1. Work on standards continues to progress on several fronts, and this report covers the production of Reports on the Observance of Standards and Codes (ROSCs) and developments related to the work on international standards and codes from May 1 to September 30, 2002, the period since the last quarterly report.² On November 15, 2002, the Executive Board approved a 12-month pilot project that significantly advances the IMF's contribution to the international efforts to combat money laundering and the financing of terrorism (AML/CFT) by adding the Financial Action Task Force (FATF) 40 Recommendations on an effective anti-money laundering framework, and the 8 Special Recommendations on Terrorism Financing (FATF 40+ 8), to the list of areas and associated standards and codes that are incorporated into the operational work of the Fund.³

2. Reviews of the FSAP and the standards and codes initiative are forthcoming.⁴

ROSC production

3. Between May 1 and Sept 30, 2002, an additional 77 ROSC modules were completed, for 27 economies, with 52 of these published (Table 1).^5,6 This brings the total number of ROSC modules completed to 310 (for 84 economies), of which 227 have been published (for 68 economies) (Table 2).⁷ Fifty-three of the 77 modules covered financial sector standards assessed under the Financial Sector Assessment Program (FSAP). Two were data modules, seven were fiscal modules, and fifteen were produced by the World Bank (comprising five corporate governance, seven accounting and auditing, and three insolvency and creditor rights modules).

Selected standards-related developments

4. As part of the Annual Meetings Program of Seminars, the Fund organized sessions entitled "Standards and Transparency" and "Anti-Money Laundering and Combating the Financing of Terrorism: Towards a New Global Standard."⁸

5. An interdepartmental mission, with World Bank participation, visited Beijing, Shanghai, Moscow, and Budapest in August 2002, to discuss the Fund and Bank's work on standards and codes and to seek feedback on this work, in the context of transition economies.⁹ The exercise was the sixth in the series of outreach missions that has been under way since June 2000. While the seminars focused on the eleven standards and codes agreed by the Fund and the Bank and the standards assessments process, including through the FSAP and ROSCs, they also covered the recent work on anti-money laundering and combating the financing of terrorism (AML/CFT). Participants, who were mostly from the official sector, were relatively well informed about the standards and codes initiatives. However, they thought that knowledge of the importance of standards was thin among their private sectors and welcomed further outreach by staff.

6. Fund staff hosted a briefing on standards and codes in July 2002 for a coalition of nongovernmental organizations (NGOs) called "New Rules for Global Finance," which focuses on the implications of international financial architecture reform initiatives for poor countries. A particular area of interest of the group is private sector regulation and disclosure.

Private Sector Initiatives

7. In an article published on its website in Summer 2002, Fitch Ratings reported "a highly significant relationship between the publications of ROSCs and changes in sovereign ratings over the last three years."¹⁰ The article acknowledged that while one explanation for the outcome is that countries that are undertaking reforms are more likely to undertake and publish the reports, the results suggest a positive impact of compliance with standards and transparency on perceptions of creditworthiness. Standard & Poor's announced on September 13, 2002 the completion of its 2002 "Transparency and Disclosure Surveys."¹¹ Among the findings of the U.S. segment of the Survey, released on October 15, 2002, are that for U.S. firms, disclosure is greatest for financial information and lowest for ownership structure, investor rights, and board/management structures and processes.¹²