September 29, 2010

IMF to Require Financial Check-Up for 25 Countries

In-depth exam to be conducted every five years

The International Monetary Fund (IMF) on Monday announced that every five years it would require 25 countries to undergo in-depth exams to determine financial stability. The countries are those with major economies whose financial sectors have the most impact on global financial stability.

Not just developed countries are included in the list; developing countries are also included if their economies are large enough to wreak havoc on the world economy. The determination on which countries to include was made based on the size of their financial sectors and their connections with financial sectors in other countries, according to the IMF. The criteria do not reflect the broader economic or political importance of any nation, and will be subject to reevaluation as country circumstances and other factors change.

While all 187 member countries of the IMF are already required to undergo a financial review annually, known as an Article IV consultation, this new requirement for mandatory reviews is, according to the IMF, "a concrete step toward strengthening the IMF's surveillance of those members whose financial sectors could have the biggest potential impact on global stability. It is one of the key steps taken by the Fund to modernize its surveillance mandate and modalities in light of the recent crisis, and is consistent with the commitment made by the leaders of the Group of 20 advanced and emerging economies at the Washington Summit in November 2008 to subject their financial sectors to greater scrutiny."

The review will examine three main factors each time a country's financial stability is evaluated. According to the IMF, those factors are:

  • Risk--the source, probability and potential impact of the main risks to financial stability
  • Policies--the country's financial stability policy framework
  • Crisis resolution--the authorities' capacity to manage and resolve a financial crisis.

The countries bound by the new requirement are:

Australia

Austria

Belgium

Brazil

Canada

China

France

Germany

Hong Kong SAR

India

Ireland

Italy

Japan

Luxembourg

Mexico

Netherlands

Russia

Singapore

South Korea

Spain

Sweden

Switzerland

Turkey

United Kingdom

United States

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