Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed a periodic review of the Financial Sector Assessment Program (FSAP) on September 3.
The FSAP provides in-depth assessments of financial sectors and provides important input to Fund surveillance. Assessments of financial sectors are usually conducted jointly with the World Bank in emerging market and developing economies and by the Fund alone in advanced economies. These assessments provide valuable analysis and policy recommendations for surveillance and capacity development. Since the program’s inception in 1999, 416 assessments have been completed across 161 Fund members, covering nearly all global financial assets.
This review builds on past assessments of the program. A landmark change in the FSAP took place in 2010 when the IMF’s Executive Board mandated that jurisdictions with Systemically Important Financial Sectors (SIFS) participate in financial stability assessments as a part of Fund surveillance. Subsequent reviews expanded the list of SIFS, recommended greater integration with Article IV surveillance, suggested more flexible use of international standards, and strengthened analytical tools for assessing systemic risk. Following the 2021 Review, FSAPs enhanced coverage of emerging risks in line with evolving international standards, introduced a two-tier frequency of mandatory assessments of SIFS, specified ways to integrate FSAP findings in Article IV consultations, and clarified the framework for expected periodic assessments with supra-national authorities.
The review examined the Fund’s role and responsibilities in the FSAP against the backdrop of a fast-changing global financial system. Growing interconnections between banks, non-bank financial intermediaries and market infrastructure providers call for systemwide analysis. Elevated uncertainty, high public debt, accelerating digitalization and adoption of artificial intelligence are reshaping the risk landscape. Reforms in this review aim at making the program more agile, tailored in topic coverage, and focused on the most material risks as they emerge. More risk-focused identification of SIFS and sharpened criteria for voluntary assessments target rebalancing resources between mandatory and voluntary assessments to preserve the global nature of the program and capacity to respond to new risks in a timely manner. The review was based on staff analyses and informed by surveys of country authorities and Executive Directors.
Executive Board Assessment[1]
Executive Directors welcomed the Financial Sector Assessment Program (FSAP) Review and reaffirmed the program as a critical instrument of the Fund’s financial sector surveillance. They noted that rapid changes in the financial landscape—including the growing role and interconnectedness of nonbank financial institutions (NBFIs), the systemic importance of financial market infrastructures (FMIs), digitalization, artificial intelligence (AI), crypto assets including stablecoins, cyber threats, and climate risks—are broadening the range of financial stability risks and increasing the resource intensity of the FSAP program for the Fund and the authorities. Against this backdrop, Directors broadly supported reforms to make the FSAP more agile, focused, and impactful, while preserving the quality, effectiveness, and evenhandedness of its assessments.
Directors supported a more risk‑based and modular approach guided by stronger initial diagnostics to define the scope of FSAP coverage across and within the three FSAP pillars comprising risk analysis, financial stability policy frameworks, and authorities’ capacity to manage and resolve financial crises. They generally endorsed a stronger emphasis on systemwide and emerging risks where relevant, tailoring coverage and the materiality of risks to country circumstances, with a number of Directors cautioning against the displacement of core financial stability analysis. Directors emphasized the importance of safeguards for preserving evenhandedness and credibility of staff analysis, calling for early discussions on scoping with country authorities, as well as for clear and transparent prioritization criteria and operational guidance to guard against major surveillance gaps, especially for emerging market and developing economies. Noting the important role of the proposed FSAP Guidance Note to operationalize these safeguards, many Directors stressed that staff’s engagement with the Board would be critical. A number of Directors also emphasized the need for adequate coordination with other international assessments.
Directors welcomed measures to strengthen the FSAP’s traction and reach. They supported closer integration of FSAP findings with Article IV surveillance and capacity development to support reform implementation. Directors favored proposals to make recommendations better prioritized, sequenced, and actionable, tailored to country circumstances and implementation capacity, including allowing a longer timeframe for implementation if needed. They also welcomed greater transparency in the FSAP’s approach, including publication of analytical methods and technical manuals, wider use of the iFSAP database—collecting all published FSAP materials—and a communication strategy for mandatory assessments.
Most Directors supported revisions to the methodology for identifying jurisdictions with systemically important financial sectors (SIFS) to make FSAP coverage more agile and better aligned with evolving risks. They noted that the addition of an overlay of staff’s judgment to account for systemically important FMIs and cross‑border data gaps would help address limits in the methodology. Directors stressed the importance of the application of staff judgment being evidence based, evenhanded, and periodically reviewed by the Board. Directors also supported the reform’s objective of increasing the number of voluntary FSAPs, and broadly agreed with their transparent prioritization according to Board‑approved criteria, while also taking into account regional balance and requests from jurisdictions on the 10‑year cycle or exiting the mandatory list. A number of Directors, however, saw a need for further refinement in the methodology and staff judgment to better capture systemic importance, with consideration of regional linkages and transmission channels, and called for greater flexibility to revisit the SIFS classification between FSAP policy reviews, if circumstances warrant. Many Directors emphasized the need for clear external communications to avoid adverse signaling effects for financial systems with changes in their mandatory status or general perceptions that the Fund is scaling back financial sector surveillance. Directors noted that staff will engage with the relevant member authorities on the appropriate modalities for following up on the FSSA recommendations stemming from the FSA of a territory of a member with a systemically important financial sector with respect to which no separate Article IV consultation discussions are held.
READ MORE: https://www.imf.org/en/news/articles/2026/09/21/pr26298-imf-concludes-periodic-review-the-fsap
