bank staff estimates. * Subscription to databases, migration of the FSAP database to a new platform, etc.

50. There has been a steady turnover of team leadership and experts over time. The

average size of mission teams by type of assessment has been stable (see Table 8). The latest

Bank financial sector strategy had planned for resource replenishment, and a structured

approach to train and mentor new FSAP leaders has been developed. Every year, on average,

two to three new team leaders have been assigned to lead an FSAP under close guidance of the

FSAP Management Unit and Sector Managers. Going forward, it will be very important to

continue developing and training skilled human resources to ensure effective implementation

of the program and to maintain the high quality of deliverables.

Table 8: Profile of Assessment Missions (FY09–14 averages)

Initial Development Stand Alone

Total Assessment Update Module ROSC

Average # of Missions 1.5 1.9 1.5 1.2 1.0

Average length of Missions (in days) 14.9 16.6 14.9 13.2 14.7

Average size of Missions (WB, persons) 7.6 8.8 8.1 6.1 3.7

Average size of Missions (IMF, persons) 7.0 7.6 7.1 n.a. 2.5

Average size of Missions (Combined, persons) 13.3 16.5 15.2 n.a. 5.3

Source: Staff estimates based on Scoping Notes. 1 2009–2014; figures include preliminary scoping missions. 2 Staff members and consultants participating in more than one mission per assessment are counted once.

41

X. PROPOSALS AND AREAS SEEKING GUIDANCE GOING FORWARD

51. There has been significant progress in several of the areas identified by the 2009

FSAP Review (see Box 8). The Bank and the Fund have been able to build on the successes

and wide acceptance of the program among its membership. Notably, the quality and adequacy

of coverage of assessments have improved since 2009, as shown in the most recent survey of

country authorities.43 There have also been successful experiences in the implementation of the

modular assessments. The FSAP has included new analytical tools, complemented by off-site

monitoring. The Bank has also continued its efforts to support follow-up implementation.

Recent changes to the FIRST Initiative (e.g., the programmatic window) have provided new

avenues for more comprehensive FSAP follow-up implementation. Countries responding to the

survey have also indicated a significant implementation of the main recommendations (though

for some, only partially).

Box 8: Summary of Key Messages from the 2009 Board FSAP Review

Previous reviews of the FSAP have concurred that FSAP has helped deepening the understanding of countries’

financial sectors and linkages with the rest of the economy, enriched the policy dialogue, and ensured

consistency of the Bank and Fund advice, the last being a feature highly valued by participant countries. The

2009 FSAP Review called to:

Preserve and capitalize on the successes and wide acceptance to the program among the membership.

Introduce flexibility through modular assessments without weakening the comprehensive nature of the

overall process.

Enhance the quality, candor and comparability of assessments.

Enhance analytical tools with greater emphasis on crisis preparedness/crisis management framework,

macroprudential risks, and better explore cross-border linkages.

Enhanced off-site monitoring and analysis to improve the continuity of monitoring and policy dialogue.

Strengthen mechanisms for quality control and inter-institutional coordination through FSLC to ensure the

continued integrity of the FSAP product.

Integrate the findings of the FSAP more efficiently with Bank’s financial sector work and follow-up

technical assistance.

43

Compared to 70 percent in the 2009 Survey, 94 percent of the 2014 Survey respondents indicated that they

agreed or strongly agreed that there was adequate coverage of the financial sector in the FSAP.

42

52. However, there are some opportunities and challenges going forward:

Applying more effective response to demand from EMDEs given the IMF’s

increased attention on countries with systemically important financial systems.

Dealing with the added complexity in the assessment of the standards and

codes.

Continuing to benefit from the successful implementation of the modules, while

keeping a collaborative approach between both institutions for the

implementation of full updates.

Enhancing the Bank-Fund collaboration through FSLC.

Adapting internal procedures to effectively implement the program and ensure

follow up in the context of implementation of the Global Practices in the Bank.

53. In this context, some questions and proposals are presented below for discussion

and guidance:

i. Given the recent decrease in participation by LICs (see Section II): to what extent

is a rebalancing in country prioritization needed? Given the recent financial crisis, a

focus on countries with systemically important financial systems is reasonable and was

expected. However, assessments in these countries should not crowd out FSAPs in

LICs. From a financial sector development perspective, and in line with the Bank’s

objectives, it is very important that the program has broad coverage. Broad coverage is

also important from the financial stability perspective as crisis risks may not come

exclusively from countries whose financial systems are designated as systemically

important. Thus, a rebalancing of the prioritization criteria may be needed to ensure a

sufficient breadth of coverage.

ii. Following the analysis of the standards and codes (see Sections III and IV), to

what extent are formal assessments the best vehicles to achieve compliance with

international standards and safe financial systems? With limited resources,

increased complexity, and new added standards, the Bank and the Fund could consider

a more flexible approach to undertake these assessments. A new approach could

consider modalities beyond formal assessments, by adding flexibility while ensuring

consistency at the same time. In any case, any decision on this issue should be adopted

in the context of the joint Bank-Fund 2016 Standards and Codes Review, after

consultation with SSBs.

43

Modality and flexibility. FSAP mission chiefs/team leaders should inform

authorities of possible modalities beyond formal assessments (e.g., targeted ROSCs,

developmental assessments through technical notes). Should authorities decide to

request a formal assessment, there should be a very clear understanding about the

implications of embarking in such assessments. Some countries may better benefit

from a more flexible approach versus the formal assessment.

Ensuring consistency: If a flexible approach is followed, there should be a process

to ensure consistency and quality of the assessments. Guidance Notes based on the

existing standards and assessment methodologies will be useful in balancing

flexibility with consistency of analysis. Some standard-setters have already been

advancing in this direction (e.g., the CPSS-IOSCO Principles for Financial Market

Infrastructure).

iii. Modules have proven very beneficial for assessments with a limited scope (see

Section V), but it is important they do not become a substitute for full updates

when the requested scope is broad. The 2009 FSAP review indicated that joint Bank-

Fund assessment missions would remain the norm and would be conducted at a

frequency determined by country circumstances and the strategic prioritization of each

institution’s resources. This balance has been achieved in the last five years as the Bank

undertook 11 modules out of the 60 assessments since the last FSAP Board Review in

2009, or about 20 percent. However, there is a risk of development modules becoming

substitutes for full updates for LICs starting in FY16. This is due to the constraints on

resources arising from when the Fund is expected to receive a new wave of requests

from the G20/FSB jurisdictions.

iv. The FSLC has continued to coordinate FSAP-related activities productively (see

Section VII); however, there is room for more effectiveness in achieving broader

financial sector work collaboration between both institutions. The 2009 FSAP

Review called for a strengthened FSLC but this objective has only been achieved

partially, mostly in respect to FSAP coordination. Thus, there are opportunities to fully

achieve the intended role for FSLC as envisaged in the 2009 Board paper. These

opportunities include enhanced knowledge sharing, technical assistance and policy

development coordination. An active FSLC role beyond the FSAP and reporting of

FSLC activities to top management every fiscal year will be important to achieve

broader financial sector work collaboration.

54. Finally, the Bank has started to implement the new Global Practices as of July 1st,

2014, and the FSAP will need to adapt its processes to this new structure. In order to

ensure effective implementation and follow-up of the FSAP, two elements are key: i)

continuity of the high quality of assessments; ii) engagement with client countries. FSAP

guidelines and procedures (including clearances and approvals) are being adapted to place the

44

responsibility and accountability for quality under the Finance & Markets (F&M) Global

Practice, and clearance and final delivery jointly between the F&M Global Practice and the

regional Vice Presidencies (VPs) and CMUs. At the same time, regional VPs and CMUs will

take the main responsibility and accountability for country engagement and follow-up. The

FSAP Management Unit is coordinating with LEGOP to adapt the FSAP procedures to the new

GPs in line with the Accountability and Decision-Making framework, and consistent with the

Policy and Procedure Framework (P&PF). In the new country engagement model, FSAPs will

be a useful instrument to inform the preparation of the SCDs and CPFs, as it will be better-

aligned to the multi-year budgeting cycle of the CPF. In addition, the new structures within the

WBG will be able to present client countries with an integrated suite of solutions that will

contribute to more effective follow-up implementation.

45

APPENDIX I: COUNTRY PARTICIPATION IN THE FSAP

Initial

Assessments Updates

Albania* Dominican Republic* Lebanon^ 3/ Serbia * Bosnia and Herzegovina

Algeria** East African Community^ 6/ Lithuania * Sierre Leone CEMAC

Angola ECCU 2/ Luxembourg Singapore^ Maldives Georgia

Antigua and Barbuda 2/ Ecuador Slovak Republic * Nepal Guatemala

Argentina# Egypt, Arab Republic of* Slovenia *^ Samoa Jamaica^

Armenia ** El Salvador ** 3/ Madagascar South Africa** 3/ Suriname Mauritania

Australia Equatorial Guinea Malawi Spain* Zimbabwe Mali

Austria ** Estonia * 3/ Malaysia Sri Lanka *^ Total: 6 Moldova

Azerbaijan Fiji Mali St. Kitts and Nevis 2/ Montenegro

Bahrain Finland Malta St. Lucia 2/ Morocco

Bangladesh* France Mauritania St. Vincent and the Grenadines 2/ South Africa^

Barbados** Gabon Mauritius *# Sudan Tajikistan

Belarus*^ Georgia * Mexico ** Swaziland Total: 12

Belgium Germany* Moldova * Sweden

Belize Ghana ** Mongolia^ Switzerland *

Benin Greece Montenegro Syrian Arab Republic^

Bolivia* Grenada 2/ Morocco * Tajikistan

Bosnia and Herzegovina Guatemala * Mozambique* Tanzania*

Botswana Guinea-Bissau Namibia Thailand^

Brazil* Guyana Netherlands Togo

Bulgaria* Haiti New Zealand Trinidad and Tobago^

Burkina Faso Honduras* Nicaragua* Tunisia **

Burundi Hong Kong SAR, China* Niger Turkey*

Cambodia Hungary *^ 3/ Nigeria* Uganda **

Cameroon* 3/ Iceland *^ Norway Ukraine*

Canada * 3/ India* 3/ Oman* United Arab Emirates *

Cape Verde Indonesia Pakistan* United Kingdom*

CEMAC 4/ Iran, Islamic Republic of 3/ Panama United States

Central African Republic Ireland * 3/ Papua New Guinea Uruguay*

Chad Israel * Paraguay* Vietnam

Chile* Italy * Peru ** WAEMU 5/

China Jamaica Philippines * Yemen, Republic of

Colombia** 3/ Japan * Poland **# Zambia*

Costa Rica* Jordan*^ Portugal Total: 151

Cote d'Ivoire* Kazakhstan**^ 3/ Qatar Total Regional: 3

Croatia * Kenya* Romania* Total Updates: 91

Cyprus Korea, Republic of* Russian Federation*^ Total Modules: 18

Czech Republic*^ Kosovo Rwanda* Total ROSCs: 3

Denmark Kuwait* San Marino

Djibouti Kyrgyz Republic ** Saudi Arabia*

Dominica 2/ Latvia *^ Senegal *

1/ Defined as cases where the FSA and FSSA have been delivered to the Bank's and the Fund’s Executive Boards.

2/ The ECCU FSAP covered the ECCU member countries: Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines.

3/ The initial assessment was a part of the pilot program.

4/ The Central African Economic and Monetary Community (CEMAC) comprises Cameroon, Central African Republic, Congo, Gabon, Equatorial Guinea and Chad.

5/ The West African Economic and Monetary Union (WAEMU) comprises Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo.

6/ The East African Community comprises: Kenya, Uganda, Tanzania, Rwanda, Burundi.

*/ The country had an update.

**/ The country had or requested the second update.

^/ The country had stability or development module.

#/ The country had stand-alone ROSC assessment.

Overview of Country Participation in the FSAP

(as of July 2014)

Underway

Completed 1/

Macedonia, former Yugoslav

Republic of*

Congo, Democratic

Republic of

46

APPENDIX II: FSB KEY STANDARDS FOR SOUND FINANCIAL SYSTEMS44

The standards under the 12 policy areas highlighted here have been designated by the FSB as

key for sound financial systems and deserving of priority implementation depending on

country circumstances. These standards are broadly accepted as representing minimum

requirements for good practice that countries are encouraged to meet or exceed. The FSB

applied the following criteria for determining the list of key standards for sound financial

systems:

relevant and critical for a stable, robust, and well-functioning financial system

(including in light of the lessons from the recent financial crisis), in order to impart a

sense of prioritization in implementation;

universal in their applicability, by covering areas that are important in nearly all

jurisdictions;

flexible in implementation, by being general enough to take into account different

country circumstances;

broadly endorsed - namely, that such standards should have been issued by an

internationally recognized body in the relevant area in extensive consultation with

relevant stakeholders. To satisfy this criterion, the standard should preferably undergo a

public consultation process. This criterion would also be satisfied when the standard-

setting body has wide representation, or when the standard has been endorsed by

International Financial Institutions (IFIs), such as the IMF and the World Bank; and

assessable by national authorities or by third parties such as IFIs.

The list of key standards is periodically reviewed and updated by the FSB in light of policy

developments at the international level.

Area Standard Issuing Body

Macroeconomic Policy and Data Transparency

Monetary and financial policy

transparency

Code of Good Practices on Transparency in

Monetary and Financial Policies

IMF

Fiscal policy transparency

Code of Good Practices on Fiscal Transparency

IMF

Data dissemination

Special Data Dissemination Standard /

General Data Dissemination System (1)

IMF

Financial Regulation and Supervision

Banking supervision Core Principles for Effective Banking Supervision BCBS

Securities regulation Objectives and Principles of Securities Regulation IOSCO

44

Source: FSB website (http://www.financialstabilityboard.org/cos/key_standards.htm)

http://www.financialstabilityboard.org/cos/key_standards.htm

47

Insurance supervision Insurance Core Principles IAIS

Institutional and Market Infrastructure

Crisis resolution and deposit

insurance (2)

Core Principles for Effective Deposit Insurance

Systems

BCBS/IADI

Insolvency Insolvency and Creditor Rights (3) World Bank

Corporate governance Principles of Corporate Governance OECD

Accounting and Auditing International Financial Reporting Standards (IFRS)

International Standards on Auditing (ISA)

IASB

IAASB

Payment, clearing and settlement Principles for Financial Market Infrastructures CPSS/IOSCO

Market integrity FATF Recommendations on Combating Money

Laundering and the Financing of Terrorism &

Proliferation

FATF

(1) Economies that have, or seek, access to international capital markets are encouraged to subscribe to the more stringent

SDDS and all other economies are encouraged to adopt the GDDS.

(2) The FSB supports the inclusion of one or more standards on resolution regimes under this policy area, and intends to make

a selection once relevant policy development work is completed.

(3) The World Bank, working with UNCITRAL and internationally recognized experts, has completed and implemented the

ICR ROSC Assessment Methodology. The ICR ROSC Methodology is based on the current Creditor Rights and Insolvency

Standard (ICR Standard), derived from the World Bank's Principles and Guidelines for Effective Insolvency and Creditor

Rights Systems, and the recommendations included in the UNCITRAL's Legislative Guide on Insolvency Law.

Table 9: Financial Standards Assessment Completed and Underway

(as of end-December 2013)

Standards Assessed

Completed

Underway

Transparency in Monetary and Fiscal Policies 114

1

Banking Supervision

250

24

Securities Regulation

116

6

Insurance Supervision

113

14

Payment & Settlement Systems

111

2

Securities Settlement Systems (RSSS)

32

2

AML/CFT

110

39

Accounting & Auditing

133

19

Corporate Governance

81

1

Insolvency and Creditors Rights

62

3

Total

1409

127

Source: Reports on the Observance of Standards and Codes.

48

APPENDIX III: ANALYSIS OF COMPLIANCE WITH INTERNATIONAL STANDARDS

The analysis in Section III.B looks at compliance of EMDEs with the following international

standards:

the Basel Core Principles for Effective Banking Supervision (BCP);

the Insurance Core Principles developed by the International Association of Insurance

Supervisors (IAIS); and

the Objectives and Principles of Securities Regulation by the International Organization

of Securities Commissions (IOSCO).

The compliance was calculated using rating scales for each of the core principles. All three

sets of principles have similar, but not identical rating scales. Each of the ratings was

translated into numerical values to calculate averages and to facilitate better comparison over

time. The rating scales for the respective standards are as below:

Translated

rating 5 4 3 2 1 N/A

BCP (none) C: Compliant LC: Largely

Compliant

MNC:

Materially

Non-

compliant

NC: Non-

Compliant

Not

applicable

IAIS O: Observed LO: Largely

Observed

PO: Partly

Observed

MNO:

Materially

Non-observed

NO: Not

observed

Not

applicable

IOSCO FI: Fully

implemented

BI: Broadly

Implemented

PI: Partly

Implemented

MNI:

Materially

Not

Implemented

NI: Not

implemented

Not

applicable

The following statistics were computed for each set of the ratings (BCP, IAIS and IOSCO):

i) the average compliance per core principle in the entire database (1999-2013);

ii) the frequency distribution (histogram) of ratings per core principle;

iii) each country's average rating per set of core principles; and

49

iv) the frequency distribution (histogram) of country averages, per set of core principles.

For BCP and IOSCO only,45 an additional statistic was calculated:

v) the average and frequency distribution of country averages for BCP and IOSCO over

time.

The figures and tables below show further information on each of the standards.

BCP (1999 – 2012)

Figure 27: BCP (1999 – 2012): Average compliance per core principle

LHS: 1: Not Compliant, 2: Materially Not Compliant, 3: Largely Compliant, 4: Compliant

RHS: Core principle

Source: FSAP Management Unit

Table 10: BCP (1999 – 2012): Strongest and weakest observed compliance

Strongest observed compliance Weakest observed compliance

2. Permissible activities

1.3 Legal framework

1.1 Responsibilities and objectives

1.4 Legal powers

17. Internal control and audit

19. Supervisory approach

12. Country and transfer risks

11. Exposure to related parties

20. Supervisory techniques

13. Market risks

15. Operational risk

1.2 Independence, accountability and transparency

[also 1.5 legal protection of supervisors]


45

The IAIS database was too sparse to make these calculations meaningful.

50

IAIS (2000 – 2003)

Figure 28: IAIS (2000 – 2003): Average compliance per core principle

Y-axis: 1: Not Observed, 2: Materially Not Observed, 3: Partially Observed, 4: Largely Observed, 5: Observed

X-axis: Core principle


Figure 29: IAIS (2000 – 2003): Compliance dispersion

Y-axis: Number of countries

X-axis: Compliance, with 1: Not Observed, 2: Materially Not Observed, 3: Partially Observed, 4: Largely

Observed, 5: Observed


51

Table 11: IAIS (2000 – 2003): Strongest and weakest observed compliance


17. Confidentiality

12. Financial reporting

2. Licensing

15. Cross border business operations

14. Sanctions

7. Prudential—Liabilities

4. Corporate Governance

5. Internal Controls

9. Derivatives and off balance sheet items

6. Prudential—Assets

11. Market Conduct

1. Organization


IAIS (2003 – 2012)

Figure 30: IAIS (2003 – 2012): Average compliance per core principle

Y-axis: 1: Not Observed, 2: Materially Not Observed, 3: Partially Observed, 4: Largely Observed, 5: Observed

X-axis: Core principle


52

Figure 31: IAIS (2003 – 2012): Compliance dispersion

Y-axis: Number of countries

X-axis: Compliance, with 1: Not Observed, 2: Materially Not Observed, 3: Partially Observed, 4: Largely

Observed, 5: Observed

Table 12: IAIS (2003 – 2012): Strongest and weakest observed compliance


24. Intermediaries

12. Reporting to supervisors and off-site

monitoring

13. On-site inspection

4. Supervisory process

5. Supervisory cooperation and information

sharing

2. Supervisory objectives

3.Supervisory authority

17. Group-wide supervision

18. Risk assessment and management

10. Internal controls

22. Derivatives and similar commitments

27. Fraud


53

IOSCO (2000 – 2011)

Figure 32: IOSCO (2000 – 2011): Compliance per core principle

FI:Fully Implemented, BI: Broadly Implemented, PI: Partially Implemented, NI: Not Implemented.

Source: WB FSAP Management Unit

Table 13: IOSCO (2000 – 2011): Strongest and weakest observed compliance


5. The staff of the regulator should observe

the highest professional standards

18. The regulatory system should provide for

rules governing the legal form and structure of

collective investment schemes and the

segregation and protection of client assets

27. Regulation should promote transparency

of trading

25. The establishment of trading systems

including securities exchanges should be

subject to regulatory authorization and

oversight

21. Regulation should provide for minimum

entry standards for market intermediaries

1. The responsibilities of the regulator should

be clearly and objectively stated

2. The regulator should be operationally independent

and accountable in the exercise of its functions and

powers

10.The regulatory system should ensure an effective and

credible use of inspection, investigation, surveillance

and enforcement powers and implementation of an

effective compliance program.

22. There should be initial and ongoing capital and other

prudential requirements for market intermediaries that

reflect the risks that the intermediaries undertake

3. The regulator should have adequate powers, proper

resources and the capacity to perform its functions and

exercise its powers

24. There should be a procedure for dealing with the

failure of a market intermediary in order to minimize

damage and loss to investors and to contain systemic

risk

28. Regulation should be designed to detect and deter

manipulation and other unfair trading practices

Source: FSAP Management Unit.

1

ANNEX I: FSAP CONTENT SINCE 1999 - A TEXT MINING EXERCISE

“Here’s some advice for bibliophiles with teetering piles of books and not enough hours in the

day: don’t read them. Instead, feed the books into a computer program and make graphs, maps

and charts: it is the best way to get to grips with the vastness of literature. That, at least, is the

recommendation of Franco Moretti, a 63-year-old professor of English at Stanford University and

unofficial leader of a band of academics bringing a science-fiction thrill to the science of fiction.”

-John Sunyer, “Big data meets the Bard”

“Mining texts for data makes it possible to look at the bigger picture – to understand the context

in which a writer worked on a scale we haven’t seen before.”

-Franco Moretti (in J. Sunyer’s “Big data meets the Bard”)

A. Introduction

This annex presents preliminary results of a text mining exercise on the first 192 Aide-Memoires

delivered by joint IMF-WBG missions since the program’s inception in 1999. The exercise

reveals a significant diversity, across regions and over time, in the Aide-Memoire content

dedicated to assess bank risks, nonbanks, financial inclusion, capital markets development,

financial infrastructure, etc. Far from adopting a “one-size-fits-all” approach, FSAP missions

have delivered reports attuned to the particular characteristics and circumstances of the many

different national financial sectors assessed, in several cases more than once, since 1999.

Computational analysis of texts dates back to at least the 1940’s, to Roberto Busa’s Index

Thomisticus (an index of Thomas Aquina’s works). The exponential growth in both reading

material and computational power since then has made particularly attractive Franco Moretti’s

idea of “distant reading.” In particular, to analyze some contemporary types of texts, such as

millions of Twitter messages and Google searches created every day, “distant reading” is the

only kind of reading feasible.

This annex is organized as follows. Section B explores the extent of regional and temporal

diversity in the content of FSAP Aide-Memoires by computing a measure of lexical similarity

among the 192 reports. Section C presents the evolution over time and across regions of content

in terms of Aide-Memoire space dedicated to different bank risks, non-banks, corporate

governance, etc. Section D explores a qualitative question: the presence or absence in FSAP

Aide-Memoires of discussions about certain key matters such as the independence and legal

protection of financial sector authorities, financial inclusion and other developmental issues, and

crisis preparedness. Section E concludes with some ideas for future work.

B. Regional and temporal diversity of FSAP content

While the diversity of content becomes apparent as soon as we focus on the relative weight of

typical financial sector issues in different Aide-Memoires, as we do in section C below, a more

general way of verifying diversity, or lack of diversity, is to consider a measure of lexical

similarity-a number between 1 and 0, such that two texts using exactly the same words, in

2

exactly the same proportions, have a lexical similarity of 1, and two texts using completely

different words have a similarity of 0.1 Lexical similarity should not be confused, however, with

the much more complex concept of semantic (meaning) similarity. For example, the sentences

“interest rates went up” and “interest rates went down” mean exactly the opposite but have very

similar content (because they talk about the same thing, interest rate behavior, and they share 3

out of their respective 4 words2).

We have computed the lexical similarity for the 18,336 pairs present in a corpus of 192 Aide-

Memoires.3 To graphically represent any existing similarity among them, we identified the pairs

of Aide-Memoires which turned out to be reciprocally “close neighbors” in the sense that each

one of them is among the five lexically closest to the other.4 The following two graphs illustrate,

respectively, the lexical similarity across regions and time periods. Each vertex represents an

Aide-Memoire, its relative size is proportional to the number (between 0 and 5) of its “close

neighbors”, and the edges join those vertices which are “close neighbors”.

Regional Lexical Similarity

Focusing our attention in the three regions that accumulate most Aide-Memoires delivered since

1999, frequently including both an original assessment and one or more updates per country

(which should be expected to increase lexical similarity), we observe substantial diversity in

AFR (red vertexes) and ECA (green vertexes), and just partial clustering in LCR (blue vertexes).

1 Given a vocabulary V of N different words, (v1, v2,… vN), and two vectors p=(p1, p2,… pN) and q=(q1, q2,… qN)

representing the relative frequency of each one of those words in two different texts, P and Q, we measure the

lexical similarity between these texts as the cosine of the angle θ between vectors p and q:

Box 1 below presents Python code implementing the function lexical_similarity(P,Q) , which returns the lexical

similarity of any pair of texts P and Q. 2 In this example, P=”interest rates went up” and Q=”interest rates went down”. Consequently, V=(“interest”,

“rates”, “went”, “up”, ”down”), p=(0.25,0.25,0.25,0.25,0.00) and q=(0.25,0,25,0,25,0.00,0.25), resulting in a lexical

similarity of 0.75 3 18,336 = (191*191-191)/2

4 Since our measure of lexical similarity is necessarily greater than zero for any pair of documents written in the

same language -and dealing with related matters- we choose to focus our attention on the five mutually closest

neighbors simply to facilitate the interpretation of the network graphs. For example, if the five closest neighbors of

Aide-Memoire #1 are Aide-Memoires (7,2,9,4,15), those of #4 are (7,22,14,1,2) and those of #7 are (2,5,21,11,72),

we highlight graphically the connection between #1 and #4, but not between any of them and #7, because while #7

is among the closest to them, they are not among the closest to #7.

3

Figure 1. Regional similarity

AFR (red), EAP (coral), ECA (green), LCR (blue), MENA (cyan), SAR (yellow), other (gray).

Temporal Lexical Similarity

Not surprisingly given the widespread impact of the global financial crisis, the Aide-Memoires

delivered in 2007-2010 (green vertexes) look closer one to another—but still far from

representing a single cluster—than in any other period since 1999.

4

Figure 2. Temporal Similarity

1999-2002 (red), 2003-2006 (blue), 2007-2010 (green), 2011-2013 (yellow)

C. Aide-Memoire content over time and across regions

Risks

As it could be expected, discussions on various risks normally take a substantial proportion of

Aide-Memoire space. Consider first the percentage of Aide-Memoire space (measured as the

number of paragraphs) dedicated to the discussion of various risks over the years. The

following graph reveals an amazing dispersion:

5

Figure 3. All Risks – All Aide-Memoires

The superimposed straight line reveals essentially no trend across all Aide-Memoires. The

average Aide-Memoire has consistently dedicated 22-23 percent of its paragraphs to discussions

of various risks, with a substantial dispersion, since 2009. Desegregating by region, however, we

get a radically different picture. Consider in particular what has happened in the three regions

with the largest, hence statistically more meaningful corpus of Aide-Memoires: AFR, ECA, and

LCR:

Figure 4. All Risks – AFR

0%

5%

10%

15%

20%

25%

30%

35%

40%

1998 2000 2002 2004 2006 2008 2010 2012 2014

0%

5%

10%

15%

20%

25%

30%

1998 2000 2002 2004 2006 2008 2010 2012 2014

6

Figure 5. All Risks – ECA

Figure 6. All Risks – LCR

Although less representative, data from other regions also shows considerable dispersion among

Aide-Memoires, as well as different trends over time:

0%

5%

10%

15%

20%

25%

30%

35%

40%

1998 2000 2002 2004 2006 2008 2010 2012 2014

0%

5%

10%

15%

20%

25%

30%

35%

40%

1998 2000 2002 2004 2006 2008 2010 2012 2014

7

Figure 7. All Risks – EAP Figure 8. All Risks – MNA

Figure 9. All Risks – SAR

Figure 10. All Risks – Other

Content of discussions on risks

The following graph represents the “cloud” of the 50 most frequent (meaningful) words found in

all paragraphs discussing risks, in all Aide-Memoires delivered since 1999:

0%

5%

10%

15%

20%

25%

30%

35%

1999 2001 2003 2005 2007 2009 2011 2013

0%

5%

10%

15%

20%

25%

30%

1999 2001 2003 2005 2007 2009 2011 2013

0%

5%

10%

15%

20%

25%

30%

1999 2001 2003 2005 2007 2009 2011 2013

0%

10%

20%

30%

40%

1999 2001 2003 2005 2007 2009 2011 2013

8

Figure 11. All Risks – Words Cloud

Credit Risk

Credit risk has been quite prominent and can be expected to be found in most Aide-Memoires,

particularly given the typical emphasis on banking sector issues reflected in the cloud. The

following chart shows, however, the notorious dispersion observed over time, and across

different Aide-Memoires produced in a given year, in the fraction of paragraphs that while

talking about risk specifically discuss credit risk:

Figure 12. Credit Risk – All Aide-Memoires

0%

10%

20%

30%

40%

50%

60%

70%

80%

1998 2000 2002 2004 2006 2008 2010 2012 2014

9

Except in the case of SAR, which has too few observations to tell, in all regions we observe an

increasing attention to credit risk until the onset of the crisis, and a declining attention once the

perceived risk was in fact realized.

Figure 13. Credit Risk – AFR

Figure 14. Credit Risk – ECA

0%

10%

20%

30%

40%

50%

60%

1998 2000 2002 2004 2006 2008 2010 2012 2014

0%

10%

20%

30%

40%

50%

60%

70%

80%

1998 2000 2002 2004 2006 2008 2010 2012 2014

10

Figure 15. Credit Risk – LCR

Figure 16. Credit Risk – EAP Figure 17. Credit Risk – MENA

Figure 18. Credit Risk – SAR

Figure 19. Credit Risk – Other

0%

10%

20%

30%

40%

50%

60%

1998 2000 2002 2004 2006 2008 2010 2012 2014

0%

10%

20%

30%

40%

50%

1999 2001 2003 2005 2007 2009 2011 2013

0%

10%

20%

30%

40%

50%

60%

1999 2001 2003 2005 2007 2009 2011 2013

0%

10%

20%

30%

40%

50%

1999 2001 2003 2005 2007 2009 2011 2013

0%

20%

40%

60%

80%

1999 2001 2003 2005 2007 2009 2011 2013

11

Liquidity Risk

Similarly, the following graphs represent the fraction of paragraphs that while talking about risk

specifically discuss liquidity risk:

Figure 20. Liquidity Risk – All Aide-Memoires

Figure 21. Liquidity Risk – AFR

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1998 2000 2002 2004 2006 2008 2010 2012 2014

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1998 2000 2002 2004 2006 2008 2010 2012 2014

12

Figure 22. Liquidity Risk – ECA

Figure 23. Liquidity Risk – LCR

Finally, the following graphs represent the percentage of paragraphs in all Aide-Memoires that

while discussing risks specifically address operational, interest rate, exchange rate, systemic,

corporate governance, volatility, AML-CFT, and contagion risks.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1998 2000 2002 2004 2006 2008 2010 2012 2014

0%

5%

10%

15%

20%

25%

30%

35%

40%

1998 2000 2002 2004 2006 2008 2010 2012 2014

13

Operational Risk

Figure 24. Operational Risk – All Aide-Memoires

Interest Rate Risk

Figure 25. Interest Rates – All Aide-Memoires

0%

5%

10%

15%

20%

25%

1998 2000 2002 2004 2006 2008 2010 2012 2014

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1998 2000 2002 2004 2006 2008 2010 2012 2014

14

Exchange Rate Risk

Figure 26. Exchange Rates – All Aide-Memoires

Systemic Risk

Figure 27. Systemic Risk – All Aide-Memoires

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1998 2000 2002 2004 2006 2008 2010 2012 2014

0%

5%

10%

15%

20%

25%

30%

35%

40%

1998 2000 2002 2004 2006 2008 2010 2012 2014

15

Corporate Governance

Figure 28. Corporate Governance – All Aide-Memoires

Volatility

Figure 29. Volatility – All Aide-Memoires

0%

5%

10%

15%

20%

25%

30%

1998 2000 2002 2004 2006 2008 2010 2012 2014

0%

3%

5%

8%

10%

13%

15%

1999 2001 2003 2005 2007 2009 2011 2013

16

AML-CFT

Figure 30. AML-CFT – All Aide-Memoires

Contagion Risk

Figure 31. Contagion Risk – All Aide-Memoirs

0%

2%

4%

6%

8%

10%

12%

14%

1999 2001 2003 2005 2007 2009 2011 2013

0%

2%

4%

6%

8%

10%

12%

14%

1999 2001 2003 2005 2007 2009 2011 2013

17

Aide-Memoir space discussing NBFIs

While discussions on various risks are typically bank-centric, as revealed by the cloud in Figure

11, FSAP Aide-Memoires also dedicate a significant fraction of space to both risks and

developmental issues of non-bank financial institutions. The following graph represents the ratio

of paragraphs discussing NBFIs to paragraphs discussing banking issues.

Figure 32. NBFIs/Banks – All Aide-Memoires

D. Qualitative Questions

While section C shows the amount of Aide-Memoire space dedicated to different issues over

time and across regions, this section exhibits the fraction of Aide-Memoires delivered each year,

in each region, addressing the independence and lack/inadequacy of legal protection of financial

sector authorities, financial inclusion and other developmental issues, and crisis preparedness.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1999 2002 2005 2008 2011

18

Lack/inadequate legal protection

Figure 33. Legal Protection

Independence

Figure 34. Independence

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

11

99

9

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

AFR

EAP

ECA

LCR

MENA

SAR

other

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

AFR

EAP

ECA

LCR

MENA

SAR

other

19

Developmental Issues

Figure 35. Developmental Issues

Crisis Preparedness

Figure 36. Crisis Preparedness

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

11

99

92

00

0

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

AFR

EAP

ECA

LCR

MENA

SAR

other

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

AFR

EAP

ECA

LCR

MENA

SAR

other

20

E. Ideas for future work

The Financial Sector Assessment Program provides technical assistance to World Bank client

countries, often helping to shape policy and institutional reforms in their financial sectors. Since

the World Bank Group also does a significant amount of financial-sector related lending, both in

development policy and investment operations, it would be useful to study the impact that the

diagnostics and recommendations delivered by FSAP missions have had in the structure of those

loans.

Mining the documents associated to a sample of 198 lending operations that explicitly mention

the FSAP, it is possible to verify the potential relevance of the knowledge thus generated in the

structure of those operations. The following “cloud” exhibits the 50 most frequent (among nearly

500,000) noun phrases present in those documents:

Figure 37. Most frequent noun phrases in lending documents mentioning the FSAP

This cloud confirms that the issues typically discussed, in varying proportions, by FSAP

missions are in fact those addressed by the Bank’s financial sector operations. The FSAP is not,

of course, the only potentially relevant source of information to prepare those operations; it will,

however, be interesting to attempt measuring its precise impact on them.

21

References

Dunyer, John, (2013). “Big data meets the Bard”, Financial Times, June 15.

Jockers, Mattew L. (2013) Macroanalysis: Digital Methods and Literary History, University of

Illinois Press, 2013.

Moretti, Franco (2013) Distant Reading, Verso

Smedt, T. & Daelemans, W. (2012). “Pattern for Python.” Journal of Machine Learning

Research, 13: 2031–2035.

Box 1. A lexical similarity (P,Q) function in Python

from collections import Counter import numpy as np def cleaner(text): ignored_chars=range(9,32)+range(33,65)+range(91,97)+range(123,127) text_clean='' for i in range(len(text)): if ord(text[i]) not in ignored_chars: text_clean+=text[i] else: text_clean+=' ' return text_clean def bag_of_words(text,min_characters=1): tokens=cleaner(text).lower().split() tokens1=[] for token in tokens: if len(token)>=min_characters: tokens1.append(token) x=Counter(tokens1) for key in x: x[key]=1.0*x[key]/len(tokens1) return x def lexical_similarity(P,Q): P=bag_of_words(P) Q=bag_of_words(Q) words=set(P.keys()+Q.keys()) p=[] q=[] for word in words: if word in P.keys(): p.append(P[word]) else: p.append(0) if word in Q.keys(): q.append(Q[word])

else:

q.append(0)

p=np.array(p)

q=np.array(q)

return np.vdot(p,q)/(np.sqrt(np.vdot(p,p))*np.sqrt(np.vdot(q,q)))

Survey: 2014 FINANCIAL SECTOR ASSESSMENT PROGRAM (FSAP) SURVEY

Central Bank/Monetary Authority 75.6% 31

Bank Superintendency/Financial Sector Authority 14.6% 6

Finance Ministry/Treasury 7.3% 3

Other (please specify) 2.4% 1

Total 41

New Summary Report - 17 June 2014

Responses "Other (please specify)" Count

Left Blank 41

1. The agency/institution you represent is (please select one):

Central Bank/Monetary Authority 75.6%

Bank Superintendency/Financial Sector Authority 14.6%

Finance Ministry/Treasury 7.3%Other (please specify) 2.4%

1

wb353108

Typewritten Text

wb353108

Typewritten Text

Annex II: Survey of Country Authorities, 2014

wb353108

Typewritten Text

wb353108

Typewritten Text

To learn more about my country’s financial sector 26.8% 11

To obtain an independent assessment of my country’sfinancial sector

80.5% 33

To obtain an independent assessment of my country’sfinancial compliance with international standards (e.g., BCP,IOSCO, IAIS)

73.2% 30

Because of concerns over vulnerabilities in my country’sfinancial sector

19.5% 8

As a signal to international capital markets 26.8% 11

To facilitate lending by International Financial Institutions(IFIs)/other donors

7.3% 3

To facilitate access to technical assistance from IFIs/otherdonors

31.7% 13

It was recommended by the IMF or World Bank 31.7% 13

The initial assessment was becoming dated (e.g., 4-5 yearsold)

26.8% 11

Don’t know 0.0% 0

Other (please describe) 12.2% 5

Total 41

Responses "Other (please describe)" Count

Left Blank 36

G-20 and FSB recommendations. 1

It is one of the 25 systemically important countries for which FSAP is mandatory. 1

2. To your knowledge, why did your country request an FSAP assessment? (indicate all that apply):

26.8%

80.5%73.2%

19.5%26.8%

7.3%

31.7% 31.7%26.8%

12.2%

To learnmore about

my country’sfinancial

sector

To obtain anindependentassessment

of mycountry’sfinancial

sector

To obtain anindependentassessment

of mycountry’sfinancial

compliancewith

internationalstandards(e.g., BCP,

IOSCO,IAIS)

Because ofconcerns

overvulnerabilities

in mycountry’sfinancial

sector

As a signalto

internationalcapital

markets

To facilitatelending by

InternationalFinancial

Institutions(IFIs)/other

donors

To facilitateaccess totechnical

assistancefrom

IFIs/otherdonors

It wasrecommendedby the IMF orWorld Bank

The initialassessment

wasbecoming

dated (e.g.,4-5 years

old)

Other(please

describe)

0

100

50

2

Set an action plan to develop non banking financial sector in DR Congo 1

To obtain a grant from FIRST 1

FINANCIAL SECTOR GROWTH AND DEVELOPMENT IN PREPARATION FOR THE EAST AFRICAN COMMUNITY MONETARYUNION

1

Stronglydisagree Disagree

Neither agreenor disagree Agree

Stronglyagree

Don'tknow Responses

Was our response to your requestfor an FSAP timely?

0 0.0% 2 5.6% 1 2.8% 22 61.1% 11 30.6% 0 0.0% 36

Did we adjust to your request toexpedite or postpone ourassessment?

1 2.9% 5 14.7% 4 11.8% 18 52.9% 4 11.8% 2 5.9% 34

Was the adjustment done to yoursatisfaction?

0 0.0% 3 8.8% 5 14.7% 18 52.9% 5 14.7% 3 8.8% 34


Neitheragree nordisagree Agree

Stronglyagree

Don'tknow Responses

The scope of the FSAP was discussedwith and clearly communicated to thecountry authorities.

1 2.8% 0 0.0% 1 2.8% 21 58.3% 13 36.1% 0 0.0% 36

Country authorities agreed with the scopeof the assessment and overall coverageof topics for the FSAP

0 0.0% 2 5.6% 1 2.8% 21 58.3% 11 30.6% 1 2.8% 36



Stronglyagree

Don'tknow Responses

1. The FSAP provided adequatecoverage of financial sector

0 0.0% 2 5.6% 0 0.0% 26 72.2% 8 22.2% 0 0.0% 36

2. The FSAP provided adequate depth ofanalysis

0 0.0% 2 5.6% 3 8.3% 21 58.3% 10 27.8% 0 0.0% 36

3. The FSAP analysis considered theunique circumstances of my country

1 2.8% 2 5.6% 11 30.6% 13 36.1% 8 22.2% 1 2.8% 36

4. The FSAP analysis balanced financialsector stability issues with thedevelopment priorities of my country

0 0.0% 3 8.3% 7 19.4% 17 47.2% 9 25.0% 0 0.0% 36

5. Overall, the FSAP analysis providednew analytical insights into my country’sfinancial sector

0 0.0% 1 2.8% 4 11.1% 21 58.3% 10 27.8% 0 0.0% 36

3. Please indicate your level of agreement with each of the following statements:



3

Yes 100.0% 35

No 0.0% 0

Other (please explain) 0.0% 0

Total 35



Stronglyagree

Don'tknow Responses

1. Recommendations were clear 0 0.0% 2 5.6% 0 0.0% 22 61.1% 12 33.3% 0 0.0% 36

2. Recommendations were candid 1 3.0% 2 6.1% 5 15.2% 18 54.5% 6 18.2% 1 3.0% 33

3. Recommendations were prioritizedwell

0 0.0% 0 0.0% 7 20.6% 21 61.8% 6 17.6% 0 0.0% 34

4. Recommendations were sequencedwell

0 0.0% 0 0.0% 6 17.6% 22 64.7% 6 17.6% 0 0.0% 34

5. Recommendations were actionablewith a reasonable effort on theauthorities’ part

0 0.0% 0 0.0% 4 11.8% 27 79.4% 3 8.8% 0 0.0% 34

Responses "Other (please explain)" Count

Left Blank 41


7. Where you comfortable with the way in which confidential information was handled?

Yes 100%

4

Yes 65.6% 21

No 34.4% 11

Total 32

8. Did you disclose the FSAP or parts of it?

Yes 65.6%

No 34.4%

5

Communicate country’s progress 71.4% 15

International commitments (e.g., FSB) 42.9% 9

Peer pressure (e.g., other countries in the region disclosed) 4.8% 1

Inform potential investors 23.8% 5


Total 21


Left Blank 37

Country Financial Stability Reports 1

communicated to the Capital Markets Authority 1

disclosed to the Capital Markets Authority 1

we allowed the World Bank to publish at their request 1

9. If Yes, what were your reasons to disclose parts of the FSAP report?

71.4%

42.9%

4.8%

23.8%19.1%

Communicate country’sprogress

International commitments(e.g., FSB)

Peer pressure (e.g., othercountries in the region

disclosed)

Inform potential investors Other (please explain)0

100

25

50

75

6

Protect sensitive information 77.8% 7


Total 9


Left Blank 39

Internal use to improve our work 1

Requisito de las autoridades de Gobierno 1

10. If No, what were your reasons to keep it confidential?

77.8%

22.2%

Protect sensitive information Other (please explain)0

20

40

60

80

100

7

Implemented 30.6% 11

Partially implemented 61.1% 22

Not implemented 5.6% 2

Don’t know 0.0% 0


Total 36


Left Blank 39

Just completed the FSAP. Implementation is in process. 1

Under progress 1

11. In your country, the main FSAP recommendations were (or are in the process of being) subsequently:

30.6%

61.1%

5.6% 5.6%

Implemented Partially implemented Not implemented Other (please explain)0

20

40

60

80

100

8

The FSAP assessment was recently completed 27.6% 8

Disagreement with recommendations 24.1% 7

Limited technical capacity to implement recommendations 27.6% 8

Little political support in my country for recommendations 24.1% 7

Lack of financial resources to implement recommendations 17.2% 5

Too many recommendations 13.8% 4

Difficulty in prioritizing recommendations 3.5% 1

We do not consider recommendations to be a priority 0.0% 0

Other (please specify) 27.6% 8

Don't know 3.5% 1

Total 29

Responses "Other (please specify)" Count

Left Blank 33

Delays in enacting legislative changes required to implement some of the recommendations. 1

Some recommendations are not actionable with a reasonable effort on the authorities' part 1

THE REGIONAL FSAP WAS ONLY DONE LAST YEAR (2014) 1

same recommendations are im process to implement 1

the recommendations will be implemented in phases 1

will be implemented in phases 1

Some recommendations require more time, some need to be modified based on the facts on the ground and other require 1

12. If not all of the main FSAP recommendations were implemented, what were the reasons for that? (indicateall that apply)

27.6%24.1%

27.6%24.1%

17.2%13.8%

3.5%

27.6%

3.5%

The FSAPassessmentwas recently

completed

Disagreementwith

recommendations

Limitedtechnicalcapacity toimplement

recommendations

Little politicalsupport in my

country forrecommendations

Lack offinancial

resources toimplement

recommendations

Too manyrecommendations

Difficulty inprioritizing

recommendations

Other (pleasespecify)

Don't know0

100

25

50

75

9

10

technical assistance.

They are being implemented gradually. Some of them, especially those needing statutory changes would be time-consuming. 1 Also, please see response to Question. No. 12

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