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On Dodd-Frank, ICP Asks IMF Of Redefining SIFI to $500B, Of Somalia Remittances

By Matthew Russell Lee

UNITED NATIONS, July 8 -- When the International Monetary Fund released reviews and papers about the United States, complete with support of the Dodd Frank Act and mentions of anti money laundering protection on June 8 Inner City Press asked about the proposal to raise the definition of Systemically Important Financial Institution from $50 billion up to $500 billion and if tight AML strictures are to blame for cutting off remittances to Somalia.

  Aditya Narain, IMF mission chief for the Financial Sector Assessment Program and deputy director, Monetary and Capital Markets department, told Inner City Press that the IMF believes such definition should give predictability, but should be based on risk and not necessarily only asset size.

  Narain told Inner City Press, "On the first one, our general belief is that supervisory approaches should be risk based, and therefore the materiality and proportionality of institutions should be taken into account for to develop supervisory frameworks. At the same time, we also recognize that itís important to have some clear rules, regarding a unit, in this case size of institutions, because not only does it set a baseline of expectations, but it also provides a useful framework for people to anchor their expectations on. So thatís why, in a sense we would agree that itís important to make these approaches risk based and therefore not dependent on size alone. I should add also, that our only political ideology is financial stability, for the purpose of this exercise.

  But will this be used FOR the Senator Richard Shelby draft bill?

  On remittances, Aditya Narain said it is an important question but one that the IMF is dealing with in other venues; it apparently wasn't raised to the US during this process. Why not?

 Narain told Inner City Press, "On the regulatory question, this is an issue which is being discussed in several forums where the IMF has been participating, and this is an issue not just for the US, although it has been most discussed in the context of the US, but the effects of the AML on remittances and the result, the stringent adherence to standards has led to a concern more globally that might be affecting the flow of remittances to those jurisdictions... where such remittances and the channels through which they flow are more important. We have not discussed this... there is work ongoing in the Fund, including in collaboration with other institutions like the World Bank... and we expect to be able to have more information on this in a few months time."

   In the embargoed media conference call, two questions in a row went to the Financial Times, which opined that the IMF report takes the side of the Democratic Party. The IMF disagreed. The IMF said, in writing, ďAs the epicenter of the global financial crisis that began in 2008, the United States passed a major law in 2010, the Dodd-Frank Act, to reform its financial system. Officials need to complete the rulemaking under the law, while parts of reform agenda face legislative proposals to water them down.Ē

   Central Banking asked two questions and Reuters one, on federal insurance regulation. The underlying papers will go online on the IMF's website. Watch this site.

 

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