Ethiopia set to start reporting FSIs for IMF

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Ethiopia is set to start reporting Financial Soundness Indicators (FSI) for the Statistics Department (STA) of IMF as of this month in accordance with the 2019 FSI Guide using the workbook developed by IMF mission on the technical assistance that was mid this year.
The STA mission had paid an assistant mission in June remotely, on the aim to technical provide assistance to the Bank Supervision Directorate (BSD) of National Bank of Ethiopia to manage and commence the new reporting.
Meanwhile, Ethiopia has been reporting for IMF’s African Department (AFR) for deposit takers for internal use in its AFR’s financial stability analysis. It is the first time for the country to report to the STA. The quarterly report will be posted on the IMF FSI website, which makes Ethiopia another country alongside 143 countries who posts on the website.
BSD now can compile quarterly FSIs for DTs using the workbook developed by the mission and agreed on for reporting FSI data and metadata, a key for interpreting the FSIs and to allow for cross-country comparisons, to STA for posting on the IMF’s FSI website.
The quarterly reporting will start in this month for DTs with quarterly data beginning from the second quarter of 2017 and the institutional coverage with annual data starting from 2017.
“As this was the first FSI mission to work with the BSD in developing an FSI compilation framework, the mission reviewed the FSIs currently compiled by the BSD to assess consistency with the 2019 FSI Guide and found discrepancies in key indicators, including nonperforming loans (NPLs) to total gross loans, interest margin to gross income, noninterest expenses to gross income, and capital to assets,” IMF explained.
According to IMF technical assistance report, the main objectives of the mission that was conducted from June 15 to July 10 via video conference were to: review the source data, institutional coverage, and accounting and regulatory frameworks supporting the compilation of FSIs; provide guidance for mapping source data for the banking sector to the FSI reporting templates as well as preparing the metadata; and agree with the authorities on the timeline to begin regular reporting of the FSIs for deposit-takers to STA.
It added that the mission also provided technical assistance to the NBE on the compilation of net open positions in foreign currencies.
“This was the first STA mission on FSIs for the NBE. Ethiopia does not report FSIs to STA but it does produce and share a select subset of FSIs with the AFR department. Prior to this mission, Ethiopia received a monetary and financial statistics (MFS) mission which assisted the NBE in compiling MFS standardized report forms for the central bank and other depositary corporations in January 2019,” it added.
Ethiopia is currently under Extended Credit/Fund Facility (ECF/EFF) arrangements with proposed financial sector reforms.
“Improved FSIs are expected to facilitate better monitoring of financial stability by the NBE and help guide economic policies in the context of the ECF/EFF arrangements, by shedding light on the underlying accounting and regulatory frameworks for the FSIs,” the IMF said.
It said that as a result of the mission, the NBE is now in a position to report quarterly FSIs to STA in line with the 2019 FSI Guide. “Together with staff of the bank supervision department, the mission compiled 22 FSIs for deposit takers (DTs), and two FSIs on the size of Offshore Financial Centers (OFC’s) sector from the existing source data. The coverage of DTs for the compilation of FSIs includes 17 commercial banks which cover 90 percent of the entire DTs sector,” it explained.
The FSIs for DTs cover key aspects of capital adequacy, asset quality, earnings and profitability, and liquidity, providing a useful input for financial stability analysis.
The mission was able to assist the NBE in their mapping to the FSI workbook and validated aggregated data from bank- by- bank data for December 2019. In addition, the mission reviewed source data from the balance sheet, income statement, and supervisory data from June 2019 to December 2019 and made various recommendations to improve the collection of source data.
The mission assisted the NBE in the compilation of 11 core FSIs and 11 additional FSIs for deposit-takers as well as two additional FSIs relating to the size of OFC subsectors.