Public Information Notice: Assessing the Implementation of Standards--An IMF Review of Experience and Next Steps

March 5, 2001

Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.

On January 29, 2001, the Executive Board of the International Monetary Fund (IMF) reviewed the experience that had been gained to date with the assessment and implementation of economic and financial system standards and codes, and discussed the next steps.


In the wake of the financial crises since 1995, the international community has emphasized the need for specific steps to strengthen the architecture of the international financial system. Increased transparency and the development and implementation of standards and codes in areas relevant to the effective functioning of members' economic and financial systems have been central elements of these efforts.

The concept of internationally agreed standards is not new: For many years standards have provided a context within which policy advice and technical assistance is provided to national authorities. However, in the last two years, the work has accelerated in developing international standards and codes to provide policy makers with benchmarks of good practice in key areas of policy. Encouraging greater transparency of countries' policies is a key aspect of many of the standards used by the IMF including the Code of Good practices on Transparency in Monetary and Financial Policies and the Code of Good practices on Fiscal Transparency. Standards also promote the use of consistent definitions. For example, the IMF's Special Data Dissemination Standard includes precise definitions for countries to use when publishing reserves data. Another important area of standards is financial market regulation. Expert bodies, such as the International Organization of Securities Commissions (IOSCO), which represents securities commissions from over 100 member countries, have extracted the common elements of a good regulatory system for securities that apply in various legal environments and markets of varying sophistication.

By promoting good policies and sound financial systems and by encouraging the release of accurate information to private markets, standards are designed to promote sustained growth and greater stability in international financial markets. Standards also allow potential investors and international capital markets to make informed cross country comparisons.

The World Bank and the IMF have collaborated closely to assess progress in implementing selected standards. In January 1999, the Fund initiated a pilot program for the preparation and use of summary assessments of members' implementation and observance of internationally recognized standards in those areas of direct concern to the Fund and where it had relevant technical expertise. These summary assessments were subsequently referred to as Reports on the Observance of Standards and Codes (ROSCs). In September 1999, the Fund's Executive Board agreed to an approach to the preparation of ROSCs whereby different institutions could be invited to take primary responsibility for undertaking assessments in the areas related to their competencies.

The World Bank subsequently identified areas in which it would be prepared to experiment with the preparation of ROSC assessments. These areas were selected to be consistent with the Bank's mandate for capacity building and poverty reduction, and for now cover corporate governance, accounting, and auditing, and, when standards are available, insolvency and creditor rights.

As of December 4, 2000, a total of 83 ROSC modules had been produced for 32 countries, of which 67 have been published on the IMF's external website. The majority of modules were prepared in the areas of data dissemination (11), fiscal transparency (18), monetary and financial policy transparency (18), and banking supervision (18). ROSC modules on financial sector standards have increasingly been prepared as part of the IMF and World Bank's comprehensive Financial Sector Assessment Program (FSAP).

Executive Board Assessment


Executive Directors welcomed the opportunity to review the experience of assessing and implementing standards and to discuss next steps in what is a complex and evolving area. They viewed the development and implementation of standards in areas relevant to the effective functioning of members' economic and financial systems as central to strengthening the architecture of the international financial system. While the work on standards is not new, as standards have provided a context for discussions between national authorities and Fund staff for many years, Directors noted that the increased attention to standards, and the introduction of standards assessments, are intended to help sharpen the focus of Fund policy discussions with national authorities and to strengthen the functioning of markets. They stressed that, by establishing a consistent, although not mechanistic, approach to standards assessments, Reports on the Observance of Standards and Codes (ROSCs) can provide rigor, content, and focus to the work on standards. Directors welcomed the broad based participation of member countries in the initiative, together with closer contact with standard setters and growing interest in the private sector as a sign of the increasing momentum for the work on standards.

Lessons from the review and implications for next steps

Directors highlighted a number of lessons from the review and drew out a number of implications for next steps:

  • the current modalities for undertaking assessments and producing ROSCs, including the voluntary nature of ROSC participation are working well and should continue;

  • assessments need to be independently conducted and consistently applied across countries. Detailed guidance for assessors can help provide this consistency. Self-assessments also have a useful role to play, as these would help promote ownership of the assessments. In general, Directors thought self-assessments should be followed by external evaluations to bring the perspective of independent assessors to the process;

  • early evidence suggests ROSCs can appropriately allow for consideration of the different stages of economic development, the range of administrative capacities, and the different cultural and legal conditions across the membership; but care needs to be taken to ensure that these considerations are actively incorporated in standards assessments;

  • ROSCs should provide the context for the assessment, including the progress made by the country in implementing standards, and the authorities' plans for further implementation;

  • ROSCs can be useful to national authorities by helping them develop their own reform plans, assess compliance with international standards and codes, and serve, if published, as a signal of transparency of their policies;

  • ROSCs can provide a helpful input into Fund surveillance and technical assistance;

  • there is growing interest and awareness in the private sector of the work done on standards by the Fund and the World Bank, but further outreach efforts are clearly needed;

  • caution should be exercised to ensure that the Fund's assessments do not resemble ratings for countries, or make use of pass-fail judgments.

Beyond these lessons, it was recognized that the concerns expressed by a number of Directors about the process of developing standards and assessing observance of standards needed to be kept in mind as we move beyond the experimental phase and to the establishment of the ROSC as a permanent and principal tool for assessing standards and codes. Several Directors suggested that more research needed to be done to assess the specific benefits of the use of standards and codes in reducing vulnerability to macroeconomic and financial shocks.

Ensuring an appropriate framework for the work on standards

Directors agreed that the adoption and assessment of internationally recognized standards will remain voluntary. They recognized that priorities for implementing standards would differ by country and through time, and assessments would need to take into account differences in members' economic circumstances and stages of development.

Directors encouraged the staff to continue its work on developing and managing Fund standards and codes, and to enhance its collaboration with other standard-setting agencies.

Directors recognized the 11 areas and associated standards and codes identified in the staff paper (see Attachment I) as those which are useful to the operational work of the Fund and the World Bank, and for which assessments will be undertaken as appropriate. They stressed that the list should only be reviewed and modified by the Executive Board of the Fund, in consultation with the World Bank, where appropriate.

Directors reaffirmed that the Fund would undertake assessments in the areas of data dissemination and fiscal transparency, and that assessments in the areas of monetary and financial policy transparency, banking supervision, securities, insurance, and payments systems will generally be undertaken in the context of the joint Fund-Bank Financial Sector Assessment Program (FSAP). They welcomed the steps taken by the World Bank toward the goal of preparing assessments in the areas of corporate governance, accounting, auditing, as well as insolvency and creditor rights, and looked forward to a significant increase in Bank-led ROSCs in these areas in the period ahead. Directors recognized the important role that representatives of standard setters and other institutions have played in developing assessment methodologies and in undertaking assessments, including through participation in missions.

Concerns about the process

While welcoming the work under way in the Fund on standards and codes, a number of Directors expressed concerns about the process of developing and assessing standards. They stressed the importance of ownership and of ensuring that all members had a role in shaping and guiding the work on standards, and indicated that the key aspect of achieving this aim would be the regular review by the Fund Board of the modalities under which assessments take place and of the list of standards used for such assessments. Directors welcomed the steps which have been taken thus far to address the concerns raised by some members, including: prioritization of assessments so that members are assessed only against those standards, and those parts of standards, which are relevant to their situation; and the fact that, in several cases, standard setters have adopted a multi-track approach, setting out benchmarks for countries at different stages of development. They also welcomed the proposal to include authorities' views on ROSC assessments. In order to ensure uniform treatment, Directors agreed on the importance of filling the current gap in procedures so that industrial countries can also be assessed against standards for which the Bank is in the lead. They also agreed that the staff should experiment with ways to fill this gap, including by allowing Bank experts to prepare assessments in the context of Fund missions.

While underscoring the importance of addressing the concerns that have been raised about the work on standards, Directors emphasized that a key benefit of international standards is the use of consistent definitions across countries and that it is important to maintain this consistency.


Directors agreed that members' implementation of standards identified as useful for Fund operational work is an important element in the assessment of the general economic situation and economic policy strategy of members. While differences of view were expressed about the modalities of linking the Fund's work on standards and codes to the surveillance process, on balance, Directors agreed to the modalities proposed by the staff and to the proposal for how these would operate in practice (see Attachment II). Many Directors emphasized that the provision of information by members on the observance of standards in the 11 identified areas was important to the conduct of comprehensive analysis under surveillance. These Directors agreed that ROSCs and ROSC updates, though voluntary, provide a systematic and structured way of organizing and presenting information on standards assessments to help guide and inform the surveillance process.

Most Directors recognized that if a member does not volunteer to participate in a ROSC, other sources of information, if available, will need to be used to inform surveillance, including standards-related technical assistance, self-assessments on which the staff has conducted due diligence, or could be the result of work in the context of an Article IV mission. These Directors indicated that, where they considered a country's observance of standards to be poor, or where the information available to them was insufficient, they would encourage countries to participate in a ROSC, including through the FSAP, as appropriate.

Many Directors, however, considered that, while standards assessments can help inform the surveillance process, they were concerned that the proposed modalities went too far in formalizing the link between the work on standards and surveillance at the risk of becoming too mechanistic. In particular, they considered that the proposed modalities risk bringing some standards closer to becoming an obligation of members and could overburden the surveillance process. These Directors did not see the need to move beyond the current practice and pointed out that this practice seems to be working well.

To ensure that the information contained in ROSCs remains current, Directors agreed that factual updates to ROSCs would be prepared and circulated to the Board at the time of subsequent Article IV reports.

Circulation and publication

Directors supported a transmittal policy for ROSCs to other organizations that follows the policy currently in operation for Article IV documents.

Directors agreed that the Fund's new publication policy formalizes the voluntary approach to publication of ROSCs. They agreed that any updates to ROSCs will be subject to the same procedure.

Directors agreed that ROSC modules will often be published following the conclusion of an Article IV consultation—at the time of the Fund's Board release of a Public Information Notice, where one exists. However, they also recognized that, in some cases, ROSC modules are finalized a number of months prior to the Board discussion of the Article IV consultation. In line with the recent transparency decision and in order to maximize disclosure, Directors reconfirmed that publication of finalized ROSC modules on the Fund's website could take place with the member's agreement and after notice to the Board. Several Directors asked that consideration be given, in some cases, to finalizing and allowing publication of ROSC modules derived from the FSAP in advance of the Article IV consultation.

Pace and prioritization of assessments

Directors noted that the work on standards has significant resource implications for national authorities and for the Fund. Most Directors indicated that maintaining the output of ROSCs at the current level was the minimum necessary for effective Fund surveillance. Some Directors viewed the current pace of ROSC output as adequate for effective surveillance. However, a few Directors were of the view that if ROSCs were to fulfill their objective of better informing surveillance and the private sector, the pace will need to be increased.

Directors called for a careful prioritization of work in this area. Some Directors, noting the critical importance of standards and codes, observed that this matter will be taken up in the context of the forthcoming budget discussion.

Technical Assistance (TA)

Directors recognized that the work on standards is leading to an increase in demand for the provision of TA to facilitate self-assessments, to implement standards, and to respond to recommendations contained in assessments. They urged as many countries as possible to make available additional technical specialists and resources to help meet this demand. Consistent with Fund Board recent guidance, Directors agreed that there could be a role for the Bank and the Fund to coordinate TA in this area in some cases.

Directors agreed that a further overall review of experience with standards assessments should take place in two years' time. In the meantime, the list of standards could be revised by the Board as appropriate. There will also continue to be periodic reviews of individual standards.

Attachment I

List of Standards and Codes Useful for Bank and Fund Operational Work

Group 1: these are the initial set of areas defined as within the Fund's direct operational focus when the ROSC pilot was initiated.

Data Dissemination: the Fund's Special Data Dissemination Standard/General Data Dissemination System (SDDS/GDDS).

Fiscal Transparency: the Fund's Code of Good Practices on Fiscal Transparency.

Monetary and Financial Policy Transparency: the Fund's Code of Good Practices on Transparency in Monetary and Financial Policies (usually assessed under the FSAP).

Banking Supervision: Basel Committee's Core Principles for Effective Banking Supervision (BCP) (usually assessed under the FSAP).

Group 2: these additional areas are assessed under the FSAP. It is arguable that the Fund's focus on financial sector monitoring under surveillance, and the development of the FSAP as the principal means to conduct that monitoring, combined with the Bank's responsibility for financial sector development, also make these areas of direct operational focus for both institutions.

Securities: International Organization of Securities Commissions' (IOSCO) Objectives and Principles for Securities Regulation.

Insurance: International Association of Insurance Supervisors' (IAIS) Insurance Supervisory Principles.

Payments Systems: Committee on Payments and Settlements Systems' (CPSS) Core Principles for Systemically Important Payments Systems.

Group 3: these areas were highlighted as important for the effective operation of domestic and international financial systems by the Fund Board1/ and are now being assessed by the Bank under the ROSC pilot.

Corporate Governance: OECD Principles of Corporate Governance.

Accounting: International Accounting Standards Committee's International Accounting Standards.

Auditing: International Federation of Accountants' International Standards on Auditing.

Insolvency and creditor rights: see paragraph 3 of staff paper.

Attachment II

Standards as an Operational Part of Fund Surveillance: Option 2

The following are the main elements of staff's proposals to implement Option 2:

Which standards are relevant for surveillance? The paper proposes that the Fund Board should establish a list of areas and related standards that it considers important for surveillance. Attachment I provides a suggested list for consideration.

What information should national authorities provide? Information would be sought for only those standards that are on the list. The information would need to be sufficiently detailed to allow staff to judge the degree of progress in implementation. In individual cases:

  • staff would seek information on those standards which are relevant to the circumstances and stage of development of the country;

  • like economies would need to be treated alike, but not all economies would be treated identically, as the standards relevant to individual countries would differ over time as their economic circumstances change; and

  • each assessment would focus on those elements that are most relevant to the individual member.

When would staff seek this information? Standards assessments would be an input into the Fund's Article IV consultation and would need to draw on the expertise of specialists. Thus, the information should be sought prior to an Article IV mission, and the implications of the assessment should be discussed during the Article IV mission.

Who should seek this information? The area department will be the main link between national authorities and the Fund. They would need to seek this information in consultation with relevant functional departments.

How would this information be obtained? Staff believe that it would be preferable to obtain the information through the preparation of ROSC modules. However, it may be possible to rely on other sources of information.

How often would ROSCs need to be prepared? At the current pace, every Fund member would, on average, receive four modules every seven to eight years. It would be possible to allow considerable variation around this average cycle. Countries implementing reforms, of systemic importance, or at greater perceived risk, could be assessed more frequently, but others would be assessed over a longer cycle. Nevertheless, it is not clear that this average periodicity is sufficient to be consistent with the view that ROSCs are the preferred method of obtaining information to inform surveillance in these areas.

How would ROSCs be kept current? Short updates could be prepared in the context of an Article IV consultation in years between the preparation of a module. These updates could be largely descriptive in nature and would be prepared by the area department. However, it is not clear that such an approach will provide the information necessary to undertake effective surveillance. The alternative of substantive updates would increase resource requirements.

What if a country does not volunteer for a ROSC? Participation in the ROSC is voluntary. If a member has not volunteered to participate, other information sets would need to be used to inform surveillance, if available. If a ROSC is not used, it would be important to say how the information was collected. Such information could be presented in an Annex with the limitations clearly spelled out. In the absence of a ROSC, staff could report on a member's self-assessment provided it had conducted a "due diligence" of the member's conclusions, and the results of standards-related TA or questionnaires could be used.

In cases where countries' observance of standards is deemed poor, the Board could encourage countries to participate in a ROSC.


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