I will be so grateful if I hear answers from you.
I wonder how could these institutions affect bank stability and through What? Where is the link?
Dear Islam Babela,
I described this issue in my publications on the analysis of the sources and determinants of the emergence and development of the global financial crisis of 2008 and the applied systemic anti-crisis solutions and measures as well as credit risk management improvement factors. Based on the research carried out, I conclude that the impact of international financial institutions (such as the IMF and the World Bank) on the stability of banks in developing countries may be significant. The International Monetary Fund, together with the European Central Bank and the European Commission, played a key role in systemic anti-crisis state intervention programs aimed at restoring financial liquidity in banking systems in the countries of the Monetary Union during the global financial crisis that emerged in September 2008. These institutions established special anti-crisis financial stability funds, in which several hundred billion euro were initially deposited as an additional anti-crisis instrument that could possibly be used to stabilize the situation in financial markets and provide liquidity for commercial banks in the event of another financial crisis. On the other hand, the European Central Bank, like the Federal Reserve Bank in the USA, for several dozen billion euros a month, for a period of several years, purchased from commercial banks assets with the highest credit risk, including loans booked to loss, the so-called junk securities, etc. In this way, despite the severe financial crisis, commercial banks continued to lend to businesses, public institutions and citizens, which is particularly important in reducing the economic downturn. I described these issues in my scientific publications, which are posted on the Research Gate portal.
Best wishes,
Happy New Year 2021
Dariusz Prokopowicz
The World Bank Group works with developing countries to reduce poverty and increase shared prosperity, while the International Monetary Fund serves to stabilize the international monetary system and acts as a monitor of the world’s currencies. The World Bank Group provides financing, policy advice, and technical assistance to governments, and also focuses on strengthening the private sector in developing countries. The IMF keeps track of the economy globally and in member countries, lends to countries with balance of payments difficulties, and gives practical help to members. Countries must first join the IMF to be eligible to join the World Bank Group; today, each institution has 189 member countries.
Perhaps could be useful to read the following paper: What Is the Role of the IMF and the World Bank? (saylordotorg.github.io).
According to UN sources, the International Monetary Fund (IMF) and the World Bank are institutions in the United Nations system. They share the same goal of raising living standards in their member countries. Their approaches to this goal are complementary, with the IMF focusing on macroeconomic and financial stability issues and the World Bank concentrating on long-term economic development and poverty reduction.
The IMF promotes international monetary cooperation and provides policy advice and capacity development support to help countries build and maintain strong economies. The IMF also provides medium-term loans and helps countries design policy programs to solve balance of payments problems when sufficient financing cannot be obtained to meet net international payments. IMF loans are short and medium-term and funded mainly by the pool of quota contributions that its members provide. IMF staff are primarily economists with wide experience in macroeconomic and financial policies.
The World Bank promotes long-term economic development and poverty reduction by providing technical and financial support to help countries reform certain sectors or implement specific projects—such as building schools and health centers, providing water and electricity, fighting disease, and protecting the environment. World Bank assistance is generally long term and is funded both by member country contributions and through bond issuance.
International financial institutions work with host countries, including developing countries, to develop standards that are geared towards stability of the financial system. These standards are not laws and it is left for each country to determine how best to apply the recommendations. A key factor in maintaining bank stability revolves around capital adequacy and liquidity standards and these international institutions have several prescriptions for countries to adopt. The final outcome depends on the circumstances and 'openess' of each country.
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