Selected Decisions and Selected Documents of the IMF, Fortieth Issue -- Fund/Bank Collaboration: Invitation to the Bank to Send a Staff Member as an Observer, Executive Board Meeting 70/30, April 10, 1970

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As updated as of April 30, 2019

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Relations with Other International Organizations

Fund/Bank Collaboration: Invitation to the Bank to Send a Staff Member as an Observer, Executive Board Meeting 70/30, April 10, 1970

2. The Executive Board authorizes the issuance of a general invitation to the International Bank for Reconstruction and Development to send a staff member as an observer to attend Fund Board discussions on staff reports on missions relating to Article VIII and Article XIV consultations and use of Fund resources in areas of common interest.

Concluding Remarks by the Acting Chairman—Bank-Fund Collaboration—Report of the Managing Director and the President; and Review of Collaboration in Strengthening Financial Systems Executive Board Meeting 98/102, September 22, 1998

I shall summarize the constructive and useful discussion of the two papers on Bank-Fund collaboration in two parts. First, I will offer remarks on the Report of the Managing Director and the President on Bank-Fund Collaboration in which I have tried to capture the spirit of the views expressed by Directors. Second, I will provide a summary of the discussion on the review of Bank-Fund Collaboration in strengthening financial systems, which includes Directors’ comments on the issues and proposals on which their views were sought.

Report of the Managing Director and the President on Bank-Fund Collaboration

This has been a constructive and useful discussion.

Directors generally agreed that the 1989 Concordat still provides a valid framework for Bank-Fund collaboration. Nevertheless, some Directors considered that there might be a need to more fully reflect present realities, in which macroeconomic and sectoral issues were becoming increasingly intertwined. Directors noted that recent experience pointed to some areas where collaboration could be further strengthened. In this context, while welcoming the further clarification of responsibilities between the Bank and the Fund outlined in the Report, Directors stressed the even greater importance of developing practical mechanisms to ensure close coordination and to manage the unavoidable overlaps that will remain in some areas between the two institutions. In that regard, many Directors welcomed the emphasis given to reinforcing the culture of collaboration among the staffs. Directors equally underscored the importance of effective implementation of the existing guidelines as well as the spirit in which that was done. They welcomed the commitment of the heads of both institutions to enhancing collaboration.

Directors regarded the framework set out for the interaction of the two institutions in surveillance, policy advice, lending operations, and crisis management as helpful. Important lessons had been learnt from the Asian crisis, and it was essential that those lessons were applied to other countries that could be vulnerable to the turmoil in world financial markets. The need to seek out the Bank’s advice in its areas of expertise at an early stage and to the maximum extent feasible was emphasized. Equally, it was important for the Bank to respond in a timely fashion. Those two elements were essential ingredients for the quick delivery of advice on integrated stabilization and structural reform policies and programs.

Directors welcomed the Bank’s efforts to undertake more intensive structural assessments and to enhance its capacity to respond quickly to deliver policy advice. Directors endorsed the proposals for strengthening collaboration in the financial sector. Collaboration in public sector work was also considered a priority, especially on social sector issues. Directors also welcomed the pilot program in enhanced Bank-Fund collaboration in low-income countries that was in the process of being launched.

Directors agreed with the proposals for improving operational procedures for enhancing collaboration, but stressed the importance of the culture of collaboration to ensure that those

procedures were followed. Access to the right people and to timely information were key to coordination. Most Directors also supported the establishment of the joint electronic information system. Those, and other mechanisms, were seen as useful complements to, but not substitutes for, open communication between staff. In that regard, cross-participation in missions was important, and some Directors felt that, when appropriate, joint missions could be considered.

Several Directors felt that the Report should give more attention to the role of the authorities. Those Directors stressed that the framework for Bank-Fund collaboration should give more emphasis to: taking account of the needs of the country; making the delineation of responsibilities and the designation of key decision-makers clear to the authorities; and involving the country in the collaborative efforts of the Fund and the Bank. Indeed, the Bank and the Fund exist to serve their shareholders according to the highest possible standards, and the needs of the member country should be the driving force of our activities.

Some Directors felt that an important contribution to Bank-Fund collaboration was strengthened coordination between the Executive Boards of the two institutions, and we will come back to the proposals that have been put forward in this area.

Let me assure you that the managements of both institutions are personally committed to strengthening Bank-Fund collaboration. We frequently discuss issues of common concern and work through any disagreements that emerge. Given the strong links between the areas of our work and overlaps in certain sectors, it is inevitable that differences of view will arise. To manage these differences constructively, it is important to keep the channels of communication between the two institutions open and to maintain a dialogue. We will continue to keep an open dialogue.

Finally, we will consider how we can best reflect your comments in the Report to the Interim Committee and to the Development Committee and consult with our Bank colleagues on the points raised in their Board discussion. I see two areas where we can strengthen the Report, namely, by emphasizing the culture of collaboration and better reflecting the role of country authorities.

Review of Bank-Fund Collaboration in Strengthening Financial Systems

I will now try to summarize the useful discussion we have had on collaboration in strengthening financial systems.

Executive Directors welcomed the opportunity to discuss the collaboration experience over the past year and proposals for new and improved procedures for further cooperation between the Bank and the Fund in financial sector work. Directors generally agreed that the broad division of responsibilities prescribed by the 1989 Concordat, and further elaborated in the paper presented to the Boards of the two institutions in August 1997, continues to provide a valid framework. However, recent experiences, especially in crisis situations, had exposed problems in operational coordination and highlighted the need to improve collaboration procedures. In that connection, Directors agreed that the distinction in the mandates of the two institutions—the Fund to exercise surveillance over macroeconomic and stabilization policies and the Bank to promote overall economic development, structural and sectoral reforms—should continue to provide the basis for the delineation of responsibilities in financial sector work. However, as attested by the recent experience in Asia, Directors underscored that it might not be possible to delineate responsibilities between the Bank and the Fund along functional lines in all areas and at all times. Financial sector strengthening was such an area, in which the distinction between macroeconomic and sectoral/developmental issues was inherently blurred. Thus, while agreeing that, where possible, the staff should continue to identify areas that allow clearer delineation, they stressed the need to strengthen the implementation of the existing guidelines, particularly by addressing how best to manage unavoidable overlaps of responsibilities. Noting that the staff paper provided a useful starting point for the Board’s review of those issues, Directors urged the staff to build on this work with a view to further clarifying and specifying the operational aspects of coordination and collaboration.

Directors emphasized that in crisis situations and short-term stabilization programs, the Fund should continue to take responsibility for the overall stabilization exercise, including the adoption of urgent structural adjustment measures. This would be particularly important in those cases in which financial sector issues have macroeconomic implications and when Bank input is not immediately available. Directors stressed, nevertheless, that engagement of the Bank should begin at an early stage, or at least from the time problems emerge. Noting that mismatches in the operational time schedules of the Bank and the Fund had complicated past coordination efforts, Directors stressed that improved coordination would require a timely response from the Bank. In this regard, they welcomed the efforts by the Bank to expedite the delivery of its policy advice and assistance. Directors stressed that, in less critical circumstances, the Bank should be consulted on aspects of program formulation that pertain to structural issues where the Bank has primary responsibility. The country’s longer-term program in the financial sector would be worked out over time by the Bank and the country, taking into account the requirements of stabilization objectives, and this would feed into the review process of the programs supported by the Bank and the Fund.

Directors supported staff proposals to strengthen operational procedures to improve collaboration. In particular, they emphasized the importance of cross-participation in missions. Such efforts could help alleviate the pressure on staff resources on both institutions, and ease the burden on national authorities. Directors also called for greater sharing of information, while stressing the need to preserve confidentiality of data. The possibilities for some formal linkages between Fund-supported programs and related Bank sectoral work was noted, in view of the many implications of structural reforms in the financial area for macroeconomic stability and the success of Fund-supported programs. Directors considered that such procedures could serve to avoid duplication of work and assure complementary in policy advice.

Directors supported the establishment of a Bank-Fund Financial Sector Liaison Committee to reinforce the collaboration process. They agreed that this Committee should focus in the first instance on facilitating coordination in financial sector work, improving the efficiency of the use of staff resources and experts in this area, and resolving disagreements. The Committee should in particular assist in prioritizing assignments and quickly delineating work in overlapping areas to country-specific situations, in order to avoid inconsistent advice or duplication of work. Directors agreed with the proposed organization of the Committee, but cautioned that the Committee should be used as a flexible instrument where needed, and not regarded as a panacea for improved collaboration. A few Directors suggested that a joint subcommittee of Executive Directors could be formed to enhance accountability and transparency, especially on disagreements between the two institutions. More fundamentally, however, Directors considered that strengthened collaboration would require staff in the field to work together and resolve their own differences. It was also suggested by some Directors that the management of the Fund and the Bank report to the Bank and the Fund Boards periodically on the working of the Committee and that its activities be reviewed in light of experience.

Directors considered that the Bank and the Fund should play a catalytic role in developing commonly accepted policies and good practices. In that respect, they noted that neither the Bank nor the Fund should take the lead in developing standards and good practices in areas outside their core fields of responsibility; rather, that they should rely on more specialized agencies to do so. An important function of the Bank and the Fund in this area would be to participate in the elaboration of standards and good practices where they have relevant expertise, provide guidelines for adapting them to country-specific circumstances, and disseminate commonly accepted principles among their member countries.

Directors agreed that the Fund could, with the prior consent of the concerned authorities, seek to augment internal resources by drawing on experts from national and other international organizations for the monitoring of financial systems under Article IV surveillance. They underscored the need for the Bank and the Fund to collaborate closely in the dissemination of standards and good practices and the delivery of associated technical assistance. They stressed that such efforts should be well coordinated from the start to ensure the effectiveness of technical assistance and efficient use of expert resources as well as to avoid the risks of overlapping requests for technical assistance, conflicting advice to countries, and suboptimal use of expert resources. They also underscored the need to adopt appropriate policies in this area to ensure confidentiality. In that respect, Directors felt that outside experts should be held to the same standards as the staff.

Some Directors thought that peer review procedures could provide a useful arrangement for following up on the findings of Article IV surveillance missions on financial sector issues in countries where substantial actual and potential problems had been identified. Some Directors suggested that the institutional arrangement for operating peer reviews could be located in, and coordinated by, the Fund in collaboration with other international bodies, including the Bank for International Settlements and the World Bank, and requested that a paper be prepared for Board consideration on the organizational and other aspects of peer reviews. They noted that peer reviews would require prior consent from the authorities of the countries concerned. They encouraged the staff to explore possible approaches to coordinating peer review procedures.


September 28, 1998

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