1. This report covers recent developments in the production of Reports on the Observance of Standards and Codes (ROSCs) and the work on international standards and codes. The discussion focuses on developments since the April 2003 Report of the Managing Director to the International Monetary and Financial Committee on the IMF's Policy Agenda and the data cover the period since the last Quarterly Report, i.e., from October 1, 2002 through May 31, 2003.¹

ROSC production

2. Between October 1, 2002 and May 31, 2003, an additional 100 ROSC modules were completed, for 38 economies, with 52 of these published (Table 1).² This brings the total number of ROSC modules completed to 410 (for 91 economies), of which 292 have been published, for 79 economies (Table 2).³ Sixty-six of the 100 new modules covered financial sector standards, including four Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) ROSCs. All but one of these 66 modules were assessed under the Financial Sector Assessment Program (FSAP).⁴ Also produced in the period were eleven data and nine fiscal transparency ROSCs, plus fourteen modules in the areas where the World Bank takes the lead (four corporate governance, five accounting and auditing, and five insolvency and creditor rights modules).

3. The 100 new modules completed in the period October 1, 2002 to May 31, 2003 included seven ROSC re-assessments that replace earlier modules—for instance, a monetary and financial policy transparency module for Uganda published in April 2003 replaced an earlier module published in August 1999. Also in the period, factual updates of 13 modules in the context of Article IV surveillance were produced as stand-alone documents.⁵

Selected standards-related developments

4. The Executive Boards of the Fund and the Bank reviewed the standards and codes initiative and the FSAP in March 2003.⁶ The Communiqué issued by the International Monetary and Financial Committee (IMFC) at its April 12, 2003 meeting welcomed progress with the standards and codes process and the FSAP. The IMFC stressed the importance of further enhancing the quality and effectiveness of standards and codes assessments, and called on the IMF to implement quickly agreed measures to strengthen prioritization, technical assistance, and follow up of FSAP and ROSC assessments. Efforts are underway at the Fund, including through the interdepartmental Taskforce on Monitoring and Assessment of Standards (TAMS), to implement these recommendations. The IMFC also looked forward to the further work of the Financial Stability Forum and standard-setting bodies on strengthening the content and coverage of standards in accounting, auditing, and corporate governance, and on improving transparency and financial disclosure.

5. At its June 2003 Plenary, the Financial Action Task Force (FATF) issued its revised Forty Recommendations to combat money laundering, reflecting broad consultation, including with Fund staff.⁷ The FATF, working with the staff, is revising the AML/CFT assessment methodology, which the FATF projects to finish by its February 2004 Plenary. The staff are planning a note on the implications for the Fund's AML/CFT work program of the revision of the FATF Recommendations.

Outreach activities

6. The Fiscal Affairs Department (FAD) has undertaken a project of outreach and surveys on the use of fiscal ROSCs by the financial markets and civil society. FAD surveyed rating agencies, financial analysts, and civil society organizations (CSOs) via a questionnaire and interviews. The main findings, which will be reported in a forthcoming IMF Working Paper, were that key sectors of the financial markets, notably sovereign rating analysts and U.S.-based international investment banks, are making extensive use of fiscal ROSCs. It also appears, however, that awareness is relatively limited in the broader international investment community. The level of awareness of fiscal ROSCs is also lower amongst broader civil society, although a few CSOs have explicitly used the transparency code in their work and are aware of fiscal ROSCs. The forthcoming working paper suggests possible improvements to the ROSC process and further outreach to the financial markets and civil society.

Private sector initiatives

7. CalPERS, the California Public Employees' Retirement System and one of the largest U.S. pension funds, announced in April 2003 that it would give emerging equity markets that had been removed from its permissible investment list one full year to improve before CalPERS would take any action to liquidate its investments in a market. As reported in the December 2001 Quarterly Report,⁸ CalPERS commissioned a consultancy firm to undertake assessments of countries' observance of the Fund's fiscal and monetary and financial policy transparency codes as an input into determining the permissible investment list. CalPERS indicated that during this one-year period, countries that have fallen below the threshold can obtain the information used to determine their rating and CalPERS will work with them to support countries' efforts to achieve higher standards of market efficiency and transparency.⁹