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Financial Sector Legal and Regulatory Toolkit : Part Two: Preconditions and Infrastructure for Financial Sector Development : I. Preconditions for Financial Sector Development
C. Macroeconomic Policy and Data Transparency
Unlike institutional underpinnings of financial sector development, macroeconomic policy issues have long received significant attention. As a result, a number of standards have been developed for this area. However, the Financial Stability Forum (FSF) framework addresses only institutional arrangements for and transparency of macroeconomic policy—it does not address policies themselves, reflecting the largely legal and institutional focus of the system of standards and codes. Specifically, the FSF includes macroeconomic policy and data transparency as one of its major subject areas, subdivided in turn into four standard areas, the first three of which are identified as key standards:
In essence, the transparency policies deal with governance structures for financial authorities, especially central banks and regulatory agencies.
The area of monetary and financial policy transparency includes one standard, identified as a key standard. The Code of Good Practices on Transparency in Monetary and Financial Policies or the MFP Transparency Code was approved by the Interim Committee of the Board of Governors of the IMF (renamed the International Monetary and Financial Committee in September 1999). It is supported and explained by a subsequent Supporting Document, approved by the IMF's Executive Board on 24 July 2000. It is also intended to interact with other standards in related areas, e.g., banking, securities, insurance, payment, and settlement.
Under the Code of Good Practices on Transparency in Monetary and Finacial Policies, "transparency" is defined as an environment in which the objectives of policy, its legal, institutional, and economic framework, policy decisions and their rationale, data and information related to monetary and financial policies, and the terms of agencies accountability, are provided to the public on an understandable, accessible, and timely basis. Specifically, the MFP Transparency Code covers four main areas: Despite the general international consensus on the value of independence for central banks and regulatory authorities (combined with clear objectives and proper accountability), independence is not specifically addressed in the context of the MFP Code. This is an important consideration and is also an area which has received attention in several recent papers by IMF staff.
As monetary and financial policy responsibilities are typically distributed between a central bank and one or more other financial agencies, the MFP Transparency Code is divided into two main sections: the first addresses transparency and monetary policy for central banks and the second addresses transparency of financial policies for what the Code calls "financial agencies"—which could be more clearly termed as "regulatory and supervisory authorities." Central banks traditionally incorporate a number of different functions, including note-issue, monetary policy, banking supervision or regulation, financial stability and lender of last resort, the government's bank, management of gold and foreign exchange reserves, debt management, responsibility for exchange controls, and various developmental and promotional tasks (Lastra, 1996). Today, the essential functions of a central bank are mainly monetary policy and financial stability issues. For purposes of the MFP Transparency Code, a central bank is defined as the "institution responsible for conducting monetary policy." With respect to good transparency practices for monetary policy by central banks, the MFP Code includes four general areas of guidance as mentioned above. Governments, in addition to the agency responsible for monetary policy (the central bank), may also have one or more agencies responsible for other financial policies. The MFP Transparency Code uses the term "financial agencies" to refer to the institutional arrangements for the regulation, supervision, and oversight of the financial and payment systems, including markets and institutions, with the view to promoting financial stability, market efficiency, and client-asset and consumer protection. Since the terminology is not reflected in other principles and standards (which typically refer to regulatory or supervisory authorities), this toolkit will instead use the term "financial regulatory authority." The MFP Code also provides for good transparency practices for financial policies by financial agencies. Like monetary and financial policy transparency, the FSF area of fiscal policy transparency includes one standard, identified as a key standard. The IMF Fiscal Transparency Code [ PDF ] (FT Code) was approved on 16 April 1998; the latest version was approved on 8 May 2007. Fiscal transparency is defined on the basis of openness to the public regarding the structure and functions of government, fiscal policy intentions, public sector accounts, and fiscal projects. The FT Code is based on four key objectives: In March 2003, the IMF released an assessment of experiences with the FT Code, which identified four key points: The key standard area of data dissemination includes two standards—both identified as key: the Special Data Dissemination Standard (SDDS), and the General Data Dissemination System (GDDS). The SDDS, GDDS along with the Data Quality Reference Sites (DQRS) comprise the IMF Dissemination Standards Bulletin Board (DSBB). As a response to the Mexican financial crisis in 1994 [ PDF ], the IMF approved the provision of economic and financial statistics to the public by member countries, especially countries that participate in the international capital markets or aspire to do so, and including both industrial and emerging economies. The SDDS was established in March 1996, to "guide IMF members in the provision to the public of comprehensive, timely, accessible, and reliable economic and financial statistics in a world of increasing economic and financial integration." While participation is optional, countries that participate in international capital markets or aspire to do so could comply with the SDDS in order to meet investor demands for comparable information on competing countries. The SDDS comprises four elements: (i) coverage, periodicity, and timeliness of data; (ii) access by the public; (iii) integrity of the disseminated data; and (iv) quality of the disseminated data. As part of the IMF's efforts at dissemination and timeliness, data for participating countries is available on the DSBB. Established in December 1997, the GDDS is designed to complement the SDDS. Read a discussion on the differences between the SDDS and GDDS. The purpose of the GDDS is threefold: The guidance comprises four dimensions, with data covering the real, fiscal, financial, and external sectors of the economy. In addition, it covers a range of socio-demographic data reflecting the indicators included in the Millennium Development Goals (MDG).
In addition to the key standards and standard areas described above, the FSF Compendium also includes one additional standard area: data compilation. The data compilation standard area includes four standards, dealing with monetary and financial statistics, government finance statistics, balance of payments data, and national accounts data. Together, these create a framework supporting the data included in the SDDS and GDDS. The IMF has undertaken a number of reviews of its data dissemination initiatives. In its Fifth Review of the Fund's Data Dissemination [ PDF ] a number of important conclusions and recommendations for the IMF's Data Dissemination Initiatives were reached, including the following: The IMF has recently undertaken its Sixth Review of the Fund's Data Dissemination Initiative [ PDF ]. Office of the General Counsel
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