IMF Course on Financial Sector Policies

The IMF’s Financial Sector Policies course (FSP) was delivered at the JVI in November 2024. It was attended by 27 participants from 12 countries, primarily officials from financial stability departments of central banks and supervisory agencies, as well as other governmental institutions focused on promoting financial stability. 

The FSP is designed to give participants an overview of financial vulnerabilities and how shocks are transmitted within and between the financial system and the real sector. Participants examine the rationale for the design of financial sector policies and how to assess their impact on mitigating systemic risk as well as idiosyncratic vulnerabilities. The different tools of both micro-prudential and macroprudential policies are also analyzed and discussed. Although the emphasis is on preventive strategies, the course discusses policies to deal with financial distress situations and contingency planning too.

The course underscores how countries’ institutional framework has to be considered when designing policy measures, in particular the need to address the main structural financial frictions of imperfect contract enforcement and asymmetrical information, generating moral hazard and principal agency issues. Participants are also led to recognize the calibration issues and the implementation challenges for the different policy tools and to evaluate their potential interaction with other macroeconomic policies, including possible unintended consequences. The course also covers the main financial sector policies to address climate change risks, risks associated with the growth and diversification of the non-bank financial sector, and the regulatory challenges posed by financial innovations. 

As typical for IMF courses, the FSP syllabus combines lectures with hands-on workshops on regulatory instruments and risk assessment tools. Participants, divided into groups, prepared final presentations on financial sector challenges and policy issues in selected countries.

Participants were very actively engaged throughout the course and provided very positive feedback. Many expressed their intention to apply the knowledge, skills, and tools acquired to conduct a more robust and comprehensive assessment of the financial sector policies and initiatives in their countries and to improve the design of their countries’ macroprudential tools. 

Luisa Zanforlin, Senior Economist, IMF