Standards and codes are benchmarks of good practices. The IMF and the World Bank have recognized international standards in 12 policy areas related to their work. In assessing countries' observance of these standards, and helping them to implement reforms where needed, the IMF and the World Bank aim to increase economic and financial stability by strengthening domestic economic and financial institutions.
The term “standards and codes” refers to sets of provisions relating to the institutional environment—the “rules of the game”—within which economic and financial policies are devised and implemented. Countries whose institutions are well-regulated and transparent tend to demonstrate better economic performance and greater financial stability. It is thus in countries’ own interest to adopt and implement internationally-recognized standards and codes.
The IMF and the World Bank’s work on standards and codes is a prominent component of the efforts to strengthen the international financial architecture that followed the emerging market crises of the 1990s. The development, dissemination, and adoption by countries of international standards aim to assist countries in strengthening their economic institutions, inform market participants to allow for more effective market discipline, and inform IMF surveillance and the World Bank’s country assistance strategies. The ultimate goal is to promote greater economic and financial stability at both the domestic and international levels.
In March 2011, a review of the IMF and the World Bank’s work on standards and codes concluded that this work has been useful for countries in identifying gaps, setting the reform agenda, strengthening institutions, and enhancing transparency. It also identified scope to adapt standards to a changing environment, better prioritize assessments across countries and policy areas, enhance integration of the Report on the Observance of Standards and Codes(ROSC) findings into the IMF’s surveillance and technical assistance, and improve the availability of ROSCs. The IMF and the World Bank’s Executive Boards supported the Financial Stability Board’s decision to combine the accounting and auditing standards under one policy area and introduce a new policy area on crisis resolution and deposit insurance. An August 2012 IMF policy paper emphasized the need to strengthen existing fiscal transparency standards and monitoring arrangements, including the IMF’s Fiscal Transparency Code and assessment tools.
The list of standards and codes
The IMF and the World Bank have recognized international standards in 12 policy areas, which form three broader groups:
(1) Policy Transparency: Standards in these areas have been developed by the IMF.
(2) Financial Sector Regulation and Supervision: Standards in these areas have been developed by specialized standard-setting bodies.
(3) Institutional and Market Infrastructure: Standards in these areas have been developed by specialized standard setting bodies, with substantive input from the IMF and World Bank:
A member’s observance of standards and codes is assessed, at its request, by the IMF and/or the World Bank (and also by the FATF or FATF-style regional bodies in the case of AML/CFT). In the financial sector regulation and supervision areas, standards are typically assessed in the context of the Financial Sector Assessment Program (FSAP). Results of these independent assessments are summarized in ROSCs, which usually accompany FSAP reports. In the fiscal policy transparency area, the revised Fiscal Transparency Code will provide the basis for a new Fiscal Transparency Evaluation (FTE), which will replace the fiscal ROSC (pilot FTEs have been started in several countries).
Findings of an initial assessment may be updated by a reassessment, which comprises a new assessment of the jurisdiction, or a targeted (or risk-based) assessment, whereby only selected principles are reassessed based on identified criteria. In the case of AML/CFT, all the principles have to be reassessed. Countries are responsible for implementing the recommendations in a ROSC, FSAP, or FTE. Many developing countries request technical assistance from the IMF and other international bodies in doing so.
Participation in the standards and codes initiative through a request for ROSCs and FTEs is voluntary. The publication of the ROSCs and FTEs is also voluntary, but presumed. Most of the IMF’s member countries had completed one or more ROSCs. As of end-February 2014, 1,299 ROSCs have been produced, of which about 63 percent were published.