Strengthening the Architecture of the Global Financial System:

Abstract

Summary More timely and accurate information on countries' economic situations – in particular on foreign reserves – is required for proper risk assessment. Capital account liberalisation can bring benefits but needs to be carefully managed. Shortcomings in national prudential regulation and supervision made Asian economies vulnerable. Private entities need to participate in burden sharing to provide incentives for adequate risk evaluation. Bail?outs should only take place to avoid systemic risks and orderly workout procedures are needed in cases of bankruptcy. The IMF and other multilateral institutions played a crucial role managing the crisis. However, they need to improve transparency and should become more involved in international prudential supervision.