Paul Lachine

Testing America’s Financial Stability

The US authorities have done much to strengthen the financial sector, which speaks to their commitment to global efforts to ensure that the crisis of the last three years will not be repeated. The true test, however, will be how the recent reforms enacted by the US Congress are implemented domestically, and how they will be coordinated internationally.

WASHINGTON, DC – Far-reaching financial-reform legislation has just been enacted in the United States – a landmark response to the most devastating financial crisis in decades, and one that takes important and welcome steps toward addressing the many weaknesses in the US regulatory and financial system that the crisis revealed.

While the Obama administration and the US Congress were drawing lessons from the crisis and deliberating on reforms, the International Monetary Fund was also assessing the US financial system under the Financial Sector Assessment Program (FSAP). The FSAP was introduced in the wake of the Asia crisis in the mid-1990’s to enable objective assessment of the strengths and vulnerabilities of countries' financial systems, including the extent to which they measure up to international standards. The latest global crisis prompted the G-20 to re-affirm the importance of these FSAP “check-ups” to efforts to promote global stability, and it has even committed its members to undergo them regularly.

So, with the US now having undertaken this exam, what insights does it provide about the health of the US financial system and recent regulatory reforms?

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