Dubai Forum 2014 - Simon Bradbury Presentation · & ELRIC Focus on Governance The Forum 2. IMF Core Functions Surveillance Review of member macroeconomic policies and financial developments

Central Bank Governance Forum

Mr. Simon Bradbury Deputy Director Finance Department, IMF

Dubai, December 8-9

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Overview

IMF LendingSafeguards

Assessments & ELRIC

Focus on Governance The Forum

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IMF Core FunctionsSurveillance

Review of member macroeconomic policies and financial developments

Provide advice to 188 member countries to foster economic stability

Lending Financial support to member countries facing balance of payments problems

Technical Assistance Strengthen member country institutional development and capacity

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Where the IMF Gets its Money

Member country payment of quotas - currently SDR 238 billion Borrowing - total borrowing access of SDR 370 billion Trust funds with bilateral contributions for concessional lending and debt relief to low-income countries.

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GRA Credit Outstanding

USD 116.6 billion GRA credit outstanding5

PRGT Credit Outstanding

USD 9.3 billion credit outstanding to low income countries 6

The Safeguards Policy

Introduced in 2000 to mitigate the risks of misuse and misreporting

A safeguards assessment is required whenever a country borrows from the IMF

Provides reasonable assurance that central banks have appropriate structures in place to manage resources and ensure the integrity of operations

Establishes prioritized recommendations to address key vulnerabilities. Facilitates the Board’s decision on approval and review of lending arrangements

Promotes international good practices in transparency, accountability and autonomy

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ELRIC framework

Safeguards reports include a snapshot of governance practices at a central bank and identify vulnerabilities across five key areas:

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Safeguards Assessments

266 assessments completed as of end-October 2014

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96 Central Bank’s assessed, regionally:

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Safeguards Assessments Benefits to Central BanksPromoted improved controls and enhanced transparency & accountability

Surveyed CBs agreed that there was a positive impact on operations and management

Assessments helped CBs to implement initiatives that were already being contemplated

Supported amendments to the CBs legal frameworks that underpin good governance

Periodic demand for voluntary assessments

Safeguards seminars continue to receive good participation

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2010 Safeguards Policy Review

Sharper focus on governance and risk-management Continued emphasis on Oversight and Audit Quality Retain confidentiality, but broaden dissemination of findings Outreach and further engagement with stakeholders Trial option for fiscal assessments

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Lessons from high profile Governance abuse cases

Oversight bodies need to be effective, not just exist in form.

Control environment is dynamic and may deteriorate over time.

CB internal audit and staff need to have channels to report questionable transactions/behaviors

A quality external audit can play a key role in uncovering frauds

Short term remedial measures are important, but cannot substitute for integrity, effective governance and controls.

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Focus on Governance

Our reports are now more explicit on governance issues.

We consider the key attributes of good governance:

discipline & commitment (including “tone from the top”)

transparency and accountability

autonomy

“checks and balances” (internal controls)

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Assurance Functions

Internal and external audits, and Risk Management enable good governance

When assessing the effectiveness of internal and external audit, we look for the role of audit oversight, including in:

ensuring internal audit independence and authority

review of external audit independence, performance, and quality

monitoring audit recommendations

ensuring internal audit has adequate coverage & resources

Risk Management is a developing function for most central banks

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Audit Oversight

What we look for: independent membership to ensure checks-and-balances over management

adequate mandate - which covers internal and external audit, controls and financial reporting

requisite skills or access to external experts, if needed

actual practices - meetings, matters considered, ability to challenge auditors and management

Challenges faced by central banks: legal framework, the rotation and skills of Board members, internal audit capacity resulting in poor assurance on internal controls

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2013 Governance Forum - TakeawaysRisk Management:

Governance structures vary. Board-level oversight often with the AC.

RM is a new function for many CBs and implementation challenges abound.

Most advocated a separation between Internal Audit and Risk Management

Audit Oversight and Audit Quality: Most CBs have or are required to have an audit oversight body

Key challenge is to ensure adequate skills and expertise on the AC

Audit quality has improved over the last decade; Acs role in audit oversight has also increased

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2014 Governance Forum - Objectives

Continue exchange on evolving practices in good governance at central banks Focus on the role of audit committees in audit and control oversight What makes assurance functions effective? Recognize that “one size does not fit all” and share your experience Network

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Meet the IMF Team

Mr. George Kabwe Ms. Joanna GrochalskaMr. Simon Bradbury

Mr. Elie Chamoun Mr. Wouter Bossu

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Additional Information

More information on the Safeguards policy and activities is available under the following link:

https://www.imf.org/external/np/exr/facts/safe.htm

by contacting: [email protected]

or any member of the IMF Team.

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Thank You !

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