The desire to accumulate reserves on the part of the developing countries has been reinforced by the Asian crisis, and this was presumably a significant factor underlying the recent magnification of the US current account deficit. That is doubtless inconceivable unless and until the developing countries demonstrate a desire to hold a major part of their reserves in SDRs rather than just to receive allocations that they promptly pass on to the OECD countries, but at present there is not even an attempt to scope out the possibility of mutual gains of this character. The Fund's surveillance of individual countries is rightly focused on helping countries avoid crises. It has recently been expanded beyond the traditional macroeconomic concerns of Article IV consultations, to include assessment of whether member countries are implementing the wide-ranging standards and codes that have been developed, largely under the aegis of the Financial Stability Forum, in response to the Asian crisis. One has to be impressed by the speed with which agreement has been reached on these minimum international standards, and the rapidity with which the Fund has got around to initiating surveillance of them.
Surveillance is concluded without any attempt to rate a country's performance.
He reassured them that this was not the intention. This seems to me misguided. The proposals for a new capital adequacy framework issued by the Basel Committee on Banking Supervision in June 1999 sought a way to eliminate use of the crude proxy of OECD membership as a measure of the riskiness of a borrower, and to replace this by a more satisfactory measure. The main such possibility discussed was use of the rating given a country or bank by the credit rating agencies. That proposal has attracted much criticism, and rightly so, given the weak record of those agencies.