Comments sought on financial soundness indicators guide

• Pages: 123

Page 123

To encourage countries to develop stronger and more effective financial sectors, the IMF is preparing the Guide on Financial Soundness Indicators. The IMF recognizes that analytically sound and readily understood indicators can give policymakers and the markets a good quantitative picture of the stability and soundness of a country's financial system. The guide, currently in draft form, will provide background information on concepts, definitions, and data sources and offer techniques for compiling and disseminating core and encouraged indicators.

Core indicators seek to assess the banks' (deposit-taking institutions') capital adequacy, asset quality, earnings and profitability, liquidity, and sensitivity to market risk. These indicators are likely to be useful in all countries, regardless of their institutional characteristics or stage of development, and are feasible to collect without excessive extra resources.

Encouraged indicators seek more detailed data for deposit-taking institutions and go beyond these institutions to other key sources of vulnerability, such as nonbanks, corporations, households, and relevant markets, including securities and real estate markets. The encouraged indicators are designed to add depth to financial soundness assessments but may be relevant at the present time for only a limited number of countries.

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