Banking Act | Special Resolution Regime | Risk Reduction Initiatives | Payment Systems Oversight | International Financial Architecture | Crisis Management

The past 30 years have been characterised by a rapid integration of the world economy. International trade has grown markedly, as has the amount of capital flowing across national borders. In general, the linkages between one economy and another are now deeper and more complex than ever before.

Greater integration between national economies places a premium on maintaining the stability of the international monetary and financial system. Abrupt movements in exchange rates, for example, can pose a material risk to economic stability at the domestic level.

The Bank is involved in a range of initiatives to strengthen the ability of the international financial and monetary system to withstand shocks and facilitate smooth economic adjustment. One important priority is to encourage reform of the International Monetary Fund (IMF).

During the 1980s and 1990s, the IMF became best-known for its involvement in helping emerging market economies recover from financial crises. There is, though, now a broad international consensus that the IMF should adjust its focus towards crisis prevention rather than crisis resolution.

The IMF's primary tool for crisis prevention is surveillance of its 185 member countries. As an international institution with near-universal membership, the Fund is uniquely-placed to identify threats to international monetary and financial stability. In particular, the Fund can highlight circumstances where the policy choices of one country may have spillover effects on other countries. It can also facilitate multilateral dialogue between its members, possibly leading towards a coordinated policy response.

The IMF is currently conducting a review of its surveillance framework, a process to which the Bank is contributing pro-actively. In a speech delivered in Delhi in February 2006, the Governor outlined a set of proposals for making surveillance more effective. Subsequent speeches by the Governor and former Deputy Governor Rachel Lomax offer further reform ideas. The Bank is working with IMF staff and other members to implement these proposals.

An important first step was taken in June 2007, when IMF members agreed to update the legal framework underpinning surveillance, which had previously been unaltered since the late 1970s. The Fund's new mandate increases its focus on multilateral issues and spillover effects. Further steps to underpin this, including a statement of surveillance priorities, and reforms to the Fund's corporate governance, are envisaged. These reforms should clarify responsibilities, delivering a more accountable Fund and improved surveillance.

Key Resources

	Reform of the International Monetary Fund Speech by Mervyn King, Governor of the Bank of England 20 February 2006. Download PDF (121k)
	International Monetary Stability - Can the IMF Make a Difference? speech by Rachel Lomax, Deputy Governor of the Bank of England 1 November 2006. Download PDF (51k)
	Through the Looking Glass: Reform of the International Institutions speech by Mervyn King, Governor of the Bank of England 21 December 2006. Download PDF (56k)