New IMF policy to curb risks
Posted Thursday, September 26 2013 at 01:00
Kampala- Bank of Uganda has welcomed the new International Monetary Fund Policy framework, which aims to help all its 188 member countries design and implement new macroprudential policies.
In response to the new IMF macroprudential policy yesterday, the deputy Governor of Bank of Uganda, Dr Louis Kasekende, said it will help the Central Bank ensure that Ugandan banks have adequate capital buffers.
The IMF on Monday released new policy framework macroprudential policies that are designed to identify and mitigate risks to systemic stability, in turn reducing the cost to the economy from a disruption in financial services that support financial markets—such as the provision of credit, insurance payment and settlement services.
The initiative by the IMF is part of the post–crisis efforts to reform financial supervision regulation at the global level – spearheaded by the G-20 and the Basel Committee on Financial Supervision, which have been underway since 2010.
These include strengthening the capital adequacy framework for banks, introducing stronger liquidity buffers, introducing macroprudential regulations which are intended to dampen the pro-cyclical nature of bank lending.
One of the most important lessons from the global financial crisis was that significant risks (systemic risks) can build up and ultimately jeopardise the stability of the financial system as a whole, while at the same time individual banks seem to be healthy and stable. The need to address systemic issues has led to a new policy named the macroprudential policy.