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This evaluation assesses the effectiveness of the Financial Sector Assessment Program
(FSAP) from the perspective of the IMF. A parallel evaluation by the World Bank’s OED
assesses the World Bank’s role. The FSAP was established in 1999 to provide advice to
strengthen the financial systems of member countries by facilitating early detection of
financial sector vulnerabilities and helping to identify financial sector development needs.
Although a voluntary program, it has become the principal platform for financial sector
diagnosis at the IMF. It is a joint IMF-World Bank exercise (except in industrial countries),
but with different outputs for different purposes, including a confidential report to the
authorities and separate summary reports to the Boards of the IMF (the Financial System
Stability Assessment or FSSA) and the World Bank (Financial Sector Assessment or FSA),
dealing with issues that are in their respective areas of responsibility.
Our overall assessment is that the FSAP represents a distinct improvement in the IMF’s
ability to conduct financial sector surveillance and in understanding the key linkages between
financial sector vulnerabilities and macroeconomic stability. It has significantly deepened the
IMF’s understanding of the financial sector in specific countries, helped articulate policy
recommendations, prompted better discussions with authorities, and helped support policy
and institutional changes. The FSAP also permits an integrated approach to assessing
financial sector vulnerabilities and development needs that could not be achieved by an
ad hoc series of assessments. The evaluation also suggests that the joint IMF-World Bank
nature of the exercise has been generally beneficial. Thus, putting in place this major new
initiative within a relatively short period represents a substantial achievement.
Despite these achievements, the initiative is at a critical crossroads and there is a danger that
some of the gains could be eroded witho