WASHINGTON (REUTERS) - The International Monetary Fund (IMF) on Monday added Denmark, Finland, Norway and Poland to its list of countries that must have regular check-ups of their financial sectors, under an effort to prevent a repeat of the global financial crisis.
The International Monetary Fund in 2010 had identified 25 other countries where financial sector evaluations will be mandatory. These reviews had been voluntary prior to the 2008-2009 financial crisis, which showed how quickly financial problems in one country could spread to its neighbors and the rest of the world.
More than half of the 29 financial sectors the IMF deems"systemically important" are located in Europe.
"The financial sectors of these jurisdictions are highly interconnected not just with each other but also with other major financial centers," the IMF said about the focus on European financial centers.
"This makes them central nodes in the global financial network and important for global systemic stability."
The Fund's new evaluations have been shaped by the prolonged sovereign debt crisis in the euro zone, which at times threatened to destroy the currency bloc. The IMF itself has lent billions of dollars to the euro zone's weakest members, including Greece, Portugal and Cyprus.
Under a new methodology also released on Monday, the IMF said it would review not only how exposed one country's banks are to another's, but also consider sovereign debt exposures and the links between a country and its banks.
The Fund also said it would put a greater focus on the connections among each country's financial sector and that of its neighbors when it reviews financial stability. It previously emphasized the size of each financial sector.
The IMF also plans to analyze price contagion, such as the close links among stock markets around the world.
The IMF's executive board welcomed the new methodology, but said it may omit certain countries that have had banking and financial crises since 2008. They were also concerned the new focus on mandatory check-ups in 29 countries would leave IMF staff with less time to do voluntary reviews of the financial sectors in the rest of the world.