Financial Sector Technical Assistance

closed

The first project development objective will consist of strengthening the institutional capacity of the monetary authorities to improve the design and implementation of monetary and fiscal policies. The project has the following ten components. Component 1) the Central Bank has generated an important quasi-fiscal deficit as a result of the banking crisis management. Component 2) focus on the areas of IT auditing function, external audits accountability, institutional strengthening, implementation of risk-focused supervision and full implementation of the off-site manual. Component 3) seeks to support a gradual development of the market through two major elements focusing on securities markets, and government debt management and fixed income markets. Component 4) will include review and update of the legislation; implementation of risk-based supervision; procurement of IT systems. Component 5) focuses on five areas where institutional capacity would be needed in the medium term: strategic planning, institutional development, human resource and IT and implementation; establishment of appropriate technical and regulatory framework for survivor and disability benefits; investment policy advice on appropriate regulations and linkages to other capital market reforms; training of supervisory staff and; creation of database and production of periodic reports in coordination with other agencies. Component 6) will support a comprehensive reform of the payments system, including the launch of safer and more efficient systems and an improved legal and oversight framework. Component 7) regulatory developments of the Monetary and Financial Law (LMF) include bank resolution and deposit insurance, penalties, consolidated supervision, capital adequacy, fit-and-proper criteria for bank managers and directors, loan classification and provisioning rules, adoption of market risk criteria, limits and enforcement of credit to related parties, adoption of best practices for corporate governance and strengthening of the bank's internal controls. Component 8) A draft law intended to change the functioning of the Ministry of Finance is currently being discussed in Congress. Component 9) Contingencies that could occur from an intensification of the banking crisis. Component 10) Financial Statements Audit. Hiring of a firm to audit the financial statements of the project.