The international community has emphasized the important role of international standards in strengthening the international financial architecture. In a world of integrated capital markets, financial crises in individual countries can imperil international financial stability. This provides a basic public goods rationale for minimum international standards which would benefit both international and individual national systems. At the international level, international standards enhance transparency as well as multilateral surveillance. They help to better identify weaknesses that may contribute to economic and financial vulnerability, foster market efficiency and discipline, and ultimately contribute to a global economy which is more robust and less prone to crisis. At the national level, international standards provide a benchmark that can help identify vulnerabilities as well as guide policy reform. To best serve these objectives, however, the scope and application of such standards needs to be assessed in the context of a country's overall development strategy and tailored to individual country circumstances.

In this connection, the IMF has invited the World Bank to embark on a joint pilot exercise preparing "Reports of the Observance of Standards and Codes" (ROSCs). In this exercise, the two institutions are undertaking a large number of summary assessments of the observance of selected standards relevant to private and financial sector development and stability. These assessments are being collected as "modules" in country binders constituting the "ROSCs." Under this modular approach, the Fund takes the lead in preparing modules in the area of data dissemination and fiscal transparency. Modules for the financial sector (monetary and financial policy transparency, banking supervision, securities market regulation, payment systems, deposit insurance) are mostly derived as by-products from a parallel Bank-Fund Financial Sector Assessment Program (FSAP). The World Bank has been asked to take the lead in three areas covered by ROSCs: (i) corporate governance, (ii) accounting and auditing, and (iii) insolvency regimes and creditor rights.

A review of the ROSC initiative, "The Standards and Codes Initiative—Is It Effective? And How Can It Be Improved?" has now been posted.

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