Standards and codes are benchmarks of good practices. The IMF and the World Bank have recognized international standards in 12 policy areas related to their work. In assessing countries' observance of these standards, and helping them to implement reforms where needed, the IMF and the World Bank aim to increase economic and financial stability by strengthening domestic economic and financial institutions.
The term “standards and codes” refers to sets of provisions relating to the institutional environment—the “rules of the game”—within which economic and financial policies are devised and implemented. Countries whose institutions are well-regulated and transparent tend to demonstrate better economic performance and greater financial stability. It is thus in countries’ own interest to adopt and implement internationally-recognized standards and codes.
The IMF and the World Bank’s work on standards and codes is a prominent component of the efforts to strengthen the international financial architecture that followed the emerging market crises of the 1990s. The development, dissemination, and adoption by countries of international standards aim to assist countries in strengthening their economic institutions, inform market participants to allow for more effective market discipline, and inform IMF surveillance and the World Bank’s country assistance strategies. The ultimate goal is to promote greater economic and financial stability at both the domestic and international levels.
In March 2011, a review of the IMF and the World Bank’s work on standards and codes concluded that this work has been useful for countries in identifying gaps, setting the reform agenda, strengthening institutions, and enhancing transparency. It also identified scope to adapt standards to a changing environment, better prioritize assessments across countries and policy areas, enhance integration of the Report on the Observance of Standards and Codes (ROSC) findings into the IMF’s surveillance and technical assistance, and improve the availability of ROSCs. The IMF and the World Bank’s Executive Boards supported the Financial Stability Board’s decision to combine the accounting and auditing standards under one policy area and introduce a new policy area on crisis resolution and deposit insurance. In August 2014, the IMF Board approved the first three pillars of a new Fiscal Transparency Code, the groundwork for which was laid in a 2012 IMF policy paper. Fiscal Transparency Evaluations (FTEs), which assess country practices against the new Code, will replace the Fiscal Module of the ROSC as the IMF’s principal fiscal transparency diagnostic under the Standards and Codes Initiative.
The list of standards and codes
The IMF and the World Bank have recognized international standards in 12 policy areas, which form three broader groups:
(1) Policy Transparency: Standards in these areas have been developed by the IMF.
- Data Dissemination: IMF’s Special Data Dissemination Standard (SDDS), General Data Dissemination System (GDDS), and Special Data Dissemination Standard Plus (SDDS Plus).
- Fiscal Policy Transparency: The IMF’s Fiscal Transparency Code, described in the Update on the Fiscal Transparency initiative, is the international standard for disclosure of information about public finances. It is articulated in four pillars covering the key elements of fiscal transparency: (i) fiscal reporting; (ii) fiscal forecasting and budgeting; (iii) fiscal risk analysis and management; and (iv) resource revenue management. The first three pillars have been completed while Pillar IV will be completed later in 2014.
- Monetary and Financial Policy Transparency: IMF’s Code of Good Practices on Transparency in Monetary and Financial Policies.
(2) Financial Sector Regulation and Supervision: Standards in these areas have been developed by specialized standard-setting bodies.
(3) Institutional and Market Infrastructure: Standards in these areas have been developed by specialized standard setting bodies, with substantive input from the IMF and World Bank:
A member’s observance of standards and codes is assessed, at its request, by the IMF and/or the World Bank (and also by the FATF or FATF-style regional bodies (FSRBs) in the case of AML/CFT). In the financial sector regulation and supervision areas, standards are typically assessed in the context of the Financial Sector Assessment Program (FSAP). Results of these independent assessments are summarized in ROSCs, which usually accompany FSAP reports.
In the fiscal policy transparency area, the new FTEs assess countries against the new Fiscal Transparency Code. FTEs provide quantified analyses of the scale and sources of fiscal vulnerability, based on a set of fiscal transparency indicators, a summary of country fiscal transparency strengths and reform priorities through a set of heat maps, and the option of a sequenced fiscal transparency action plan to help countries address reform priorities.
Findings of an initial assessment may be updated by a reassessment, which comprises a new assessment of the jurisdiction or a targeted (or risk-based) assessment in which only selected principles are reassessed, based on identified criteria. FTEs allow for modular assessments focused on the new Fiscal Transparency Code’s individual pillars for addressing the most pressing transparency issues. In the case of AML/CFT, an update can also be prepared based on a reassessment, or in due course based on a targeted assessment and FATF/FSRBs follow-up reports; in the absence of the latter findings can also be updated for inclusion in an FSAP on the basis of the best available information. Countries are responsible for implementing the recommendations in a ROSC, FSAP, or FTE. Many developing countries request technical assistance from the IMF and other international bodies in doing so.
Participation in the standards and codes initiative through a request for ROSCs and FTEs is voluntary. The publication of the ROSCs and FTEs is also voluntary, but presumed. Most of the IMF’s member countries had completed one or more ROSCs. As of end-September 2014, 1,300 ROSCs have been produced, of which about 63 percent were published. As of end-August 2014, eight country FTEs have also been conducted—four of which have been published—covering four geographic regions.