The International Monetary Fund said Friday it plans to bolster its oversight of the global banking system, but the IMF isn't likely to soon replace the other institutions such as the Financial Stability Board as the global arbiter of industry policy, as some in the fund had hoped.
Instead, the IMF will have to better cooperate with the FSB, the Bank of International Settlements and other institutions to strengthen its ability to pinpoint major risks to the global financial system before they occur and recommend actions to prevent crises.
"Given the critical importance of financial systems for economic growth and stability, it is essential to have effective financial surveillance to enable the early detection of systemic risks and provide timely macrofinancial policy advice," said IMF Deputy Managing Director David Lipton.
Some in the IMF have sought to promote the fund with its universal membership as a "global facilitator on macroprudential policy" that could replace some of the functions of the FSB and the Basel Committee on Banking Supervision.
But that stoked turf-battle concerns. "There's a natural tension between the various institutions," said Ted Truman, a senior fellow at the Peterson Institute for International Economics and former assistant secretary of the U.S. Treasury.
The biggest problem for the fund appears to be access to data on financial institutions and international capital flows. The fund's articles were developed "in a steamship age, and haven't kept up that we're now in a supersonic age," said Christopher Towe, deputy director of the IMF's Monetary and Capital Markets Department.
Under fund rules, member countries don't have to provide data on the financial industry.
That has meant that while the IMF has developed new surveillance tools such as the Financial Sector Assessment Program, it has had to rely on information that countries sometimes only begrudgingly provided or on near-stale data from the Bank of International Settlements.
But instead of moving towards re-writing the fund's rules, the executive board said fund staff would have to figure out how to cooperate better with the data holders.
"Improving the traction and impact of financial surveillance requires both the commitment of members and more active engagement with stakeholders," the directors said in a statement.
Still, it was suggested at a board meeting on the issue earlier this week that the IMF might go ahead and assume a more active role as financial system watchdog in an "informal capacity."
The board consensus, however, appeared to overrule that idea, with members stressing the need to continue to cooperate with other institutions.
"In particular, they looked forward to further collaboration between the Fund and the Financial Stability Board in line with their respective mandates," the board said in a statement.
One particular battle over data access is still ongoing: who will get the information on the systemically important global financial institutions once the FSB identifies which firms fall into that category.
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Instead, the IMF will have to better cooperate with the FSB, the Bank of International Settlements and other institutions to strengthen its ability to pinpoint major risks to the global financial system before they occur and recommend actions to prevent crises.
"Given the critical importance of financial systems for economic growth and stability, it is essential to have effective financial surveillance to enable the early detection of systemic risks and provide timely macrofinancial policy advice," said IMF Deputy Managing Director David Lipton.
Some in the IMF have sought to promote the fund with its universal membership as a "global facilitator on macroprudential policy" that could replace some of the functions of the FSB and the Basel Committee on Banking Supervision.
But that stoked turf-battle concerns. "There's a natural tension between the various institutions," said Ted Truman, a senior fellow at the Peterson Institute for International Economics and former assistant secretary of the U.S. Treasury.
The biggest problem for the fund appears to be access to data on financial institutions and international capital flows. The fund's articles were developed "in a steamship age, and haven't kept up that we're now in a supersonic age," said Christopher Towe, deputy director of the IMF's Monetary and Capital Markets Department.
Under fund rules, member countries don't have to provide data on the financial industry.
That has meant that while the IMF has developed new surveillance tools such as the Financial Sector Assessment Program, it has had to rely on information that countries sometimes only begrudgingly provided or on near-stale data from the Bank of International Settlements.
But instead of moving towards re-writing the fund's rules, the executive board said fund staff would have to figure out how to cooperate better with the data holders.
"Improving the traction and impact of financial surveillance requires both the commitment of members and more active engagement with stakeholders," the directors said in a statement.
Still, it was suggested at a board meeting on the issue earlier this week that the IMF might go ahead and assume a more active role as financial system watchdog in an "informal capacity."
The board consensus, however, appeared to overrule that idea, with members stressing the need to continue to cooperate with other institutions.
"In particular, they looked forward to further collaboration between the Fund and the Financial Stability Board in line with their respective mandates," the board said in a statement.
One particular battle over data access is still ongoing: who will get the information on the systemically important global financial institutions once the FSB identifies which firms fall into that category.
foxbusiness.com
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