Public Information Notice: IMF Discusses Work Agenda for Financial Sector Surveillance

April 19, 2012

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. 12/37
April 19, 2012

On April 16, 2012, the Executive Board of the International Monetary Fund (IMF) discussed a Financial Sector Surveillance Work Agenda, a first step toward a strategic plan which was one of the key recommendations of the 2011 Triennial Surveillance Review. The Work Agenda explains the IMF’s responsibilities in the field of macro-financial and financial sector surveillance, and sets priorities for the Fund’s work in this sphere.


The Work Agenda builds on key lessons of the global financial crisis, and defines for the Fund immediate and medium-term priorities for financial sector and macro-financial surveillance work. The immediate priority is containing the current crisis, including by focusing on measures to limit the effects of deleveraging, promoting coordination, and improving monitoring of contagion risks. Medium-term priorities are directed at two areas: first, enhancing global risk monitoring by developing macrofinancial approaches to global surveillance, deepening our understanding of the links between financial and real activity, and refining analysis of interconnectedness; and second, building resilient financial systems to support growth by strengthening financial oversight, promoting financial sector deepening, and looking at approaches to manage capital flows and their effects. In many of these areas the Fund works in cooperation with other global stakeholders to boost the traction of the Fund’s macro-financial and financial sector work.

Executive Board Assessment

Directors welcomed the work agenda for financial surveillance, which is a first step towards a strategic plan, a key recommendation of the Triennial Surveillance Review and the Managing Director’s Action Plan for surveillance. They reiterated the Fund’s pivotal role in promoting global financial stability, and the need for an overall strategic plan to guide its work in this area. Directors considered that, since the institutional architecture and many of the issues are still evolving and a number of the initiatives discussed in the paper are at a preliminary stage of discussion, it is useful to take stock and solicit input from other stakeholders ahead of preparing a full-fledged strategy. Such a strategy will have to adapt over time as the global financial system evolves.

Directors endorsed the key elements of the work agenda, which spans immediate priorities to contain the current crisis and medium-term priorities in two broad areas: enhancing systemic risk monitoring, and distilling country experiences to derive best practices for resilient financial systems. These priorities will need to be elaborated upon in the strategic plan. Directors noted that the agenda builds on existing work in a number of areas and welcomed efforts to increase accountability.

Directors concurred that the immediate priority is to restore financial stability, notably but not only in the euro area, and limit spillovers to other regions. They stressed, however, that it is equally important for the Fund to continue engaging in all member countries and regions facing policy challenges, including in emerging market and low-income countries.

As regards medium-term priorities, Directors stressed the need to understand better and monitor more effectively global systemic risk, build more resilient and growth-enhancing financial systems, and strengthen the ability of member countries to prevent and manage crises. To that end, they supported efforts to refine the analysis of interconnectedness of financial sectors, understand better the linkages between the financial and real sectors, assess vulnerabilities in bank and non-bank institutions, and promote financial sector deepening. They also supported the Fund’s efforts, alongside those of other stakeholders, to close data gaps and monitor risks arising from global, systemically-important institutions and markets, although a number of Directors noted the legal and other constraints to data provision. A few Directors noted that cross-border balance sheet connections need to be taken into account when interpreting data. Directors agreed that, while a global consensus is still emerging on many regulatory and other policies, including macroprudential policies and capital flows management, there remains an important role for the Fund to help facilitate this process. In that context, some Directors stressed that the Fund’s role in these areas should not be to supplant national prudential supervisors.

Directors agreed that it is important to engage other global stakeholders, including national authorities, on the development of a strategic plan. In doing so the Fund should focus on its mandate and areas of core competency, drawing on the expertise of other global stakeholders as needed. In this regard, Directors acknowledged the respective roles of the Fund and the Financial Stability Board as outlined in the 2008 letter. Many Directors called for further clarification of these roles in the context of the strategic plan, once the latter’s mission and institutional status have been clarified by the G-20.

Directors looked forward to discussing the forthcoming financial sector strategic plan. Directors urged that the plan contain specific actions with clear priorities and timelines for implementation, and an assessment of the resource requirements. Some Directors also stressed that the strategy should recognize the need for flexible implementation to take into account country-specific circumstances.


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