Bhutan

At the request of the Royal Monetary Authority of Bhutan (RMA), an IMF Financial Sector Stability Review (FSSR) mission visited Thimphu, and this technical assistance (TA) report highlights the main FSSR findings. The mission conducted a diagnostic review of the financial sector and proposed a Technical Assistance Roadmap (TARM) to support the authorities’ efforts to strengthen the identification, analysis, and mitigation of risks to financial stability in Bhutan. The RMA has rapidly progressed prudential regulation for the banking sector and must now shift its focus to strengthening supervisory capacity. Non-bank financial institutions play an important role in the financial sector, and with growing digital innovation, it is important authorities develop tailored regulation for the insurance sector and crypto markets, while refining the approach to e-money. Payment systems are advanced with significant progress in modernizing domestic payment systems, but cross-border payments can be improved. More granular collection of financial sector statistics can also support more dynamic tools for analyzing and monitoring systemic risks. The mission’s diagnostic review supports a TA plan. The main recommendations are summarized and the comprehensive TARM is provided in this paper.