Press Release No. 19/163

IMF Executive Board Reviews Proposal to Update the Monetary and Financial Policies Transparency Code

May 13, 2019

On April 29, 2019, the Executive Board of the International Monetary Fund (IMF) discussed a paper proposing an update of the Monetary and Financial Policies Transparency Code (MFPT), by means of replacing it by a new Central Bank Transparency Code (CBT). The update is in line with the recommendations of the 2017 Joint Review of the Standards and Codes Initiative, indicating the need for risk-based assessments to support policy effectiveness and address macroeconomic risks.

The paper outlines how the CBT will remove the overlap in the MFPT with transparency elements of financial policies covered by other international standards and expand the central bank transparency standard to a broader set of activities undertaken by many central banks since the Global Financial Crisis, including changes in monetary policy practices.

The paper emphasizes the applicability of the CBT to all IMF members, including less-developed economies. The modular, risk-based, and proportional setup would allow taking into account country-specific circumstances. This would enable the CBT to serve as a tailored diagnostic tool in IMF capacity development. CBT assessments would help support IMF surveillance, such as Article IV reviews and Financial Sector Assessment Programs, and would be useful in an IMF Program context, as was the case for the MFPT.

Executive Board Assessment [1]

Executive Directors welcomed the opportunity to consider the staff proposal to update the Monetary and Financial Policies Transparency (MFPT) Code. They noted that the development of financial sector standards by international standard setting bodies and important developments in central bank mandates and activities since the Global Financial Crisis (GFC) contributed to the disuse of the MFPT. Against this background, Directors endorsed the proposal to replace the MFPT with a new Central Bank Transparency (CBT) Code. They generally viewed the proposed CBT as an appropriate framework to remove the overlap on financial policies covered by other FSB standards, and expand the transparency standards to a broader set of activities and practices undertaken by many central banks since the GFC. The CBT would also reorient transparency standards to facilitate risk‑based assessments to support policy effectiveness and address macroeconomic risks, in line with the recommendations of the 2017 Joint Review of the Standards and Codes Initiative.

Directors welcomed the proposal’s emphasis on ensuring that the CBT is relevant for all member countries, including less‑developed and smaller economies, recognizing that central banks operate under a diverse set of circumstances and environments. In this regard, they agreed with the proposed modular approach of the CBT and considered that flexibility would help facilitate a risk‑based and proportional application while taking into account country‑specific circumstances and needs. Directors broadly concurred that the proposed CBT can serve as a diagnostic tool in capacity development, and help central banks map their transparency frameworks and make informed choices on their transparency arrangements. Many Directors also considered that CBT assessments could help support Fund surveillance. Some Directors underscored the importance of clarifying the voluntary nature of the CBT.

Directors welcomed that the CBT will take as given the mandates, policies, and governance arrangements of central banks. They broadly agreed that the CBT would tie into existing governance work within the Fund and noted that the CBT will not provide a central bank governance framework, nor is it a means to assess or pass judgement on the governance of central banks.

Directors noted that central banks face trade‑offs between transparency and the legitimate need for confidentiality. In this regard, they considered that the CBT code should strike the appropriate balance between these needs and preserve flexibility, particularly in the context of market sensitive information and financial stability and policy effectiveness objectives.

Directors supported the staff proposal to convene an international Advisory Group to provide guidance to staff in the elaboration of the new code. Directors noted the importance of selecting the members of the Advisory Group from diverse backgrounds and regions to ensure a broad representation of views and experiences.

Directors emphasized the need for broader consultation on the proposed CBT in due course, including with monetary authorities, other international institutions, and the Executive Board. Directors also asked for more regular updates to the Executive Board as the CBT is developed.