The Acting Chair’s Summing Up— IMF Membership in the Financial Stability Board, Executive Board Meeting 10/86, September 8, 2010

Executive Directors welcomed the opportunity to discuss the proposal for Fund membership in the Financial Stability Board (FSB). Directors noted that Fund staff had already been collaborating informally but closely with the FSB’s predecessor, the Financial Stability Forum, on a wide range of financial sector issues. They considered that the establishment of the FSB with its own charter in 2009 provided an opportunity for the Fund, alongside the other international financial institutions, to establish a more formal basis for its participation in the work of the FSB.

Directors noted that the responsibilities of the Fund and the FSB are distinct but closely related and complementary. They considered that the Fund should continue to fulfill its responsibilities as they are set out in the Articles of Agreement, while the two bodies should strive to minimize duplication and overlap in their work. They stressed that the Fund should continue to take the lead in surveillance over the international monetary system and analysis of macrofinancial stability issues in its member countries. At the same time, the Fund should also collaborate with the FSB to address financial sector vulnerabilities and to develop and implement strong regulatory, supervisory, and other policies in the interest of financial stability.

Most Directors agreed that Fund membership in the FSB would provide the most appropriate basis for effective cooperation and collaboration between the two bodies. They noted that membership would allow the Fund to build effectively on the relationship that Fund staff had already established with the FSB, and to play an important role in the FSB’s work. A number of other Directors, however, expressed reservations with this approach and called for more discussion of other alternatives, including less formal arrangements, such as observer status for the Fund or a bilateral memorandum of understanding.

Directors underscored the importance of preserving the Fund’s independence and accountability to its entire membership in its future collaboration with the FSB. In approving the Fund’s acceptance of membership, they endorsed the understandings that are set out in paragraph 23 of SM/10/221 and, in particular, emphasized that the acceptance of membership in the FSB would not give rise to any legal rights or obligations for the Fund, and the Fund would reserve the right not to take part in the decision making of the FSB where such participation would not be consistent with the Fund’s legal or policy framework. In this connection, a number of Directors expressed concern about the nature of the FSB’s non-cooperating jurisdictions (NCJs) process and its potential impact on the Fund’s accountability to its membership, and stressed that Fund membership in the FSB should not be seen as endorsement of possible FSB initiatives to sanction NCJs.

Directors agreed that the Managing Director would guide the Fund’s participation in the FSB based on consultations with the Board, including on issues of strategic importance. In this context, they took note of management’s intention to keep Directors informed of the staff’s work in the FSB through regular updates.

BUFF/10/132,

September 16, 2010

Attachment¹

Paragraph 23 of SM/10/221

23. In approving Fund membership in the FSB, the Executive Board would need to clarify certain understandings that would be communicated to the FSB. Similar to the approach that the Secretariat of the OECD and the staff of the World Bank are taking in respect to membership to the FSB, the Board would clarify:

• • The acceptance of membership in the FSB will not give rise to any legal rights or obligations for the Fund.

  • Like other IFIs, the Fund will participate in the FSB in accordance with its legal framework and policies, under Article 5(3) of the FSB Charter.

  • Accordingly, the Fund will reserve the right in specific circumstances not to take part in the decision making of the FSB where such participation would not be consistent with its legal or policy framework.

  • In the event that the FSB reaches a decision by consensus that its members would be expected to implement, the Fund will only be prepared to do so to the extent that, and for so long as, it is consistent with its legal and policy framework.

These understandings could be set out in the summing up of the Board discussion approving membership and communicated to the FSB after the meeting.

¹ Ed. Note: The text of paragraph 23 of SM/10/221, August 11, 2010, is included in this volume for the reader’s convenience.