Author Description

This joint staff paper sheds light on the existing cooperation between the IMF and RFAs and suggests further avenues to enhance their work together. It offers a collective RFA reply to the IMF's recent policy paper on collaboration issues. The last global financial crisis made clear that the International Monetary System (IMS) needs strong financial backstops to provide crisis-time liquidity to countries hit directly by large economic shocks or affected by crisis contagion. In this context, the Group of Twenty (G20) most-developed economies urged at the height of the crisis that the so-called Global Financial Safety Net (GFSN) be strengthened. The GFSN refers to the different layers of resources for crisis prevention and resolution, which come mainly from (i) international reserves held by national central banks, (ii) bilateral swap arrangements between central banks (BSAs), (iii) Regional Financing Arrangements (RFAs), and (iv) the International Monetary Fund (IMF). Policymakers tried not only to increase the overall resources in the safety nets but also to enhance the coordination among different layers, thereby facilitating the effective use of resources and mitigating moral hazard risks.