Standards and codes play a central role in the new international financial architecture being developed to promote greater financial stability following crises in Asia and elsewhere. The emphasis on standards and codes reflects a view that vulnerabilities are reduced if transparency in the institutional and regulatory structures of the economic and financial sectors, and in the information that these sectors provide to the public, reflects the good practices that many countries follow. The IMF and the World Bank have been involved, together with other international financial institutions and professional bodies, in setting relevant standards and codes (see box, page 248). In addition, procedures to assess observance of standards and codes have been developed. Specifically, Reports on the Observance of Standards and Codes (ROSCs) are being prepared on a pilot basis. Currently, ROSCs covering either the full range of standards or just one or two standards have been published on the IMF’s external website.
As part of an outreach program, the IMF and the World Bank have begun a series of regional visits to explain the role of standards and codes in the new international financial architecture, describe progress in developing standards and codes, provide information on ROSCs, and seek preliminary feedback on this work. During July 10–14, a joint IMF–World Bank staff team embarked on the first of these visits, holding seminars in Tokyo, Hong Kong SAR, Bangkok, and Singapore. IMF staff members included Charles Enoch (Statistics Department), Udaibir Das (Monetary and Exchange Affairs Department), Richard Hemming (Fiscal Affairs Department), and Martin Parkinson (Policy Development and Review Department). Axel Peuker represented the World Bank.
Seminars spark interest
Attendees at the seminars included representatives of the financial and nonfinancial sectors, media, academics, and government officials. Attendance ranged from around 35 in Bangkok to 65 in Singapore. In Hong Kong SAR, the IMF-World Bank seminar was combined with one being conducted under the outreach program of the Financial Stability Forum (FSF). Andrew Sheng (Hong Kong Securities and Futures Commission and Chairman of the FSF’s Task Force on Implementation of Standards) opened the seminar by outlining the importance of standards and codes and linked the work of the IMF and the Bank in this area to that of the FSF. There was press coverage of the seminars in Hong Kong SAR and Singapore, and television coverage in Singapore.
There was a great deal of interest in IMF and Bank work on standards and codes and in other work related to the new international financial architecture and considerable support for outreach activities of this type. The statement of the Group of Seven finance ministers, who met on July 8 in Fukuoka, Japan, and discussed a number of initiatives relating to standards and codes, made the visit particularly timely (see IMF Survey, July 17, page 225). Similarly, the announcement of Hong Kong SAR’s observance of its Special Data Dissemination Standard obligations the day before the seminar, together with the publication on July 19 of the first quarterly report on compliance with the Special Data Dissemination Standard, provided a timely illustration of progress being made in implementing standards and codes.
Most participants in the Tokyo, Hong Kong SAR, and Singapore seminars had considerable knowledge of, and interest in, the Special Data Dissemination Standard. Several participants commented that it was very useful and had already led to a marked improvement in data standards. Participants also raised some issues regarding the Special Data Dissemination Standard, including the timeliness and credibility of the data and the IMF’s role in ensuring quality. The Hong Kong SAR representative of one U.S. investment house, who had sought a briefing from his New York headquarters, reported that the standards they regard as most critical were those relating to corporate governance, data dissemination, monetary and fiscal transparency, and accounting. In Bangkok, attention focused almost exclusively on fiscal transparency.
Reports on standards and codes
There seemed to be only limited awareness of the ROSC process. Few participants had heard of ROSCs before the seminar, and the IMF and the Bank were urged to make greater efforts to publicize them. Some participants who were more familiar with the ROSCs said they thought that the reports should be shorter and more focused, with brief summaries and conclusions, while others wanted specific details on where and why countries failed to meet standards and codes. A few representatives indicated that compliance with standards and codes is now explicitly reflected in their organizations’ risk-assessment practices. One investment house representative indicated that ROSCs were currently being evaluated to see if they could assist the firm’s own country assessments. While the IMF and the World Bank were keen to make ROSCs as user-friendly as possible, the IMF-Bank team pointed out that the two institutions did not intend to act as rating agencies.
In the seminars and bilateral meetings, there was some discussion of the work being done by the Monetary and Exchange Affairs and Statistics Departments to develop macroprudential indicators, with particular mention being made of the recently issued Occasional Paper on the subject (see IMF Survey, July 3, page 213) and the survey currently being undertaken to investigate national authorities’ use of such indicators. While most commentators considered this work useful, some found the results so far to be pretty crude and highlighted the unclear links between the microprudential standards on which macroprudential indicators were based and the macroeconomic vulnerabilities they were intended to foreshadow.
Overall, the visit to Asia proved useful in determining the level of awareness of IMF and World Bank work on standards and codes and in obtaining feedback. Further visits are therefore likely over the coming months to Latin America, Africa, the Middle East, and possibly Europe.
The first quarterly report on compliance with the Special Data Dissemination Standard is available on the IMF’s website at http://www.imf.org/external/np/rosc/index.htm.
Copies of IMF Occasional Paper 192, Macroprudential Indicators of Financial System Soundness, by a staff team led by Owen Evans, Alfredo M. Leone, Mahinder Gill, and Paul Hilbers, are available for $20.00 each (academic rate: $17.50) from IMF Publication Services. See page 244 for ordering information.
|Macroeconomic policy and data transparency|
|Monetary and financial policy transparency||Code of Good Practices on Transparency in|
|Monetary and Financial Policies||IMF|
|Fiscal policy transparency||Code of Good Practices on Fiscal Transparency||IMF|
|Data dissemination||Special Data Dissemination Standard||IMF|
|General Data Dissemination System||IMF|
|Institutional and market infrastructure|
|Insolvency||Principles and Guidelines on Insolvency Regimes|
|for Developing Countries||World Bank|
|Corporate governance||Principles of Corporate Governance||OECD|
|Accounting||International Accounting Standards (IAS)||IASC|
|Auditing||International Standards on Auditing (ISA)||IFAC|
|Payment and settlement||Core Principles for Systemically Important|
|Financial regulation and supervision|
|Banking supervision||Core Principles for Effective Banking Supervision||BCBS|
|Securities regulation||Objectives and Principles of Securities Regulation||IOSCO|
|Insurance supervision||Insurance Supervisory Principles||IAIS|