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

    APRA Decides to Standardize Submission Date for Quarterly Reporting

    APRA announced the standardization of quarterly reporting due dates for authorized deposit-taking institutions.

    May 11, 2021 WebPage Regulatory News
    News

    Bundesbank Publishes Supporting Documentation for Reporting by Banks

    Bundesbank published a list of "EntryPoints" that are accepted in its reporting system; the list provides taxonomy version and name of the module against each EntryPoint.

    May 11, 2021 WebPage Regulatory News
    News

    ECB Working Group Publishes Recommendations on EURIBOR Fallbacks

    The private sector working group of ECB on euro risk-free rates published the recommendations to address events that would trigger fallbacks in the Euro Interbank Offered Rate (EURIBOR)-related contracts, along with the €STR-based EURIBOR fallback rates (rates that could be used if a fallback is triggered).

    May 11, 2021 WebPage Regulatory News
    News

    EBA Publishes Phase 1 of Reporting Framework 3.1

    EBA published the phase 1 of its reporting framework 3.1, with the technical package covering the new reporting requirements for investment firms (under the implementing technical standards on investment firms reporting).

    May 10, 2021 WebPage Regulatory News
    News

    APRA to Finalize Capital Adequacy Standard Revisions by January 2022

    Asia Pacific Australia Banking APS 111 Capital Adequacy Regulatory Capital Basel RBNZ APRA

    May 10, 2021 WebPage Regulatory News
    News

    ESMA Issues Guidelines on Outsourcing to Cloud Service Providers

    ESMA published the final guidelines on outsourcing to cloud service providers.

    May 10, 2021 WebPage Regulatory News
    News

    EBA Publishes Data on Deposit Guarantee Schemes

    EBA published annual data for two key concepts and indicators in the Deposit Guarantee Schemes (DGS) Directive—available financial means and covered deposits.

    May 10, 2021 WebPage Regulatory News
    News

    OSFI Sets Out Plan for Future Guidance on Managing Technology Risk

    OSFI has set out the schedule for release of draft guidance on the management of technology risks by federally regulated financial institutions and private pension plans.

    May 10, 2021 WebPage Regulatory News
    News

    MAS Updates Housing Loan Rules, Proposes Corporate Governance Guidance

    MAS updated rules for new housing loans by banks and finance companies.

    May 10, 2021 WebPage Regulatory News
    News

    HKMA Publishes Guideline on Sustainable Finance Grant Scheme

    HKMA published a statement on the 100% Personal Loan Guarantee Scheme and a guideline on the Green and Sustainable Finance Grant Scheme (GSF Grant Scheme) as announced in the 2021-22 Budget.

    May 09, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6959