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The Role of the IMF
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Surveillance Function
The IMF monitors economic and financial developments and advises its member countries on policy. It impacts global banking by identifying risks and offering guidance to foster financial stability.
Lender of Last Resort
The IMF provides loans to countries experiencing balance-of-payments problems. This influences global banking by ensuring that countries can meet their international obligations, reducing the risk of financial contagion.
Technical Assistance
The IMF helps member countries strengthen their capacity to design and implement effective policies. For global banking, this means improving regulation, supervision, and the functioning of financial markets.
Financial Sector Assessment Program (FSAP)
Launched jointly with the World Bank, the FSAP assesses the stability and soundness of the financial sector. It impacts global banking by identifying potential risks and advising on strengthening financial systems.
Special Drawing Rights (SDRs)
SDRs are an international reserve asset created by the IMF to supplement member countries' official reserves. This affects global banking by adding liquidity to the international monetary system and reducing reliance on a single currency.
Conditionality Principle
IMF financial support comes with conditions requiring the implementation of certain economic policies. This influences global banking by pushing countries toward fiscal and monetary discipline, which can stabilize banking sectors.
Quota System
Each IMF member country contributes a certain amount of funds based on its relative size in the world economy. These quotas determine the maximum financial commitment, voting power, and access to financing, thereby influencing global liquidity.
Poverty Reduction and Growth Trust (PRGT)
The PRGT provides concessional loans to low-income countries. Its impact on global banking is to enhance financial stability in vulnerable economies, which can reduce risks to the broader financial system.
Bilateral Borrowing Agreements
The IMF secures additional financial resources from member countries through bilateral borrowing. This affects global banking by expanding the IMF's lending capacity during periods of high demand, thereby strengthening financial safety nets.
Global Policy Agenda
The IMF sets a Global Policy Agenda, identifying key economic issues that require collective action. This agenda influences global banking by promoting coordinated policy efforts, which can lead to a more stable international financial system.
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