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This technical note discusses Systemic Risk Analysis and Stress Testing for the Finland Financial Sector Assessment Program. The assessment is based on stress tests, which simulate the health of Finnish banks under a severe yet plausible adverse scenario. The scenario includes global and regional inflationary pressures, monetary policy tightness, financial market turmoil, and a major slowdown of economic activity. The exercises covered four significant institutions, and three less significant institutions representing more than 93 percent of total banking assets. Four types of stress test exercises have been performed. A top-down solvency stress test, a liquidity stress test, a wholesale funding cost stress test, and a contagion and interconnectedness stress test. The latter has been focused on both domestic banking interconnectedness, as well as the interconnectedness of the Finnish banking sector with cross-border counterparties. The analysis indicates that the Finnish banking system appears resilient to severe macrofinancial shocks but remains vulnerable to liquidity shocks.

Money and Monetary Policy --- International Economics --- Finance: General --- Banks and Banking --- Macroeconomics --- Monetary Policy --- International Agreements and Observance --- International Organizations --- Financial Institutions and Services: Government Policy and Regulation --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- General Financial Markets: Government Policy and Regulation --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Aggregate Factor Income Distribution --- Monetary economics --- International institutions --- Finance --- Financial services law & regulation --- Banking --- Monetary policy --- International organization --- Stress testing --- Financial sector policy and analysis --- Commercial banks --- Financial institutions --- Liquidity requirements --- Financial regulation and supervision --- Solvency stress testing --- Credit risk --- International agencies --- Financial risk management --- Banks and banking --- State supervision --- Financial services industry --- Income --- Finland

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During the March 2020 market turmoil, euro area money-market funds (MMFs) experienced significant outflows, reaching almost 8% of assets under management. This paper investigates whether the volatility in MMF flows was driven by investors’ liquidity needs related to derivative margin payments. We combine three highly granular unique data sources (EMIR data for derivatives, SHSS data for investor holdings of MMFs and Refinitiv Lipper data for daily MMF flows) to construct a daily fund-level panel dataset spanning from February to April 2020. We estimate the effects of variation margin paid and received by the largest holders of EURdenominated MMFs on flows of these MMFs. The main findings suggest that variation margin payments faced by some investors holding MMFs were an important driver of the flows of EUR-denominated MMFs domiciled in euro area.

Macroeconomics --- Economics: General --- Industries: Financial Services --- Investments: Stocks --- Finance: General --- Public Finance --- Banks and Banking --- Contingent Pricing --- Futures Pricing --- option pricing --- International Financial Markets --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Portfolio Choice --- Investment Decisions --- Social Security and Public Pensions --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Large Data Sets: Modeling and Analysis --- Economic & financial crises & disasters --- Economics of specific sectors --- Finance --- Investment & securities --- Pensions --- Financial services law & regulation --- Data capture & analysis --- Stocks --- Financial institutions --- Liquidity --- Asset and liability management --- Mutual funds --- Nonbank financial institutions --- Pension spending --- Expenditure --- Currency crises --- Informal sector --- Economics --- Financial services industry --- Luxembourg

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This paper discusses Islamic Republic of Mauritania’s 2022 Article IV Consultation and Requests for 42-Month Arrangements under the Extended Credit Facility and the Extended Fund Facility. The Mauritanian authorities’ IMF-supported reform program presents a comprehensive policy package to preserve macroeconomic stability, strengthen the fiscal and monetary policy frameworks, and improve governance, to consolidate the foundations for sustainable, inclusive growth, and reduce poverty. Mauritania’s economic growth has accelerated in 2022, driven primarily by the extractive sectors, while Inflation should stabilize at approximately 11 percent reflecting the central bank tight monetary policy. Mauritania has present and prospective balance of payments (BoP) needs while a confluence of shocks including the war in Ukraine and regional tensions have narrowed the space for policy intervention. The BoP needs could widen considering significant risks to the baseline including a protracted war in Ukraine, tensions in the Sahel region, climate shocks, increasing volatility in international commodity markets, and delays in the start of the Grand Tortue/Ahmeyim offshore gas project.

Money and Monetary Policy --- International Economics --- Exports and Imports --- Public Finance --- Banks and Banking --- Macroeconomics --- Finance: General --- Monetary Policy --- International Agreements and Observance --- International Organizations --- International Lending and Debt Problems --- Debt --- Debt Management --- Sovereign Debt --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- International Financial Markets --- Price Level --- Inflation --- Deflation --- Monetary economics --- International institutions --- International economics --- Public finance & taxation --- Financial services law & regulation --- Finance --- Monetary policy --- International organization --- Public debt --- External debt --- Operational risk --- Financial regulation and supervision --- Debt sustainability analysis --- Currency markets --- Financial markets --- International agencies --- Debts, External --- Debts, Public --- Financial risk management --- Prices --- Foreign exchange market --- Mauritania, Islamic Republic of

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European housing markets are at a turning point as the cost-of-living crisis has eroded real incomes and the surge in interest rates has made borrowers more vulnerable to financial distress. This paper aims to (i) shed light on the risks in European housing markets, (ii) quantify household vulnerabilties, (iii) assess banking sector implications and (iv) examine policies’ effectiveness using simulations based on microdata from the Household Finance and Consumption Survey (HFCS) and EU statistics on income and living conditions (EU-SILC). Under the baseline IMF macroeconomic forecast, the share of households that could struggle to meet basic expenses could rise by 10 pps reaching a third of all households by end 2023. Under an adverse scenario, 45 percent of households could be financially stretched, representing over 40 percent of mortgage debt and 45 percent of consumer debt. The impact on the banking sector seems contained under the baseline forecast, though there are pockets of vulnerability. A 20 percent house price correction could deplete CET1 capital by 100-300 basis points. Fiscal measures, such as subsidies to the bottom income tercile, could save 7 percent of households from financial distress at an estimated cost of 0.8 percent of GDP.

Macroeconomics --- Economics: General --- Industries: Financial Services --- Real Estate --- Infrastructure --- Banks and Banking --- Business Fluctuations --- Cycles --- Financial Markets and the Macroeconomy --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financial Institutions and Services: Government Policy and Regulation --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Housing Supply and Markets --- Production Analysis and Firm Location: Government Policies --- Regulatory Policies --- Aggregate Factor Income Distribution --- Macroeconomics: Consumption --- Saving --- Wealth --- Economic Development: Urban, Rural, Regional, and Transportation Analysis --- Housing --- Economic & financial crises & disasters --- Economics of specific sectors --- Finance --- Property & real estate --- Banking --- Financial institutions --- Housing prices --- Prices --- Income --- National accounts --- Consumption --- Currency crises --- Informal sector --- Economics --- Saving and investment --- Croatia, Republic of

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This technical note discusses Systemic Risk Analysis and Stress Testing for the Finland Financial Sector Assessment Program. The assessment is based on stress tests, which simulate the health of Finnish banks under a severe yet plausible adverse scenario. The scenario includes global and regional inflationary pressures, monetary policy tightness, financial market turmoil, and a major slowdown of economic activity. The exercises covered four significant institutions, and three less significant institutions representing more than 93 percent of total banking assets. Four types of stress test exercises have been performed. A top-down solvency stress test, a liquidity stress test, a wholesale funding cost stress test, and a contagion and interconnectedness stress test. The latter has been focused on both domestic banking interconnectedness, as well as the interconnectedness of the Finnish banking sector with cross-border counterparties. The analysis indicates that the Finnish banking system appears resilient to severe macrofinancial shocks but remains vulnerable to liquidity shocks.

Finland --- Money and Monetary Policy --- International Economics --- Finance: General --- Banks and Banking --- Macroeconomics --- Monetary Policy --- International Agreements and Observance --- International Organizations --- Financial Institutions and Services: Government Policy and Regulation --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- General Financial Markets: Government Policy and Regulation --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Aggregate Factor Income Distribution --- Monetary economics --- International institutions --- Finance --- Financial services law & regulation --- Banking --- Monetary policy --- International organization --- Stress testing --- Financial sector policy and analysis --- Commercial banks --- Financial institutions --- Liquidity requirements --- Financial regulation and supervision --- Solvency stress testing --- Credit risk --- International agencies --- Financial risk management --- Banks and banking --- State supervision --- Financial services industry --- Income