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IMF History (1972-1978) Volume 3
Chapter

Selected Resolutions on SDRs

Author(s):
International Monetary Fund
Published Date:
February 1996
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In the years 1972-78, in addition to the resolutions on the rules for reconstitution and allocations, the Board of Governors adopted three other resolutions relating to SDRs.

In March 1972, a resolution was adopted which made the SDR the unit of account for the Fund’s financial statements, records, reports, and statistics. Previously, the Fund’s accounts and statistics were expressed in terms of U.S. dollars.

In January 1974, the Board of Governors adopted a resolution prescribing the Bank for International Settlements as an “other holder” of SDRs. Previously, SDRs could be held only by the Fund and by the governments of Fund members, although provision had been made in the Articles of Agreement for prescribing additional institutions as “other holders” of SDRs. The Bank for International Settlements was the first such “other holder.”

In March 1974, the Board of Governors adopted a resolution extending the period in which the “equal value” provision specified in the Articles of Agreement for exchanges of SDRs could be temporarily suspended. Earlier, in November 1973, the Executive Directors had taken a decision permitting a suspension for a period of 120 days, which was the maximum possible period for which the Executive Directors could suspend provisions of the Articles. The suspension of the equal value provision enabled European countries to use their holdings of SDRs in payments among themselves while consideration was being given to a new method for valuing the SDR.

Amendment of Section 20(b) of the By-Laws (March 20, 1972) Resolution No. 27-3 of the Board of Governors

Resolved:

That the first sentence of the fifth paragraph of Section 20(b) of the By-Laws shall be amended, effective March 20, 1972, to read as follows:

“All accounts of the General Account shall be summarized in special drawing rights of the value prescribed in Article XXI, Section 2. The currencies of members shall be converted at their par values, or in accordance with decisions of the Fund.”

Prescription of the Bank for International Settlements as a Holder of Special Drawing Rights (January 21, 1974) Resolution No. 29-1 of the Board of Governors

Whereas the Bank for International Settlements, by a letter dated September 12, 1973, applied to be permitted under Article XXIII, Section 3, of the Articles of Agreement of the International Monetary Fund to accept, hold, and use special drawing rights in certain transactions with participants; and

Whereas pursuant to Section 25 of the By-Laws of the Fund, the Executive Directors, after consultation with the Representatives of the Bank for International Settlements, have recommended that the Bank for International Settlements be prescribed as a holder on the terms and conditions set forth in this Resolution; and

Whereas the Bank for International Settlements has indicated its concurrence in the proposed terms and conditions;

Now, therefore, the Board of Governors, having considered the recommendations of the Executive Directors, hereby resolves that:

The Bank for International Settlements is prescribed as a holder of special drawing rights on the following terms and conditions:

  • 1. Definitions: As used in this Resolution:

    • (a) “Fund” means the International Monetary Fund.

    • (b) “Bank” means the Bank for International Settlements.

    • (c) “Participant” means a participant in the Special Drawing Account of the Fund.

    • (d) “Articles” mean the Articles of Agreement of the Fund.

    • (e) “Article” refers to an identified provision of the Articles.

    • (f) “Need to use special drawing rights” means need as defined in Article XXV, Section 3(a).

  • 2. Application of General Provisions: The provisions of the Articles, By-Laws, Rules and Regulations, and decisions of the Fund that apply to all holders shall apply under this Resolution.

  • 3. Acceptance, Holding, and Use by the Bank:

    • (a) Acceptance: The Bank may accept special drawing rights and provide currency in a transaction in agreement with a participant, which agreement includes an undertaking by the Bank and participant that the Bank will use the same amount of special drawing rights to obtain currency from that participant within a period of up to six months.

    • (b) Holding: The Bank may hold special drawing rights accepted in accordance with (a) above or received from the Fund as interest on its holdings of special drawing rights.

    • (c) Use: The Bank may use special drawing rights to obtain currency in a transaction in agreement with a participant:

      • (i) to fulfill the Bank’s undertaking assumed in accordance with paragraph 3(a) above; or

      • (ii) after consultation with the Fund, to dispose of special drawing rights when the Bank finds that a participant has failed to carry out the agreement referred to in paragraph 3(a) above; and

      • (iii) to dispose of special drawing rights received from the Fund as interest on the Bank’s holdings of special drawing rights.

The Bank shall return special drawing rights to a participant which is required to accept them in accordance with paragraph 4(a)(ii).

  • (d) Exchange rates: In all transactions under this Resolution the rules which determine the exchange rates applicable to participants under the Articles at the time of each transfer of special drawing rights shall also apply to the Bank.

  • 4. Use and Acceptance by Participants:

    • (a) Use:

      • (i) A participant that represents to the Fund that it has a need to use special drawing rights may enter into a transaction in accordance with paragraph 3(a) above by giving notice to the Fund.

      • (ii) The Fund shall not challenge the representation in (a)(i) above. The Fund, however, may require the participant to accept special drawing rights from the Bank, for currency acceptable to the Bank, to the extent the Fund later finds that the participant did not have a need to use special drawing rights.

    • (b) Acceptance: A participant may accept special drawing rights in accordance with paragraph 3(c) above. A participant shall accept special drawing rights from the Bank and provide currency as required under (a)(ii) above.

  • 5. Information and Recording: The Fund shall inform the Bank of all matters relevant to the acceptance, holding, and use of special drawing rights by the Bank. The Bank and the participant shall inform the Fund promptly of the facts necessary to record any transaction in which the Bank accepts or uses special drawing rights.

  • 6. Consultation and Review: The Bank and the Fund will remain in close consultation with respect to this Resolution. The Executive Directors shall review this Resolution at least once every three years and submit any recommendation that they consider appropriate to the Board of Governors.

  • 7. General Undertaking of Bank: The Bank undertakes, in its acceptance, holding, and use of special drawing rights, to collaborate with the Fund in order to facilitate the effective functioning of the Special Drawing Account and the proper use of special drawing rights in accordance with the Articles and this Resolution.

  • 8. Annual Report: The Executive Directors shall discuss the operation of this Resolution in their annual report as part of their review of the operation of the Special Drawing Account.

  • 9. Suspension: During any period in which a suspension under Article XXIX, Section 1, is in effect, transactions under this Resolution shall be suspended unless the Executive Directors decide otherwise.

  • 10. Termination: The prescription hereunder may be terminated either by the Bank, or by the Fund on the decision of the Executive Directors, by transmitting a notice in writing to the Fund or the Bank at its principal office. Termination shall become effective on the date the notice is received. After termination the Bank may hold, receive, and use special drawing rights only in accordance with paragraphs 3(b), (c), and (d), above, and participants may accept special drawing rights from the Bank under paragraph 4(b) above.

  • 11. Adherence to Terms and Conditions:

    • (a) The Bank may adhere to this Resolution within six months of the effective date of this Resolution, which date shall be the date of its adoption by the Board of Governors.

    • (b) Adherence hereunder shall be in the form of a letter to the Fund, acknowledging these terms and conditions and bearing signatures which legally commit the Bank.

Extension of Suspension of Operation of Article XXV, Section 8(a) (March 4, 1974) Resolution No. 29-2 of the Board of Governors

Resolved:

That the suspension of the operation of Article XXV, Section 8(a) with respect to transactions under Article XXV, Section 2(b)(i), which was decided by the Executive Directors on November 5, 1973 for a period of 120 days ending on March 5, 1974, shall be extended for an additional period of 240 days ending on October 31, 1974.

The Bank for International Settlements adhered to this resolution in accordance with paragraph 11 of the resolution by letter dated January 30, 1974.

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