Transcript

Transcript of a Press Briefing by Caroline Atkinson, Director, External Relations Department, IMF

July 23, 2010

Webcast of the press briefing

MS. ATKINSON: Good morning. Welcome to the regular IMF press briefing. I’m Caroline Atkinson, the director of External Relations Department at the Fund. And we’ll welcome your questions in the room and online through our Online Media Briefing Center. As usual, the briefing is embargoed until 10:30 a.m. Washington time, 1430 GMT.

And just a couple of housekeeping issues in terms of management travel and the Executive Board. Mr. Murilo Portugal will be in Brazil on Thursday, July 29, and giving a keynote speech there. We will be making the speech text available on the IMF Web site. It’s on the future role of Central Banks and the regulating supervisory framework in light of the financial crisis. The Executive Board will be on an informal recess from Monday, August 2, until Friday, August 20. We will also, by the way, be having our next press briefing probably late in August.

Finally, there will be—right after this or at 10:30 a.m. this morning—a press call on Latvia about yesterday’s Board approval of the third review of the standby arrangement and the Article IV consultation. And the Mission Chief, Mark Griffiths, will be available on that call, and we have all of our details. The press release pertaining to Latvia was issued yesterday.

QUESTIONER: I was wondering if Hungary has signaled to the IMF—actually not signaled, told the IMF—that it will let the program expire in October and that this is the end of basically its—well, specifically that program—Hungary has said that it wants to deal with the EU now. I mean, is this the way—I mean, just generally, what are your feelings about that and whether you think that that is enough to instill confidence in what the government’s doing?

MS. ATKINSON: Well, Leslie, as you know the program in Hungary has been successful and was very important, we think, in helping to restore confidence when it was first announced. It continues for some months. We released information at the weekend about the end—about the mission coming back, not just the Fund mission, but the Fund and the EU mission and there was an EU press release that was rather similar to the one at the IMF at that time. And as we said then and, as always the case, we remain engaged with the authorities and we’re ready to resume the specific negotiations and return there at anytime.

QUESTIONER: But have the authorities actually said to the Fund—because that’s what’s being reported today—that it would not renew that program and that it wants to deal only with the EU?

MS. ATKINSON: Well, I’m not aware of a specific—you know, normally we’re talking about—has there been a formal request. So I’m not aware of a mechanism for a formal non-request. And as I say, we’re ready to continue discussions. We remain engaged with the authorities in a normal way. And the program is in place until it expires obviously. I mean, just under our normal rules.

QUESTIONER: I’ll just follow on Hungary. I have a question actually. Do you think we’re going to—it marks the start of a sort of rejection of tough fiscal measures in the region, and we may see more Hungarian responses or worse or you’re seeing with the IMF more responses this way? Second question, could you clarify what the fund was trying to do in terms of raising quotas as we’ve seen a bit of mix between the new instruments, raising resources, and if you’re trying to raise resources, I think trying to do that while discussing the quota shares, and is there a plan to try to double the permanent resources while discussing voting rights?

MS. ATKINSON: Okay, so on Hungary first. I don’t see a trend in the region as you saw. In fact, you could say if you take the region being Europe that there’s a trend in the opposite direction of increasing plans from governments to adjust their fiscal policies in line with their European commitments. So I—that’s all I would say on the Hungary issue.

QUESTIONNER: So are there more countries in Eastern Europe that have a (inaudible) program?

MS. ATKINSON: No, I don’t think that there’s a trend. No, we’ve just—as you know we’ll be discussing Latvia. The programs in other places I think continue to be on track and in discussion. So I don’t think there’s such a trend. Obviously, there’s a different evolution of a time of—as you move through the crisis.

On your other point, as you know there is a discussion underway on—a review underway—of the quotas, the 14th General Review of Quotas is underway. The main focus of that and of reports about that has been on what it means for governance and on the commitment, the political commitment, to achieve at least a 5 percent shift in quota share, you know, from overrepresented to underrepresented countries to dynamic and emerging countries. In the context of that, there are discussions about increasing the quotas.

And the Managing Director was reported as saying that in his view, he could envisage an increase in the quota size of the Fund to about a trillion dollars. And that’s obviously the kind of thing that will continue to be negotiated in coming months in our Executive Board and also outside in the political context of the shift and the increase in size—if there is to be an increase in size.

QUESTIONNER: A trillion? Not just in permanent quotas, right? Including NAB and permanent quotas or—

MS. ATKINSON: I think the issue is at the most—to think in terms of usable resources that the IMF has and an increase in quota of some $250 billion would lead to a trillion dollar Fund let’s say. But all of this is just, I mean, different—that was the Managing Director expressing his view about the size of the Fund that he could imagine, envisage, and this is something that will be discussed over coming months.

As I say, there are these two elements to the general review and most of the focus has been on the shifting shares. As you mentioned on other facilities, the Managing Director has also said that, of course, it’s important for the Fund to have adequate fire power. And I think that was sort of agreed politically, and that political commitment was shown, you know, more than a year ago when the IMF’s resources were increased following the G-20 meeting in London.

I have a question online I’ll just take that is from Alex (inaudible) which is about stress tests in Europe. “Why are they less credible than the stress tests conducted in the U.S. and what is missing?” I don’t want to buy into the premise of that which is that the stress tests are less credible than the ones in the U.S. The stress tests in Europe have not yet been published. They’re, as you know, going to be published—expected to be published—tomorrow. And the European authorities have said on many occasions that they expect the stress tests to, you know, they’re being conducted under plausible though severe assumptions. We know that there is broad coverage. There was a decision to broaden the coverage from the initial 25 institutions to 91 institutions. That covers 65 percent of the European banking system. And they’re going to be published so that’s transparency.

And we believe that transparent and comprehensive stress tests are an important step in restoring confidence in the banking system. I feel there was a second part to that question, but it’s vanished from my screen so if I haven’t answered it, I’m sure somebody will send it back to me. Ian.

QUESTIONER: Can you give us any update on the report on China?

MS. ATKINSON: The report on China will be—the Chinese team has come back and it’s going to be discussed in the Board fairly soon. I don’t believe the Board’s schedule is up yet, but in the next couple of weeks. And then following that there will be a decision about what gets published. I mean, the normal PIN would be published.

QUESTIONER: Caroline, wasn’t a mission concluding statement?

MS. ATKINSON: No, there is—typically the mission—well every mission of an Article IV has a concluding statement. Not all of those are released publicly. I mean many of them are, but not all of them.

QUESTIONER: So I assume this one’s not going to be released or they come back to work on that one?

MS. ATKINSON: I think you can assume that it’s not going to be released. I think it is not typically being released, but if I’m—and I think the next issue is really what is going to be released is the Executive Board. As you know, the concluding statement is the staff comment. And then why we have sort of several bites at the cherry, if you like, is that then there is an Executive Board discussion and decision and release of those documents. And that’s what would be coming up next.

QUESTIONER: And whether or not that is published or not, is that depending wholly on whether a country requests that or not?

MS. ATKINSON: The PIN, the press information notice, which is a kind of summing up of the Board, is a public information notice and that would be published. The staff documents, which are often published but not always, not all countries publish them, that is a decision of the Executive Board in response to the country. That’s a voluntary—although presumed—issue. And I don’t think that that’s known, and quite often there is a time, you know, period of time as that is—as the papers are being readied and so on.

I have a question online again about stress tests. And—oh, I beg your pardon, it’s not about stress tests. It’s about the size of the global safety net. He says “A few weeks ago, it was said that the Board was going to take up discussion of the global safety net ideas later in July. Did that happen and what was the outcome and discussion?” And just to say that we have not had a formal Board meeting on this issue, and I expect that there will be one. I’m not sure that there will be one now before the recess. It may well be later. We are, as the Managing Director said in Asia and has said several times, looking at our toolkit and looking at several options to strengthen that, to help crisis prevention, including the global safety net. This was something that was discussed a lot in Asia. There’s a lot of support there. And Korea, as the chair of the G-20, has been taking a leadership role in the debate about the global financial safety net.

And we do expect—we talked about the date and deliverables after the conference that the Korean authorities—the Korean government and the IMF held last week in Dijon, near Seoul. We talked about the global financial safety net and an expectation that there would be action, looking forward to the G-20 summit in November. Now obviously any IMF actions would come through the Executive Board and there would be Executive Board discussions and decisions, but I think we see the November summit in Seoul as the sort of end point of that.

QUESTIONER: I have a follow on. This one is on stress tests. What did you find out? How involved was the IMF at all in this stress test, if at all, just to clarify? And the second one is, I mean, what do you think would be—needs to be, you know, as—there’s a debate going on today about to release them early or, you know, whatever? I mean, does the Fund think that the stress tests overall, you know, need to be released in total, you know, completely revealed? And the outcome of the stress tests, I mean, there’s a feeling as well right now that it’s not going to sustain confidence, that this is going to come out and then, you know, then there will be—you know, there’s still concerns regarding the European debt situation. I mean, just generally what is the feeling within the IMF as the Europeans prepare to release these?

MS. ATKINSON: Well, I think we feel that the decision to undertake the stress tests, to broaden the coverage, and then to release them transparently, is very welcome. And the documents that we released yesterday in the context of the Euro area Article IV consultation said quite clearly that the staff welcome this and that the directors also saw the stress tests as a welcome step towards restoring confidence. And—so that’s our view. I think that it’s too soon honestly to anticipate what the market reaction will be. We will know that after tomorrow, and maybe it will even take a few days for, you know, before people look back and say, oh, that was really the market reaction in the end. I think the same thing happened with the release of the U.S. stress tests. But I think we welcome the fact of the stress tests, their broad coverage, the expectation of transparent release of a lot of information. You’re aware of the press releases that have come from the Committee of European Banking Supervisors. So I know there’s going to be a lot of stuff to follow tomorrow.

QUESTIONER: Well, I was wondering what the Fund’s involvement was at all with these stress tests. I mean, has the Fund been involved at all with putting them together?

MS. ATKINSON: Well, you know, we talked to our counterparts in all countries all the time obviously. We will, I’m sure, tomorrow be ready to comment. I mean, when we first look at them, of course, we’ll just have preliminary comments. But, you know, we will not be silent after their release.

QUESTIONER: Just following up on the stress tests. So I hear that the IMF is obviously pleased that the EU is doing this? You will comment on the actual results themselves, but is the IMF also waiting to see or is going to evaluate the actual legitimacy of the stress tests, or have you already assumed that and are confident of the process itself? So do you see the nature of the three things?

MS. ATKINSON: I think you’re trying to make me anticipate something that’s actually going to happen tomorrow. So what we are comfortable in saying is that we believe that it’s a very welcome exercise. We understand—I think the European authorities have made clear that they’ve asked banks to subject their balance sheets to severe stress and severe but plausible assumptions, and that they expect to release a lot of information. So finally, we have to see—the other important thing will, of course, be follow-up actions in the case of banks that require it.

QUESTIONER: Please forgive me. You’re talking about the—responding to the results of how the banks faired themselves. I’m wondering if the IMF is still waiting, or is going to analyze the actual process of the stress tests?

MS. ATKINSON: When I say results, I think the result you’re jumping to the final result which is what does it say about individual banks? But I think the result is a bit of a broader concept. The result includes the information that is provided about the banking system. And, you know, we expect that to be fairly detailed, and we believe that that’s a useful thing. And over time, of course, it will be important that there are, you know, follow-up actions and so on because that’s going to be the next step.

I have a question online that’s asking for an update on the recent talks between the Pakistani authorities and the IMF team with special reference to the VAT and the power tariff. Well, we had a team in Islamabad last week, and they met in the context of the fifth review of the standby arrangement. And the meeting was focused on the economic reforms under the program, including the VAT. And the IMF delegation, again, made the point—and, you know, we talked about this before—the importance of the VAT. And we expect discussions to continue. You know, this is a complicated issue there. And we believe that the discussions are going to continue actually in Washington in coming weeks.

QUESTIONER: Caroline, I’m going to come back to you on analyzing the process because that is—and that’s why I asked the question of how involved with the IMF was in putting because that’s where the Fund’s analysis and technical expertise that you guys always talk about comes into play here. And there is a question about the legitimacy of these—and I’m not saying that this is wrong or not—but I think what Ian was trying to get at is he’s trying to figure out are you going to judge at the end—is the IMF going to judge at the end whether the process is a legitimate process and was done to the extent that it fully exposes what is on the balance sheet?

MS. ATKINSON: Yeah, I mean, I’m sure that when you say, “In the end,” I’m sure that we will comment, for example, in the Global Financial Stability Report, on, you know, the process and the details, and maybe we’ll comment before that. These are quite—I mean, we’re expert in many things, and we have people who are also expert in those things, but it’s not a central function of the Fund to be this is quite detailed banking supervision and regulation issues. We do have a strong view on the value of—and I think we were early in calling for there to be stress tests—that should be transparent and it should be made public and it should have broad coverage. And those are the sort of key—those are key process issues which we have stressed and which we, you know, the European authorities have made clear that that’s what they—and that’s the exercise that they believe they’re conducting.

QUESTIONER: And when you said there will be follow up after—once the results come out—you’re talking about if there is an issue with one or other bank, that what the Fund is saying is you need to address that quickly.

MS. ATKINSON: Yeah.

QUESTIONER: Right, through various methods that —

MS. ATKINSON: Yes. I think that’s, you know, that’s also not new in the sense that we’ve made that point before, including in the documents released yesterday. And I think that’s fully in line with what the European authorities would expect. And as you know, a number of countries have arrangements already in place for bank resolution. So—

Oh, okay, I have a question, and perhaps I can use this to correct something. And the question is, “The Eurozone staff report called for ‘a more detailed disclosure of European stress tests.’ What would constitute more detailed disclosure? What needs to be included to be credible?”

Yesterday we released the staff report which had been drafted a few weeks ago, and we also released a supplement that updated the staff report. And in the meantime, the European authorities had announced the broadening of the coverage of the institutions which was initially, I think, 25 and then now is now is 91, so obviously a significant broadening. And there was more information about the planned disclosure and tomorrow now we have quite a lot of information about there will be disclosure initially as I understand it from the Committee on European Bank Supervisors and then from national authorities and so on.

The more detailed disclosure was commended in our updated supplement. You can find there’s a paragraph there on stress tests which welcomes these steps. And we also yesterday released not just the supplement to the staff report which contained this paragraph that was generally positive and welcoming of the stress tests and their, you know, expanded coverage and so on, we also released the summing up which is the Executive Directors’ view whether the Directors themselves welcomed the—just looking to see if I’ve got exact language here, but it’s on our Web site and I think we’ve made it available—that the Executive Directors in the Board discussion which took place on Monday this week of the Euro area staff report welcomed—yes, I can read it out—“welcomed the authorities’ intention to use transparent stress tests with an expanded coverage in terms of institutions and risks to help restore confidence in the financial system.”

I think that’s the most, you know, up-to-date and relevant language and comment. And as I say, in the staff supplement there is also a paragraph that refers to the welcome development of expanding the coverage and so on. Yes, Ian?

QUESTIONER: In yesterday’s report, the German Executive Director noted how something along the lines of how astonished he was about the reluctance of the staff report to note the achievements made by the region, especially in recent months. Any comment on that? Do you think that’s a fair characterization?

MS. ATKINSON: Of course, they’re free to make comments. I think the only comment I’d make on that is that sometimes we’re accused of not being even handed. And certainly when I was in Asia last week, I found many people who felt it would be valuable if the Fund were more even handed. And I think this is an example of even handedness. We may know ourselves that we’re—governments, including in the U.S. and Europe—may not always agree with our judgments and that’s part of being the IMF. But I don’t want to go into detail on a particular report or a particular comment.

I have a question online saying, “When can we—on Ukraine, when can we expect a Board meeting on Ukraine?” And I expect that we will have a Board meeting soon. As I said, the calendar will be up I guess tomorrow and so [you] should take a look at that. But I believe we will—we’re hoping that there will be a Board meeting before the recess.

Okay, well thank you all very much, and thanks to those of you who participated online. And I’ll get back to any of you that have further questions that we haven’t been able to take. Actually, I just see—sorry, there’s another one that’s flashed up, asking about the status of the Fund’s review of the Bank of Central African States and “when will the suspension and disbursements to countries—well, to the BEAC, which then on lends to countries be reconsidered?” And just note that we have been closely engaged with the authorities at the BEAC and with the CEMAC member country authorities to help them to address the underlying issues that allowed it to take place. And we hope very much that we can reach satisfactory understandings that will provide assurance that money disbursed through the BEAC will be properly safeguarded and that, therefore, we can continue with the disbursements. And, of course, we’ll let you know when that happens.

Okay, thank you very much.