Chapter

Appendix I. Executive Board Decisions

Author(s):
International Monetary Fund
Published Date:
September 1964
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A. Quota Increases: Gold Subscriptions

In connection with any quota increases granted in accordance with the Fund’s decision on “Compensatory Financing of Export Fluctuations” and any quota increases granted as the result of requests received before the decision referred to, it is decided:

  • (a) to recommend to the Board of Governors, where a member represents, for reasons which it shall submit to the Fund, that its reserves should not be reduced by an immediate 25 per cent gold payment, that such member shall be permitted in accordance with an appropriate resolution to have its quota increased in five annual installments, with the right to accelerate the payment of such installments;

  • (b) to give sympathetic consideration to a request for an exchange transaction up to 25 per cent of the increase by any member which wishes to have the full increase in its quota take effect immediately or to expedite the full increase in its quota if it is paying under the installment schedule. This facility will be available where: (i) the member would encounter undue payments difficulties through the reduction in its reserves by the payment of the 25 per cent gold subscription or of the outstanding balance; and (ii) the request is made within two years after the date of the consent to the increase or, in the case of an increase in installments, within two years after the payment of the first installment; and (iii) the member requesting such an exchange transaction beyond the gold tranche represents that it will make a repurchase corresponding to any drawing in equal annual installments, to commence one year after the drawing and to be completed not later than three years after the drawing.

Decision No. 1529–(63/33)

June 14, 1963

B. Gold Collateral Transactions

Where the Fund decides in exceptional circumstances to enter into a gold collateral transaction with a member because this would promote the purposes of the Fund and give the member the opportunity, in consultation with the Fund, to adopt policies, during the period referred to in (a) below, that would be consistent with the policies and practices of the Fund on the use of its resources:

  • (a) the period for repurchase of the Fund’s holdings of the member’s currency resulting from the transaction, to the extent that they are not otherwise reduced, shall normally not exceed six months after the transfer of exchange by the Fund;

  • (b) the repurchase shall be made with gold or convertible currencies acceptable to the Fund in accordance with its Decision of July 20, 1962;1

  • (c) the provisions of the pledge agreement shall be on the lines of those set forth in the draft letter annexed. . . .

Decision No. 1543–(63/39)

July 1, 1963

Annex draft letter to member entering into a gold collateral transaction

Dear Sir:

On ____________, the Fund decided to enter into an exchange transaction with ___________ in an amount equivalent to US$ __________ secured by the pledge of gold as collateral, [and granted the necessary waiver under Article V, Section 4,] subject to the conditions set forth in this letter. The amount of _____, equivalent to US$ ________ and _______, equivalent to US$ __________, will be transferred to your account(s) after the steps set forth in Section B below have been taken.

Section A

1. The collateral for the transaction shall consist of gold bars containing fine gold having a value not less than $_________ calculated on the basis of US$35 per troy ounce of fine gold. The fine gold content will be determined to the satisfaction of the Fund and at your expense.

2. The gold bars will be transferred by you by way of pledge at a gold depository selected by you from among the Fund’s gold depositories (Federal Reserve Bank of New York, New York; the Bank of England, London; Banque de France, Paris; the Reserve Bank of India, Nagpur, India). You will irrevocably instruct the depository in accordance with the attached exhibit that the gold is to be transferred to, earmarked, and held in a special account in the name of and for the sole account of the International Monetary Fund, that the special account shall be at the sole order of the Fund, and that the depository shall accept and act upon any and all instructions of the Fund with respect to part or all of the gold in the special account. The Fund will arrange with the depository for the establishment of the special account. The depository will not be informed that the gold is held under pledge to the Fund.

3. You will represent to the Fund that the gold is free from any claims, liens or encumbrances in favor of any other party and subject to paragraph 9 below will remain free therefrom during the pledge. You will further represent to the Fund that under your law the gold may be freely pledged and disposed of as provided in this letter.

4. The gold will continue to be owned by you. Accordingly, the Fund will enter the gold on its books in your name, and will not show the gold in its books or accounts as owned by the Fund.

5. Not later than the repurchase date, namely the close of business six months after the value date for transfer of the exchange by the Fund to your account(s), you will repurchase the Fund’s holdings of your currency resulting from the transaction, to the extent that such holdings are not otherwise reduced, with gold in the special account if you so request or with other gold or convertible currencies acceptable to the Fund in accordance with the Fund’s Decision of July 20, 1962.

6. On any reduction at any time of the Fund’s holdings of your currency resulting from the transaction otherwise than by repurchase with gold in the special account, the Fund will, on your request, release to you or to your order at the depository gold from the special account in an amount not exceeding the equivalent of the reduction, provided that the amount of gold remaining in the special account shall not be less than the equivalent of the outstanding balance of the transaction.

7. To the extent that the Fund’s holdings of your currency resulting from the transaction have not been reduced by the close of business on the repurchase date, the Fund will give you notice of the balance due and payable by way of repurchase in respect of the transaction, and you will complete such repurchase with gold in the special account if you so request or other gold or convertible currencies acceptable to the Fund in accordance with the Fund’s Decision of July 20, 1962 not later than the close of business thirty days after the repurchase date. In the absence of such repurchase by the close of business thirty days after the repurchase date, repurchase will be effected with gold in the special account on the instructions of the Fund and without the need for further notice or request to you.

8. Where repurchase is effected with gold in the special account pursuant to paragraph 5 or 7, the gold in the special account will be transferred, on the instructions of the Fund, to the ordinary gold account of the Fund at the depository, which gold shall then be deemed to have been transferred by you to the Fund and shall thereupon be owned by the Fund free from any claim, including any right of redemption. Any surplus balance of gold beyond the full amount of the repurchase will be returned to you but any balance less than one bar will be held under earmark for you pursuant to Rule I-1 of the Fund’s Rules and Regulations.

9. At any time before the repurchase date or the close of business thirty days after the repurchase date, you may, after consulting the Fund, arrange for the sale of the gold in the special account, and the Fund will be prepared to give appropriate instructions to facilitate the sale, provided that on or before the close of business thirty days after the repurchase date the Fund’s holdings of your currency resulting from the transaction will be repurchased with gold or convertible currencies acceptable to the Fund in accordance with the Fund’s Decision of July 20, 1962, and provided further that the gold will not be released from pledge before such repurchase is effected.

10. All charges and costs connected with or resulting from the transfer to the special account (including without limitation transportation, earmarking, and holding), release, and redelivery, as well as converting the gold into good delivery bars if deemed necessary by the Fund under paragraph 1 above or if the gold is transferred to the Fund’s ordinary gold account by way of repurchase will be borne by you.

Section B

The transfer of currencies pursuant to the transaction agreed by the Fund will be made by the Fund after the Fund has received from you:

(i) acceptance of all of the conditions of this letter; and

(ii) a copy of the instructions referred to in Section A 2 above; and

(iii) the representations referred to in Section A 3 above; and, in addition, has received from the depository:

(iv) confirmation that the depository has established the special account, earmarked the gold, and will act in accordance with Section A 2 above; and

(v) information satisfactory to the Fund as to the fine gold content of the bars.

Very truly yours,

International Monetary Fund

By:

C. General Arrangements to Borrow: Association of Switzerland

The understandings set forth in the letter which the Swiss Ambassador to the United States proposes to send to the Managing Director (EBD/64/73, Attachment I) are acceptable to the Fund and the Managing Director is authorized to send the letter attached to EBD/64/73 (Attachment II).2

Decision No. 1712-(64/29)

June 8, 1964

letter of swiss ambassador

Washington, D.C.

June 11, 1964

Sir:

I have the honor to refer to Mr. Jacobsson’s letter of December 14, 1961 to the President of the Swiss Confederation and to conversations between representatives of the Swiss Confederation and the International Monetary Fund (hereinafter referred to as “the Fund”) concerning the way in which the Swiss Confederation could be associated with the Fund’s General Arrangements to Borrow, and thus contribute to the objectives of those Arrangements. The General Arrangements to Borrow (hereinafter referred to as “the General Arrangements”) are those set forth in Decision No. 1289-(62/1) of January 5, 1962, of the Fund’s Executive Directors, as amended by Decision No. 1362-(62/32) of July 9, 1962 and Decision No. 1415-(62/47) adopted on September 19, 1962.3

In the light of the views that have been exchanged, the Swiss Federal Council, on behalf of the Swiss Confederation, is prepared to be associated with the General Arrangements as follows:

(1) The Swiss Confederation is prepared to make resources available to participants in the General Arrangements in accordance with this letter and in amounts not exceeding an outstanding total equivalent to 865,000,000 Swiss francs.

(2) The Swiss Confederation will be prepared to consider the conclusion of agreements (hereinafter referred to as “implementing agreements”) with any of the participants in the General Arrangements if requested by such participants. The implementing agreements will prescribe the terms and conditions in accordance with which the Swiss Confederation will make resources available to the participant or the Swiss Confederation and the participant will make resources available to each other, which shall be on the basis of reciprocal terms if required. Immediately on the conclusion of an implementing agreement, or of any amendment of an implementing agreement, the Swiss Confederation will provide the Managing Director with a copy thereof.

(3) Whenever the Managing Director of the Fund initiates the procedure and makes a proposal for calls pursuant to Paragraphs 6 and 7 of the General Arrangements for the benefit of a participant that has entered into or enters into an implementing agreement, he may propose to the Swiss Confederation, after consultation with the Swiss Confederation, that it shall make a specified amount of resources available to the participant, which amount shall be in accordance with the implementing agreement with that participant. If the proposal for calls becomes effective under Paragraph 7 of the General Arrangements, the Swiss Confederation will make the specified amount of resources available to the said participant in accordance with this letter and with the terms and conditions of the implementing agreement. If, however, the Swiss Confederation gives notice to the Managing Director that in its opinion, based on its present and prospective balance of payments and reserve position, it should not make resources available in accordance with this proposal, or should make available a smaller amount than that proposed, the Swiss Confederation will not be obliged to make any such resources available or more resources than it represents to the Managing Director that it should make available.

(4) If the Swiss Confederation makes resources available to a participant otherwise than in accordance with the procedure of paragraph (3), the Swiss Confederation, after consultation with the Managing Director, may deem such resources to be or to have been made available pursuant to this letter, provided that at the date of such deeming Switzerland has entered into an implementing agreement with that participant, that at the date of such deeming a proposal for calls for the benefit of that participant is in effect under Paragraph 7 of the General Arrangements and provided that the terms and conditions for repayment to Switzerland accord or are made to accord with paragraph (5).

(5) The effect of the terms and conditions for the timing of repayment of resources made available by Switzerland pursuant to this letter will correspond, to the maximum extent practicable, with the repayment provisions of Paragraph 11 of the General Arrangements.

(6) The Fund may, at the request of a party to an implementing agreement, make any determination, or use its good offices, to facilitate the operation of an implementing agreement, subject, however, to paragraph (9).

(7) Whenever the Swiss Confederation makes resources available pursuant to paragraph (3) or deems resources to be or to have been made available pursuant to paragraph (4), the Swiss Confederation will inform the Managing Director of the amount in terms of Swiss francs thus made available. The Swiss Confederation will inform the Managing Director of the amount in terms of Swiss francs of the repayment of any resources made available pursuant to paragraph (3) or (4).

(8) The Swiss Confederation and the Fund will provide each other with the general information necessary to facilitate the operation of this letter and implementing agreements.

(9) The Fund does not accept any responsibility or liability, whether as guarantor or otherwise, in connection with this letter or with respect to the performance of the terms and conditions of an implementing agreement.

(10) This letter will remain effective for four years from October 24, 1962, provided that the Swiss Confederation may rescind this letter, with immediate effect, within one month after an amendment of the General Arrangements becomes effective pursuant to Paragraph 15 of the General Arrangements. This letter may be amended or rescinded at any time if the Swiss Confederation and the Fund shall so agree.

(11) Any question of interpretation or application of these understandings will be settled to the mutual satisfaction of the Swiss Confederation and the Fund.

(12) For the purposes of this letter, references to participants shall be deemed to include the official institution of a participant with which an implementing agreement is made, even though such institution is not a “participating institution” under the General Arrangements.

(13) All communications by or to the Swiss Confederation pursuant to this letter shall be made by or to the Swiss National Bank.

I propose that, if this letter is approved by the International Monetary Fund, this letter and your reply constitute an agreement between the Swiss Federal Council and the International Monetary Fund, which shall enter into force on the date of your reply. I hereby declare that the Swiss Confederation has taken all steps necessary to implement the exchange of letters.

Accept, Sir, the assurances of my highest consideration.

The Ambassador of Switzerland:

/s/

Alfred Zehnder

The Managing Director

International Monetary Fund

19th and H Streets, N.W.

Washington, D.C. 20431

reply of the managing director

Washington, D.C.

June 11, 1964

Sir:

I am pleased to acknowledge receipt of your letter of June 11, 1964.

I have been authorized to inform you that the understandings set forth in your letter are accepted by the International Monetary Fund. Accordingly, your letter and this reply constitute an agreement between the International Monetary Fund and the Swiss Federal Council, which will enter into force on the date of this reply.

Accept, Sir, the assurances of my highest consideration.

Very truly yours,

/s/

Pierre-Paul Schweitzer

Managing Director

His Excellency

Alfred Zehnder

Ambassador of Switzerland

2900 Cathedral Avenue, N.W.

Washington, D.C. 20008

D. Exchange Transactions Prior to the Establishment of Initial Par Value: Membership Resolutions

The following paragraph shall be adopted in future membership resolutions submitted to the Board of Governors:

6. Exchange Transactions with the Fund: [Member] may not engage in exchange transactions with the Fund until both (a) the par value of its currency has been agreed in accordance with paragraph 5 above and put into operation and (b) its subscription has been paid in full; provided, however, that at any time before the requirements under (a) and (b) have been met, the Executive Directors are authorized to permit exchange transactions with [member] under such conditions and in such amounts as may be prescribed by the Executive Directors.

Decision No. 1686–(64/22)

April 22, 1964

On June 1,1964, the Board of Governors agreed that this provision should also apply to existing membership resolutions relating to Algeria, Burundi, Cameroon, the Central African Republic, Chad, Congo (Brazzaville), Congo (Leopoldville), Dahomey, Gabon, Guinea, Ivory Coast, Kenya, Korea, Laos, the Malagasy Republic, Mali, Mauritania, Nepal, Niger, Rwanda, Senegal, Sierra Leone, Tanganyika, Togo, Trinidad and Tobago, Tunisia, Uganda, Upper Volta, and Viet-Nam.

E. Exchange Transactions Prior to the Establishment of Initial Par Value

(a) Where the Fund prescribes the conditions and amount of an exchange transaction by a member before the establishment of an initial par value, the member will be required to complete the payment of its subscription on the basis of a provisional rate of exchange for its currency proposed by the member and agreed by the Fund.

(b) In deciding whether to permit exchange transactions before the establishment of an initial par value, the Fund, in accordance with the last sentence of Article I, will be guided by the purposes of the Articles; the Fund will encourage members to follow policies leading to the establishment of realistic exchange rates and to the adoption at the earliest feasible date of effective par values, and will take into account the efforts that are being made to achieve this objective. However, the Fund will give the overwhelming benefit of any doubt to requests for exchange transactions within the gold tranche and members can expect that requests for drawings will be met where they are made in accordance with paragraph 5 of E.B. Decision No. 1477–(63/8),4 adopted February 27, 1963.

Decision No. 1687–(64/22)

April 22, 1964

Annual Report, 1962, pages 36-41 and 245; Selected Decisions of the Executive Directors (Washington, Second Issue, September 1963), pages 33-39.

The Attachments referred to in this Decision were drafts of letters to be exchanged between the Swiss Ambassador and the Managing Director. The texts of the letters that were exchanged on June 11, 1964 follow this Decision.

For the Decision of January 5, 1962, see Annual Report, 1962, pages 234-45; for the Decision as amended, see Selected Decisions of the Executive Directors (Washington, Second Issue, September 1963), pages 55-65.

Annual Report, 1963, pages 196-99; Selected Decisions of the Executive Directors (Washington, Second Issue, September 1963), pages 40-43.

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