FSAP

The Financial Sector Assessment Program (FSAP) was launched in May 1999 by the International Monetary Fund and the World Bank in the wake of the Asian financial crisis, which had exposed how weak banking supervision and opaque capital markets could propagate shocks across borders. The program provides a comprehensive, periodic review of a member country's financial sector, blending macroprudential stress testing with assessments of compliance against international standards and codes.

In low- and middle-income countries the exercise is conducted jointly by the IMF and World Bank, with the Bank typically leading on the developmental dimension (access to finance, market deepening, payment systems) and the Fund leading on stability. In advanced economies, the IMF alone runs the Financial Sector Stability Assessment (FSSA), which feeds into the country's Article IV consultation.

Key components usually include:

• Stress tests of banks (and increasingly insurers, pension funds, and nonbank financial intermediaries) under adverse macro scenarios.
• Standards assessments, notably against the Basel Core Principles for Effective Banking Supervision, the IOSCO Objectives and Principles of Securities Regulation, and the IAIS Insurance Core Principles.
• Crisis management and resolution frameworks, including deposit insurance and lender-of-last-resort arrangements.
• Systemic liquidity, AML/CFT, and financial market infrastructure reviews.

Since 2010, FSAPs have been mandatory every five years for jurisdictions designated by the IMF as having systemically important financial sectors — initially 25 countries, expanded in 2013 to 29, including the United States, United Kingdom, Germany, China, and Japan. For other members, participation remains voluntary, though strongly encouraged.

FSAP findings are summarized in published reports (with the authorities' consent) and have become a reference point for rating agencies, supervisors, and investors evaluating sovereign and banking-sector risk.