The Financial Sector Assessment Program (FSAP) is a joint program of the International Monetary Fund and the World Bank. Launched in 1999 in the wake of the Asian financial crisis, the program brings together Bank and Fund expertise to help countries reduce the likelihood and severity of financial sector crises. The FSAP provides a comprehensive framework through which assessors and authorities in participating countries can identify financial system vulnerabilities and develop appropriate policy responses.
The program also helps bring financial sector analysis closer to the center of economic policy discussions within a country and with the Fund and the Bank. Participating in the program helps inform domestic policy-makers of the need for sequenced actions in areas requiring urgent attention and offers countries a comprehensive framework in which to take on financial sector reforms. It also provides countries with an opportunity to measure their compliance with financial sector standards and codes and, therefore, to benchmark their regulatory and supervisory systems against internationally-accepted practices.
The program also represents a collaborative international effort. Staff undertaking the assessments are drawn from the World Bank and International Monetary Fund, as well as more than 50 official institutions, central banks and supervisory agencies, from around the world. The international bodies responsible for developing relevant financial sector standards also work closely with Fund and Bank staff in implementing this program.
The FSAP follows a three-pronged approach when looking at the country’s financial sector:
- The soundness of a financial system versus its vulnerabilities and risks that increase the likelihood or potential severity of financial sector crises.
- A country’s developmental needs in terms of infrastructure, institutions and markets.
- A country’s compliance with the observance of selected financial sector standards and codes.