Former IMF first deputy managing director Stanley Fischer
yesterday attacked the decision by the G20 group of advanced
and emerging economies to conduct mutual surveillance of each
others economies with the IMF being only incidental to
Economic surveillance is the IMFs job, Fischer argued
at a briefing in Istanbul by the Group of 30 public and private
sector financial experts, of which he is a member. The
G20 have decided that they are going to engage in frank
discussions on each others policies. That is good, but
they should do it through the IMF.
Fischer, the Bank of Israel governor, added that he is
concerned about the proliferation of bodies that have no
statutory basis, to carry out such functions.
The G30 urged in a statement that all members
countries should participate in the [IMFs] Financial
Sector Assessment Programme.
It also said: In order to be more effective, the
IMF should conduct assessment to detect vulnerabilities and the
build-up of risk on a near-continuous basis in the financial
sector and elsewhere.
It added that the IMF should equip itself to issue
confidential warnings to systemically important countries
whenever developments in their economies or financial sectors
give cause for concern.
This was seen as a veiled reference to the fact that certain
advanced economies, including the US, declined to participate
in FSAP reviews in the run up to the recent financial
Some experts have argued that such reviews could have
alerted authorities to critical threats to financial
Fischer said: The financial sector has just seen the
consequences of the failure to do proper surveillance of the
financial sector. He also called for a clearer division
of responsibilities between the IMF and the Financial Stability
Board (FSB) in the field of oversight of the financial
The IMF should carry out surveillance of the sector, while
regulation is left to the FSB, he said. A memorandum of
understanding is needed, between the two.
The G30 also called for urgent, far-reaching and
comprehensive reforms of the IMF, including the need to
make its surveillance of members countries economies
more sharply focussed on current and impending
problems so as to avert future economic and financial
The G30 called for a new IMF Council to replace the
existing International Monetary and Finance Committee (IMFC).
The new council should take over executive power from the
IMF Board rather than being merely an advisory body like the
IMFC said Guillermo Ortiz, chairman of the Bank for
International Settlements (BIS), at the briefing.
Ortiz, who is also governor of the Bank of Mexico, said that
the structure of the IMF needs to better reflect changing
global economies realities and relationships.
The G30 added that its recommendations aim at
correcting imbalances in IMF quotas, improving IMF decision
making, empowering the IMF at the political level and achieving
a more efficient division of labour between the executive board
and [IMF] management.