Current Developments in Monetary and Financial Law

© 1999 International Monetary Fund

Production: IMF Graphics Section

Cover design and figures: Luisa Menjivar-Macdonald

Typesetting: Jack Federici

Cataloging-in-Publication Data

Current developments in monetary and financial law / Legal Department.—Washington, D.C. : International Monetary Fund.

v. ; cm.

Papers based on a seminar held in 1998, organized by the Legal Department of the IMF and the IMF Institute.

Includes bibliographical references.

1. Banking law—Congresses. 2. Monetary policy—Law and legislation—Congresses. 3. Financial policy—Law and legislation—Congresses. 4. Financial crises—Congresses. 5. Banks and banking—State supervision—Congresses. 6. Banks and banking, International—Congresses. 7. Banks and banking, Central—Congresses. 8. Economic and Monetary Union—Congresses. 9. Payment systems—Congresses. I. International Monetary Fund. Legal Dept. II. IMF Institute.

K1066.C97 1999

ISBN 9781557757968

CIP

Price: $65.00

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Contents

• Preface

• THE INTERNATIONAL MONETARY FUND

• 1 Developments at the International Monetary Fund

  • 1A. Capital Account Liberalization

    • Stanley Fischer

  • 1B. The International Monetary Fund and the Liberalization of Capital Movements

    • François Gianviti

  • 1C. Surveillance, Crisis, and Architecture

    • William E. Holder

• 2 The International Monetary Fund and the International Monetary System

  • 2A. Decision Making in the International Monetary Fund

    • François Gianviti

  • 2B. The Design of the International Monetary Fund’s Jurisdiction over Capital Movements

    • Sean L. Hagan

  • 2C. International Monetary Fund Initiatives to Promote Statistical and Fiscal Transparency

    • Roy C. Baban

  • Comment

    • Pierre Poret

• RECENT FINANCIAL CRISES

• 3 Recent Financial Crises—Comments from the International Monetary Fund

  • 3A. Recent Financial Crises in Latin America

    • Claudio Loser

  • 3B. Asian Crisis: Causes and Remedies

    • Bijan Aghevli

  • 3C. The International Monetary Fund’s Response to the Asian Crisis

    • Adam Bennett

  • 3D. Recent Financial Crises: Institutional Responses

    • Charles A. Enoch

  • Comment

    • Tobias M. C. Asser

• 4 Recent Financial Crises—Comments from International Development Banks

  • 4A. The World Bank’s Response to the Latin America and East Asia Crises

    • Andrés Riga

  • 4B. Recent Financial Crises and the Inter-American Development Bank

    • John Niehuss

  • Comment

    • Herbert V. Morais

• FINANCIAL SECTOR DEVELOPMENTS

• 5 Prudential Supervision of Banks and the Basle Core Principles

  • • Chester B. Feldberg

• 6 Legal Aspects of Bank Insolvency

  • • Tobias M. C. Asser

• 7 Lender-of-Last-Resort Issues—Past, Present, and Future

  • • Thomas C. Baxter, Jr. and Joseph H. Sommer

  • Comment

    • William A. Ryback

• 8 Government Securities

  • 8A. Regulation of Participants and Transactions in the U.S. Government Securities Market

    • Joyce Hansen

  • 8B. Organization of Open Market Operations in the United States

    • Spence Hilton

  • Comment

    • Michael Decker

• 9 Legal Risk in the Securities Settlement System

  • • James Steven Rogers

• 10 Clearing and Settlement of Book-Entry Securities Transactions

  • • Pierre Francotte

  • Comment

    • Richard B. Smith

• 11 The Economic and Monetary Union

  • 11A. The Economic and Monetary Union and the Introduction of the Euro

    • Antonio Sainz de Vicuña

  • 11B. Institutional Aspects of the European Central Bank

    • Antonio Sainz de Vicuña

  • 11C. The Economic and Monetary Union and the International Monetary Fund

    • Hector Elizalde

  • Comment

    • Jacques J. Polak

• 12 Financial Conglomerates

  • 12A. Financial Conglomerates: Securities Industry Perspective

    • Robert Mundheim

  • 12B. Financial Conglomerates: Trends in Regulation

    • Florence Davis

  • 12C. Financial Conglomerates: Banking Industry Perspective

    • Rodgin Cohen

  • Comment

    • John D. Hawke, Jr.

• 13 Financial Modernization

  • 13A. Current Financial Modernization Proposals in the United States

    • J. Virgil Mattingly and Kieran J. Fallon

  • 13B. Financial System Modernization in Emerging Markets: Asia and Latin America

    • Thomas Glaessner

  • Comment

    • Kathleen O’Day

• GOVERNANCE ISSUES

• 14 Good Governance and Commercial Banks

  • • Gary M. Welsh

• 15 Anti-Money-Laundering Policies—Selected Legal, Political, and Economic Issues

  • • Richard K. Gordon

• 16 Pyramid Schemes

  • • Debra A. Valentine

  • Comment

    • Henry N. Schiffman

  • Comment

    • Robert D. Strahota and Lucee S. Kirka

• 17 Enforcement of Bank Claims and the Law of Security

  • • William Blair

• 18 Enforcement of Bank Claims in Switzerland—Pledge, Set-off, and Immunity

  • • Martin Hess

• GOVERNANCE OF THE CENTRAL BANK

• 19 Accountability of the Central Bank for Monetary Policy

  • • Stephen Cecchetti

• 20 Financial Accountability of the Central Bank—Internal and External Controls

  • • Kathleen O’Neil

  • Comment

    • Tobias M. C. Asser

• 21 External Review of Decisions by Central Banks

  • • Geoffrey P. Miller

  • Comment

    • Douglas H. Jones

• PAYMENT SYSTEM DEVELOPMENTS

• 22 E-Money and Data Privacy

  • • Thomas P. Vartanian

• 23 Remarks on the Report of the Consumer Electronic Payments Task Force

  • • Walter A. Effross

• Appendices

• I 1. EC Council Regulation on Certain Provisions Relating to the Introduction of the Euro, No 1103/97 of 17 June 1997

  • • 2. EC Council Regulation on Certain Provisions Relating to the Introduction of the Euro, No 974/98 of 3 May 1998

• II The Forty Recommendations of the Financial Action Task Force on Money Laundering

• III United Nations Convention on Independent Guarantees and Stand-By Letters of Credit

• IV UNCITRAL Model Law on Electronic Commerce

• Biographical Sketches

Preface

Beginning in 1988, the Legal Department and the Institute of the IMF have been organizing seminars for central banks’ legal advisers. These seminars, attended by about 40 participants, are held every two years at the IMF’s headquarters in Washington, D.C. During the seminars, communications are presented by officials of the IMF and other international organizations, officials of central banks and regulatory agencies, representatives of the banking industry and, more generally, the private sector, scholars, economists, lawyers, etc. Most of these communications are subsequently published by the IMF with the understanding that the authors are expressing their own views, which should not be attributed to the IMF or to any institution with which any are affiliated.

The papers published in this volume reflect or are based on communications made at the sixth seminar, which was held in 1998. Although intended for central bank officials, this seminar covered such a broad range of topics dealing with monetary and financial law that the title of the first five volumes (Current Legal Issues Affecting Central Banks) seemed rather inappropriate. Hence, this book is the beginning of a new series under a different title. Presentations on developments at the IMF focused on the liberalization of capital movements, data dissemination, the IMF’s goals in financial surveillance and architecture, and responses to the financial crises in Asia and Latin America. Regarding recent issues in the financial sector, speakers addressed supervision of banks, including the major international effort—the Basle Core Principles of Banking Supervision. Updates on insolvency and liquidation of banks as well as lender-of-last-resort issues were presented along with how payment systems are adjusting to continuous financial modernization and the resulting legal issues.

Of particular interest in the seminar were the activities of the European Economic and Monetary Union (EMU), which were discussed from several viewpoints. These included the introduction of the euro, institutional aspects of the European Central Bank, and whether membership in the EMU could affect member countries’ rights and obligations with the IMF. Analysis was also provided of what commercial activity may look like in this new and important marketplace.

Good governance continues to be a major concern of the IMF. In addition to addressing accountability issues of the central bank, participants expressed views on criminal conduct arising from money laundering and pyramid schemes. Information was also provided on developments in the enforcement of bank claims and the law of security.

For the convenience of the reader, this volume includes as appendices the EC Council regulations on the introduction of the euro, the UNCITRAL Model Law on electronic commerce, the 40 recommendations of the Financial Action Task Force on money laundering, and the U.N. Convention on independent guarantees and stand-by letters of credit.

I wish to express our gratitude to a number of people for organizing the seminar and for their work on this publication. Robert Effros, former Assistant General Counsel in the Legal Department, played a key role in the seminar’s preparation and served as its moderator. David Driscoll and Martha Bonilla of the External Relations Department and Rachel Ray of the Legal Department provided editorial expertise. Carmen Tirbany, an assistant to Mr. Effros, contributed to the seminar and to this publication. Joyce White also assisted on the publication. Finally, many thanks go to David Cheney of the External Relations Department and to members of the IMF Institute without whose support and guidance the seminar and this publication would not have been possible.

François Gianviti

The General Counsel