IMF Executive Board Reviews Proposal to Update the Monetary and Financial Policies Transparency Code
May 13, 2019
On April 29, 2019, the Executive Board of the International Monetary Fund
(IMF) discussed a paper proposing an update of the Monetary and Financial
Policies Transparency Code (MFPT), by means of replacing it by a new
Central Bank Transparency Code (CBT). The update is in line with the
recommendations of the 2017 Joint Review of the Standards and Codes
Initiative, indicating the need for risk-based assessments to support
policy effectiveness and address macroeconomic risks.
The paper outlines how the CBT will remove the overlap in the MFPT with
transparency elements of financial policies covered by other international
standards and expand the central bank transparency standard to a broader
set of activities undertaken by many central banks since the Global
Financial Crisis, including changes in monetary policy practices.
The paper emphasizes the applicability of the CBT to all IMF members,
including less-developed economies. The modular, risk-based, and
proportional setup would allow taking into account country-specific
circumstances. This would enable the CBT to serve as a tailored diagnostic
tool in IMF capacity development. CBT assessments would help support IMF
surveillance, such as Article IV reviews and Financial Sector Assessment
Programs, and would be useful in an IMF Program context, as was the case
for the MFPT.
Executive Board Assessment
Executive Directors welcomed the opportunity to consider the staff proposal
to update the Monetary and Financial Policies Transparency (MFPT) Code.
They noted that the development of financial sector standards by
international standard setting bodies and important developments in central
bank mandates and activities since the Global Financial Crisis (GFC)
contributed to the disuse of the MFPT. Against this background, Directors
endorsed the proposal to replace the MFPT with a new Central Bank
Transparency (CBT) Code. They generally viewed the proposed CBT as an
appropriate framework to remove the overlap on financial policies covered
by other FSB standards, and expand the transparency standards to a broader
set of activities and practices undertaken by many central banks since the
GFC. The CBT would also reorient transparency standards to facilitate
risk‑based assessments to support policy effectiveness and address
macroeconomic risks, in line with the recommendations of the 2017 Joint
Review of the Standards and Codes Initiative.
Directors welcomed the proposal’s emphasis on ensuring that the CBT is
relevant for all member countries, including less‑developed and smaller
economies, recognizing that central banks operate under a diverse set of
circumstances and environments. In this regard, they agreed with the
proposed modular approach of the CBT and considered that flexibility would
help facilitate a risk‑based and proportional application while taking into
account country‑specific circumstances and needs. Directors broadly
concurred that the proposed CBT can serve as a diagnostic tool in capacity
development, and help central banks map their transparency frameworks and
make informed choices on their transparency arrangements. Many Directors
also considered that CBT assessments could help support Fund surveillance.
Some Directors underscored the importance of clarifying the voluntary
nature of the CBT.
Directors welcomed that the CBT will take as given the mandates, policies,
and governance arrangements of central banks. They broadly agreed that the
CBT would tie into existing governance work within the Fund and noted that
the CBT will not provide a central bank governance framework, nor is it a
means to assess or pass judgement on the governance of central banks.
Directors noted that central banks face trade‑offs between transparency and
the legitimate need for confidentiality. In this regard, they considered
that the CBT code should strike the appropriate balance between these needs
and preserve flexibility, particularly in the context of market sensitive
information and financial stability and policy effectiveness objectives.
Directors supported the staff proposal to convene an international Advisory
Group to provide guidance to staff in the elaboration of the new code.
Directors noted the importance of selecting the members of the Advisory
Group from diverse backgrounds and regions to ensure a broad representation
of views and experiences.
Directors emphasized the need for broader consultation on the proposed CBT
in due course, including with monetary authorities, other international
institutions, and the Executive Board. Directors also asked for more
regular updates to the Executive Board as the CBT is developed.
IMF Communications Department
PRESS OFFICER: Meera Louis
Phone: +1 202 623-7100Email: MEDIA@IMF.org