Köhler, Fischer discuss work of new department, IMF response to financial crises, including Turkey IMF to set up capital markets department

• Pages: 85-87

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On March 1, IMF Managing Director Horst Köhler announced the establishment of the International Capital Markets Department in the IMF. Below are edited excerpts from a March 2 press briefing by Köhler and First Deputy Managing Director Stanley Fischer on that decision and on the IMF's response to financial crises, including Turkey.

KÖHLER: In Prague, I outlined a vision of the IMF's future role that was unanimously endorsed by the members of the IMF.A central element of that vision was that the IMF should become a center of excellence for the stability of the international financial system.

In the process of making this vision operational, I asked a panel of outside experts in October 2000 to provide an independent perspective on how the IMF should organize its financial sector and capital markets work. That group, headed by John Lipsky, Chief Economist of J. P. Morgan Chase, presented its report in January 2001.

Broadly, the report observed that although important improvements had been made in the past few years, the IMF's work in capital markets needed to be considerablyPage 86 enhanced. Among its recommendations was the creation of a new department that would consolidate and develop further the capital markets-related functions now carried out in several of the IMF's functional departments.

After intensive deliberations among management and senior staff over the past few weeks, I concluded that the creation of a new department was appropriate.

I see this decision as a critical element of ongoing efforts to strengthen the international financial architecture and ensure the necessary support for the IMF's work on crisis prevention and crisis management.

More specifically, the consolidation of the work on capital market issues in the new department is expected to deepen the IMF's understanding of financial market operations and of the factors influencing the supply of capital to member countries; provide enhanced support to the IMF's surveillance and lending operations in member countries through strengthened links between information gathering, analysis, and judgment regarding capital market developments; and enhance the IMF's conceptual capacities in addressing systemic issues stemming from developments in international capital markets.

I am confident this decision is in the interest of all IMF members. It will enhance the IMF's early-warning capabilities and, more fundamentally, strengthen its ability to help member countries in their efforts to gain access to, as well as deal with and benefit from interactions with, the international capital markets and their potential for income and job creation.

To make the...