Executive Directors welcomed the opportunity to take stock of the Fund's response to date to the international financial crisis that began last year. The financial crisis is testing the resilience of the global financial system. Directors commended the staff's efforts to assess unfolding developments through the GFSR and the WEO, and, in collaboration with other international agencies, to identify mea- sures that will strengthen national policy frameworks and the international financial system. They stressed the need for continued close collaboration among national authorities, standard setters, international financial agencies, and the private sector to deal with the crisis.

Directors noted that the Fund will have a key role to play as the leading international institution for macro-financial analysis, with a global mandate and unique capacity to help prevent and resolve international financial crises and disseminate best practices. The Fund will need to be an articulate participant in the public debate, while at the same time safeguarding and strengthening its role as a confidential advisor to all its members.

Directors supported the recent increased focus of the Fund's surveillance and financial sector work on the policy challenges raised by the financial crisis. They welcomed, in particular, the increased attention paid to macro-financial linkages and contagion risks, financial safety nets, and crisis preparedness and management. They also emphasized that the Fund should give greater priority to assisting members in identifying and remedying gaps in financial regulation and supervision. Directors considered streamlined and risk-focused FSAPs that are better integrated with Article IV consultations, along with coordinated assessments of the GFSR and the WEO, to be key instruments for the Fund's enhanced financial sector work.

Directors concurred that the Fund and the Financial Stability Forum (FSF) have complementary and mutually reinforcing roles. The FSF plays a key role by bringing together senior national policymakers, international supervisory and regulatory agencies, and central banks. The Fund, for its part, is uniquely placed to draw synergies from its multilateral, regional, and bilateral surveillance activities. The Fund is also best positioned to integrate financial sector assessments with macroeconomic stability analyses, and to encourage and disseminate best practices in the context of its bilateral surveillance. Given the enhanced involvement of the Fund and other institutions in financial sector work, many Directors saw the need for a clearer multilateral framework for overarching macro-financial analysis and coordinated solutions, and suggested that, given its near universal membership, the IMF should aim to provide both the institutional and the analytical backing for such an effort. These Directors suggested that the IMF could provide a platform for members to work toward such a multilateral framework. Some Directors stressed that the Fund should concentrate on its comparative advantage and enhance its crisis prevention instruments, particularly surveillance, macro-financial analysis, and monitoring implementation of key standards and policy recommendations.

Directors were encouraged that Fund staff has been working closely with the FSF since its establishment, including through direct participation in FSF working groups, projects, and outreach efforts. They saw merit in strengthening that collaboration and in exploring concrete modalities for doing so, including with respect to financial stability assessments and further exploiting opportunities for joint Fund/FSF outreach. In this context, the importance of maintaining flexible and informal modalities was stressed.

Looking ahead, Directors stressed that the Fund should continue to enhance its work on financial stability and macro-financial linkages, consistent with its mandate and strategic priorities, and focusing in areas where it adds most value and complements the work of other institutions. They welcomed the ongoing efforts to deepen the Fund's expertise across a range of policy areas relevant to macro-financial stability. Directors noted that the Fund's value added stems both from in-house technical expertise in core financial sector policy areas, and from the Fund's capacity to put regulatory and supervisory policy challenges into a broader macro-financial stability context. Directors also emphasized that the Fund needs to better integrate its country-specific surveillance with its regional and global analyses, further sharpen its high-frequency market analyses and stability assessments, and maintain an ongoing dialogue with market participants in order to strengthen its early warning capabilities. Many Directors reiterated the importance of addressing the Fund's financing role in the context of the current crisis in a timely and flexible way, and called for accelerated progress toward a decision on a new liquidity instrument. BUFF/08/148, October 8, 2008