The IMF, its mandate and influence in prevention of financial sector abuse
| DOI | https://doi.org/10.1108/JFC-05-2015-0029 |
| Published date | 03 October 2016 |
| Pages | 987-1011 |
| Date | 03 October 2016 |
| Author | Norman Mugarura |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial crime |
The IMF, its mandate and
influence in prevention of
nancial sector abuse
Norman Mugarura
Brunel University London, London, UK, and Research Department,
Global Action Research and Development Initiative Limited, Barking, UK
Abstract
Purpose – The purpose of this paper is to articulate the mandate of the International Monetary Fund
(IMF) not least in promoting a sound legal regulatory environment for markets to operate globally and
its inherent challenges. While acknowledging the plausible work done by the IMF in supporting
countries to achieve their macro-economic stability, the paper articulates some of its shortcomings as a
global institution. It is evident that the post-war climate in which the World Bank and IMF were created
has drastically changed – which presupposes that these institutions now need to reposition themselves
to reect on contemporary global challenges accordingly. The author has argued in the past that a
robust regulatory system should be devised taking into account the dynamic challenges in the market
environment but also to prevent them from happening again.
Design/methodology/approach – The paper has utilized empirical evidence to evaluate the
mandate of the IMF in addressing its dynamic challenges such as the global nancial and debt crises in
Europe and the USA and prevention of nancial sector abuse globally. The IMF is one of the Bretton
Woods Institutions charged with the oversight responsibility to enforce policies and enable countries to
manage their macro-economic challenges efciently.
Findings – The ndings demonstrate that the IMF is as relevant and important as it was when it was
created in 1945. However, there is a need for intrinsic and structural changes within this institution to
continue discharging its mandate in a changed global regulatory landscape. The IMF is still crucial in
fostering a fundamental stabilization function to fragile global economies in areas of nancial and technical
assistance, and developing requisite legal and supervisory infrastructure within edging member countries.
Research limitations/implications – The paper was written by analysis of both theoretical and
empirical data largely based on secondary data sources. It would have been better to rst present the
ndings in an international conference to solicit wide views and internalize them accordingly.
Practical implications – While acknowledging the plausible work done by the IMF and its
counterpart the World Bank in facilitating global nancial markets regulation and prevention of
nancial sector abuse, as oversight institutions, they need to constantly review their mandate to
respond robustly to their dynamic challenges such as the global and debt crises and nancial sector
abuse. Oversight institutions need to constantly review and adapt their mandate accordingly, if they are
to discharge their varied responsibilities efciently. They cannot stand still in the face of challenges
because they will be superseded and kept at a back foot.
Social implications – Markets and states are embedded in each other, and the way they are regulated
is of a signicant importance to varied stakeholders and people.
Originality/value – This paper is one of its kind, is unique in its character and evaluates embedded
issues using empirical evidence in a way not done in its context before. Secondary data sources have
been evaluated to achieve a thoughtful analysis of the objectives of the paper.
Keywords IMF, Mandate, Financial sector abuse
Paper type Research paper
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1359-0790.htm
The IMF
987
Journalof Financial Crime
Vol.23 No. 4, 2016
pp.987-1011
©Emerald Group Publishing Limited
1359-0790
DOI 10.1108/JFC-05-2015-0029
1. Introduction
The paper has utilized empirical evidence to examine the mandate of the International
Monetary Fund (IMF) in addressing its dynamic challenges such as the global nancial
and debt crises in Europe and the USA and prevention of nancial sector abuse globally.
The IMF is one of the Bretton Woods Institutions charged with the responsibility to
enforce policies and enable countries to manage their economies better. Specically, the
paper examines the inuence of the IMF in promoting a sound legal regulatory
environment for markets to operate globally. While acknowledging the plausible work
done by the IMF in supporting countries to achieve their economic goals, the paper
articulates some of its shortcomings as a global institution. It is evident that the
post-war environment in which the World Bank and IMF were created has drastically
changed, which presupposes that these institutions now need to reposition themselves
to reect on contemporary global challenges. I have argued in the past that a robust
regulatory system should be devised taking into account dynamic challenges in the
market environment but also to prevent them from happening again.
1.1 The mandate of IMF in nancial markets regulation
The IMF was designed to have a universal international membership, with each
member country making a contribution towards its resources (in form of a quota
system). While the International Bank for Reconstruction and Development (World
Bank) was devoted to the long-term economic development of states, the IMF was
designed for a different purpose.
The primary purpose of the IMF is to facilitate countries by making its resources
available to member countries to achieve stability and economic growth. In accordance
with this mandate, nancial sector lending in the form of adjustment, investment loans
and technical assistance after the East Asian crisis increased from US$2.2bn per year on
average to US$4bn over the past three years (Boorman and Ingves, 2001). Technical
assistance is aimed at developing sound systems in banking regulation and supervision,
legal reforms, the insurance sector, a sound framework for capital markets operations,
payment and settlement systems and general restructuring and privatization. The IMF
has instituted an International Monetary Committee that works closely with the World
Bank to evolve measures designed to safeguard the nancial system (Boorman and
Ingves, 2001). The Fund’s work in member countries has helped national authorities
strengthen their supervisory and regulatory capacity. This has helped to promote the
safety and soundness of nancial markets from systemic abuse (Boorman and Ingves,
2001). In particular, the Fund carried out assessment of observance of international
regulatory standards, codes and best practices in areas of nancial supervision,
prudential regulation, transparency of scal and monetary policies and data provision
and dissemination, all these aimed at fostering the integrity of nancial markets
(Boorman and Ingves, 2001).
The IMF works closely with member countries to identify structural and correct
institutional weaknesses to promote market integrity and stability of economies. It
executes this mandate by helping countries introduce economic, nancial and legal
frameworks to enhance individual countries’ efforts to combat market abuse (Boorman
and Ingves, 2001). It also encourages members to participate in targeted international
efforts against money laundering and nancing of terrorism. It provides advanced
adjustment and investment loans as well as technical assistance amounting to US$2.2bn
JFC
23,4
988
To continue reading
Request your trial