Featured Product

    IMF Reports Assess the Stability of Financial System in Brazil

    December 11, 2018

    IMF published a report on the results of the Financial System Stability Assessment (FSSA) on Brazil. IMF also published the report on the detailed assessment of observance on the implementation of the Basel Core Principles for Effective Banking Supervision, along with several technical notes under the Financial Sector Assessment Program (FSAP). Brazil is deemed by IMF to have a systemically important financial sector, according to the Mandatory Financial Stability Assessments Under the FSAP. The technical notes published under the 2018 FSAP cover insurance sector regulation and supervision; stress testing and systemic risk analysis; supervision and oversight of FMIs; bank resolution; systemic liquidity management; and regulation, supervision, and systemic risk monitoring of the fund management segment.

    The FSSA report highlights that, since the 2012 FSAP, the financial system has been stable, with the resiliency of the banking system being supported by high profitability. Banks are broadly resilient to severe macro-financial shocks. Current high profits and capital ratios support the resiliency of banks under a severe stress test scenario. Under the stress scenario, small capital shortfalls result; banks would nevertheless experience reduced income, including from market loss on government bonds, and high credit losses on exposures to the corporate sector. Moreover, some banks are exposed to concentration risk. Some actions are still needed to address bank-specific risk profiles to boost their resilience. Banks are generally well-positioned to manage short-term and medium-term liquidity pressures while interbank contagion seems limited. The FSSA report contains a table that summarizes the key recommendations from the FSAP in 2018. 

    The results of the assessment suggest that supervision and regulation have strengthened at both micro and systemic levels. This has included risk-based supervision, off-site monitoring, effective use of large data resources, sanctioning powers, and the phasing-in of Basel III requirements. The Banco Central do Brasil (BCB) has put forward guidance for the preparation of Recovery and Resolution Plans by domestic systemically important banks (D-SIBs), and has focused on frontier risks related to interdependence, cyberattacks and potential payments system outages. The securities commission’s (CVM) oversight of financial market infrastructures and issuers’ financial disclosure is in line with international standards. Structural reforms have included revisions to the pricing of directed subsidized credit and funding modalities of BNDES, enactment of the corporate governance law for state-owned enterprises, and adoption of a new corporate governance code by CVM.

    Nevertheless, strengthening the underpinnings of regulatory agencies is needed. BCB’s independence and legal protection of staff should be ingrained in law. Likewise, the autonomy of the senior leadership of BCB and SUSEP (insurance regulator) should be protected by clear rules, including fixed terms and conditions of dismissal. Resources should be enhanced to manage challenges from new reforms, particularly at CVM and SUSEP. Overall, the assessment reveals that supervisory process is well-structured and thorough but there are areas where further improvements will be needed. The  regulatory and supervisory approach should be upgraded in related party exposures and transactions, large exposures, country and transfer risk, and restructured loans. The existing resolution regime is inadequate and a new framework aligned to best international practice should be introduced promptly. The process for dealing with weak banks and emergency liquidity assistance should also be tightened.

     

    Related Links

    Keywords: Americas, Brazil, Banking, Securities, FMI, FSAP, FSSA, Basel Core Principles, Basel III, Stress Testing, Technical Notes, IMF

    Featured Experts
    Related Articles
    News

    ESMA Releases Enforcement Priorities for 2019 Annual Financial Reports

    ESMA published a statement on the priorities that European enforcers will consider when examining the 2019 annual financial reports of listed companies.

    October 22, 2019 WebPage Regulatory News
    News

    EC Consults on Alternative Standardized Approach for Market Risk

    EC is consulting on a delegated regulation amending the Capital Requirements Regulation (CRR) with regard to the alternative standardized approach for market risk.

    October 21, 2019 WebPage Regulatory News
    News

    CPMI Report Examines Impact of Global Stablecoins

    This report by the G7 Working Group on Stablecoins finds that stablecoins, regardless of size, have implications ranging from anti-money laundering efforts across jurisdictions to operational resilience (including for cyber security), consumer or investor and data protection, and tax compliance.

    October 18, 2019 WebPage Regulatory News
    News

    BoE Announces Date for Publication of Stress Test Results for Banks

    BoE announced its plans to publish results of the full UK annual stress tests on December 10, 2019.

    October 18, 2019 WebPage Regulatory News
    News

    US Agencies Request Comments on Use and Impact of CAMELS Ratings

    US Agencies (FDIC and FED) are seeking information and comments from interested parties regarding the consistency of ratings assigned by the agencies under the Uniform Financial Institutions Rating System (UFIRS).

    October 18, 2019 WebPage Regulatory News
    News

    PRA Consults on Approach to Supervising Liquidity and Funding Risks

    In consultation paper (CP27/19), PRA published a proposal (CP27/19) to update the supervisory statement SS24/15 on the PRA approach to supervising liquidity and funding risk.

    October 17, 2019 WebPage Regulatory News
    News

    US Agencies Consult on Policy Statement on Allowance for Credit Losses

    US Agencies (FDIC, FED, NCUA, and OCC) are consulting on the policy statement on allowances for credit losses and on the guidance on credit risk review systems.

    October 17, 2019 WebPage Regulatory News
    News

    FSI Paper Examines Use of Suptech Initiatives by Financial Authorities

    The Financial Stability Institute (FSI) of BIS published a paper that examines the suptech developments by analyzing suptech initiatives of 39 financial authorities globally.

    October 17, 2019 WebPage Regulatory News
    News

    US Agencies Publish Notice to Extend Form FFIEC 102 for Three Years

    US Agencies (FDIC, FED, and OCC) published a joint notice regarding extension of the market risk regulatory report for institutions subject to the market risk capital rule (FFIEC 102).

    October 17, 2019 WebPage Regulatory News
    News

    ECB Publishes Recommendations on Euro Risk-Free Rates Transition

    ECB published a report, by private sector working group on euro risk-free rates, which contains recommendations, from a risk management perspective, on the transition to new risk-free rates.

    October 17, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 4006