Reform of the Global Financial Architecture
Although some progress has been made in reforming financial-sector policies and the International Monetary Fund (IMF) and Financial Stability Board (FSB) since the onset of the global financial and economic crisis, the bulk of reforms required to improve the ability to safeguard global financial stability and resolve global crises has yet to be agreed much less fully legislated and implemented. Focusing in particular on areas where further reforms of the IMF and FSB could help to improve the functioning, stability, and governance of the global financial system, the authors conclude that although the IMF and FSB are distinct and not fully comparable institutions, they must cooperate more closely than in the past to prevent crises and safeguard the stability of the global financial system. No other global financial architecture is both up to the task and politically feasible at this time. The authors' recommendations for substantive and institutional governance reforms of the IMF and FSB include: reorientation of central banks vis-á-vis the IMF and vice versa and vis-á-vis macroprudential policies; using the FSB-IMF collaborative structure to help address the troubling issue of volatile global capital flows; formalizing the reporting by the FSB to the International Monetary and Financial Committee (IMFC); adopting an inclusive policy agenda; more direct engagement by the IMF in the work of the FSB; and adding expert staff resources to both the IMF and FSB.