Public Information Notice: IMF Executive Board Discusses Modernizing the Surveillance Mandate and Modalities and Financial Sector Surveillance and the Mandate of the Fund

April 22, 2010

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.

Public Information Notice (PIN) No. 10/52
April 22, 2010


On April 16, 2010, the Executive Board of the International Monetary Fund (IMF) met to discuss how to modernize the mandate and modalities of IMF surveillance as well as how to strengthen financial sector surveillance. The Executive Board discussions are part of a broader review of the Fund’s mandate covering: surveillance, financing, and the stability of the international monetary system. An initial overview discussion was held by the Executive Board on February 22, 2010.1

Executive Board Assessment

Executive Directors welcomed the objective of modernizing the framework and modalities of surveillance—a core component of the Fund’s work. They agreed that, despite the progress in recent years, there remains much scope for improving spillover and multilateral analysis, the value and traction of bilateral surveillance, financial sector analysis, and the integration among all dimensions of surveillance. The current crisis has added impetus to this task. Thus, Directors welcomed the visions set out in the papers toward these important objectives.

There was broad interest among Directors in many of the specific ideas presented in the staff papers. At the same time, Directors stressed the need to be mindful of the potential resource implications of the various initiatives for both the Fund and its members, and a proliferation and overlap of surveillance outputs. Bilateral surveillance should remain a key pillar of Fund activities. The oversight role of the Executive Board was also emphasized. Some Directors preferred to keep the option of amending the Articles of Agreement open at this stage.

Multilateral surveillance. Most Directors supported, or could support on a trial basis, producing reports on outward spillovers for countries whose policies or circumstances may significantly affect the stability of the system, complementing Article IV reports.2 Many noted, however, that such analysis, as well as other cross-country issues, could, where appropriate, be integrated into existing products—for example, Article IV reports, Regional Economic Outlooks, or restructured, shorter World Economic Outlooks and Global Financial Stability Reports—or into a new shorter consolidated report that would bring together existing work and the new initiative on spillovers. Many Directors supported, or were open to, the idea of multilateral consultations, on an as needed basis, on specific topics that have systemic implications to foster collaboration and collective action. Others were skeptical about their value added, given the activities of several other fora and the experience with the first multilateral consultation. Many Directors saw merit in a multilateral surveillance decision to clarify the Fund’s role and provide a framework for engaging policymakers, based on the building blocks laid out in the staff paper. However, some remain unconvinced of the effectiveness of this approach.

Bilateral surveillance. Many Directors considered thematic multi-country reports a useful vehicle for promoting a better understanding of cross-country linkages. There was some support for consideration of staff country notes to provide more topical and timely analysis of economic issues; however, some Directors cautioned that a multiplicity of surveillance products could pose communication challenges, undercutting the Fund’s policy messages. The idea to use Article IV consultations to pre-qualify members for use of Fund resources was seen as challenging. Directors supported increased use of lapse-of-time procedures for completing Article IV consultations and greater flexibility in consultation cycles within existing rules, while underscoring the importance of ensuring that surveillance takes place within a reasonable timeframe. Many Directors called for more ambitious approaches to improving the traction of surveillance, possibly through greater ministerial engagement.

Financial sector surveillance: improving risk assessment. Most Directors supported the plans to obtain data necessary for the Fund to assess spillovers through global financial networks and their implications for macro-financial stability. These include enhanced coordination with international agencies and national authorities to compile, with appropriate aggregation to protect confidentiality, timely data on debt, derivatives, foreign exchange market exposures, and cross-border bank exposures. Most Directors also agreed that the Fund should seek more regular access to data on individual financial institutions, building on the modalities already in place for Financial Sector Assessment Program (FSAP) assessments, and deepen its engagement with key global financial institutions, although a few pointed to significant legal issues.

Improving the traction of financial sector surveillance. Most Directors supported, or could go along with, the proposal to make the FSAP stability module a mandatory part of surveillance for members with systemically important financial systems. To implement this, further work would be needed on country selection criteria and resource implications. A number of Directors were of the view that the voluntary nature of the FSAP should be preserved. Directors stressed the importance for the Fund to engage with other international bodies, in particular the Financial Stability Board (FSB), based on a clearer delineation of responsibilities. They looked forward to considering this relationship in the context of the forthcoming Board discussion of the Fund’s membership in the FSB. They were generally open to exploring ways to enhance collaboration between the Fund and financial sector standard-setting bodies, based on the Fund’s role in assessing implementation of standards and the importance of these standards for macro-financial stability.

Resource implications and next steps. Given concerns about a potential expansion of resource needs flowing from these proposals, some ideas could be pursued on a trial basis, which, as experience is gained, would help better gauge resource implications. Directors also cautioned that new initiatives should not be implemented at the expense of bilateral surveillance. These issues would be discussed in the context of the medium-term budget strategy. Staff will also prepare follow-up papers on mandatory FSAPs and the legal framework governing obligations of members to consult under Article IV.

1 See Public Information Notice (PIN) No. 10/33 – The Fund’s Mandate—An Overview of Issues and Legal Framework.

2 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here:


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