Crises in systemically important countries, whose failure is likely to lead to contagion with far-reaching consequences for the international financial system, pose acute governance problems because of the stakes involved, the amount of resources that must be mobilized, and the need for rapid decision making.
During crises in systemically important countries, the locus of effective decision making shifts outside of the formal organization of the IMF to forums that better reflect the international distribution of resources. Because crisis management involves high-level political decisions about exceptional access to Fund resources, and because it may involve matching official financing or coordinated pressure on financial institutions to extend private financing, G-7 Deputies (deputy ministers of finance with responsibility for international issues) usually play a central role. At the same time, the formal decision making system (based on universal participation and representation of the membership), in which Management formulates proposals and the Executive Board approves them and exercises oversight, is necessary to provide the IMF’s legal authority.
Download
IMF Governance and Financial Crises with Systemic Importance
