Read more at http://www.oecd.org/investment/codes.htm

1. THE 2019 REVIEW OF THE
OECD CODES OF LIBERALISATION

2. WHAT ARE THE OECD CODES OF
LIBERALISATION?

3. The Capital Movements Code
• Established in 1961 at a time when many OECD countries were in
the process of economic recovery and development and when the
international movement of capital faced many barriers.
• The Code remains to date the only multilateral instrument
promoting liberalisation of the full range of international capital
movements as its primary purpose, as the IMF does not have a legal
instrument in the area.
• Example of operations covered by the Capital Movements Code:
direct investment, real estate, securities, money markets, collective
investment securities, financial credits and loans, deposit accounts,
operations in foreign exchange.

4. The Current Invisibles Code
• Also established in 1961, covers primarily cross-border services.
• Example of operations covered by the Current Invisibles Code:
banking and financial services, insurance and private pensions
services, professional services, maritime and road transport and
travel and tourism.
• Predecessor of the WTO General Agreement on Services (GATS).
• In some areas more detailed guidance than in the GATS (example:
insurance and private pensions).
• Same governance provisions as the CLCM.

5. THE CONTEXT OF THE REVIEW

6. Volatility of capital inflows has, at times, become
an important policy challenge
OECD Non-OECD G20
• Capital inflows became the most important transmission channel for
spillovers after the global financial crisis
USD billion USD billion
Source: IMF Balance of Payments Statistics

7. Policy challenges arising from capital inflows
• Capital inflows can lead to currency appreciation and potentially a
loss of competitiveness.
• Capital inflows may entail financial stability challenges (lending
booms).
• Following the global financial crisis, the world has seen increased
and more heterogeneous use of financial tools, especially by
emerging markets.
• An ad-hoc and uncoordinated policy use can increase the risks of
cross-border spillovers and beggar-thy-neighbour behavior.
• These challenges have led to a renewed interest in the OECD‘s
Capital Movements Code (including within the G20).

8. Important trends in the use of financial policies …
Cumulative use of financial policies
(Introduction, adjustment and termination of policies)
-1400
-1200
-1000
-800
-600
-400
-200
0
200
400
600
1999q2 2001q2 2003q2 2005q2 2007q2 2009q2 2011q2 2013q2 2015q2 2017q2
MPM_cum. CBM_cum. CFM_cum.
Note: Currency Based Measures (CBMs) = FX-differentiated measures; Macro-prudential Measures (MPMs) = neither
residency- nor FX-differentiated. Sample of 62 countries, among which the 36 OECD countries and 25 Emerging
economies. MPM/CBM not available in 2017
Source: Lepers and Mehigan (2019); De Crescenzio et al (2015), Alam et al (2019)

9. … with a more active and heterogeneous use post-
crisis.
Note: Residency Based Measures (RBMs)= residency based measures; Currency Based Measures (CBMs) = FX-
differentiated measures; Macro-prudential Measures (MPMs) = neither residency- nor FX-differentiated. T= tightening,
L=loosening. Sample of 62 countries, among which the 36 OECD countries and 26 Emerging economies. MPM/CBM
not available in 2017
Source: Lepers and Mehigan (2019); De Crescenzio et al (2015), Alam et al (2019)
-80
-60
-40
-20
0
20
40
60
1999q2 2001q2 2003q2 2005q2 2007q2 2009q2 2011q2 2013q2 2015q2 2017q2
CBM_L. CBM_T. RBM_L. RBM_T. MPM_L. MPM_T.
Quarterly easing and tightening of financial policies

10. THE REVIEW PROCESS

11. Key players in the review
OECD BODIES:
• The Advisory Task Force on the OECD Codes (ATFC): advisory
body, composed of governmental experts from OECD countries,
non-OECD G20 and FSB Members, other non-OECD countries,
experts from relevant International Organisations (IOs) such as the
IMF.
• Three parent committees (Investment Committee, Insurance and
Private Pension Committee, Committee on Financial Markets).
• The Investment Committee: responsible for the Codes.
EXTERNAL CO-ORDINATION:
• G20 Finance Ministers and G20 International Financial
Architecture (IFA) WG
• IMF

12. Terms of Reference: Purpose of the Review
“A Review should
strengthen the Code”
“An agreement which
emerged from the
discussions at the ATFC
and the Investment
Committee is that the
Code's obligations should
not be diluted”
“A Review should
adapt to current
requirements for
capital flow
management”
“in particular of recipient
countries”

13. MAIN OUTCOMES OF THE REVIEW

14. Main outcomes of the Review
A CODE MORE IN LINE WITH CURRENT CHALLENGES…
… A MORE EFFICIENT AND TRANSPARENT CODE…
… WITH CLOSER LINKS TO OTHER INTERNATIONAL
ORGANIZATIONS ...
… AND MORE EFFECTIVE DECISION MAKING

15. Main outcomes of the review (1/4)
A. Improved guidance on the treatment of macro-prudential
measures under the Code
B. Measures to discourage a possible excessive dependence
on short-term foreign currency liabilities to be analysed
case-by-case
C. National adaptations of Basel III regulations (bank
liquidity ratios) differentiated by currency to be
considered outside of the scope of the Code
D. Further guidance on the invocation of derogations from
the Code associated with capital inflow surges.
A CODE MORE IN LINE WITH CURRENT CHALLENGES…

16. A. General treatment of macro-
prudential measures under the Code
• Macro-prudential measures normally
fall outside the scope of the Code
 Standard caps on Loan to value (LTV) or
Debt to Income (DTI) ratios
 Countercyclical capital buffer
 Higher risk weights for sectoral exposure
 Leverage ratio
[…]
Not
covered

17. B. Basel III liquidity ratios differentiated
by currency
• Basel III liquidity ratios are considered
outside of the scope of the Code, even if
differentiated by currency:
 Differentiated Liquidity Coverage Ratio
(LCR)
 Differentiated Net Stable Funding Ratio
(NSFR)
Not
covered

18. C. Non-residency based measures on
foreign currency liabilities
 Higher reserve requirements for FX
liabilities
 Measures based on the remaining
maturity of bonds or other debt
securities
Case-by-case
assessment
Restrictions on foreign currency liabilities of financial
institutions (non-residency based) will be analysed on a
case-by-case basis.
Examples:

19. D. Review of the derogation clause
• Clarification that the derogation clause has been invoked
in the past and can be invoked for serious economic and
financial disturbances associated with capital inflow
surges.
• Introduction of a quantitative method of
measurement of inflow surges, to complement other
inputs and elements of context.

20. Main outcomes of the review (2/4)
• Clarification of the criteria for the conformity assessment
of measures under the Codes (p47 of the User’s Guide).
• Formalisation of the possibility for the OECD Secretariat
to bring measures to the attention of the Committee.
• Strengthening of the notification procedure for new
measures through clearer deadlines.
• Requirement for prompt declassification of the reports on
assessment of measures (subject to safeguards).
A MORE EFFICIENT AND TRANSPARENT CODE…

21. • Explicit provision for the possible consultation of other
relevant International Organisations by the ATFC and/or
the Committee, in addition to other OECD Committees.
• Possibility to request the IMF to give its views on issues
related to balance of payments and the state of the
international reserves of a Member.
WITH CLOSER LINKS TO OTHER INTERNATIONAL ORGANISATIONS ...
Main outcomes of the review (3/4)

22. Main outcomes of the review (4/4)
…MORE EFFECTIVE DECISION MAKING
• Adoption of Consensus-minus-one decision-making for
the review of country-specific measures, which do not
alter by themselves a Member’s rights and obligations
under the Codes.
 Preventing the country under review to block final
decision on whether its measure is conforming or not.
• Will only apply after every effort has been made to reach
consensus, and provided that the views of all countries
are fully reflected in the Committee’s report.
• The general rule at the Investment Committee will
continue to be consensus.

23. • Three defined cases under consensus-minus-one :
1. recommendations to the Member concerned to consider
ways and means towards relaxing certain existing
restrictions;
2. individual conformity assessments of a new measure with
a Member’s obligations under the Codes;
3. Committee proposals for action by a Member, following a
Committee review of a measure introduced or maintained
by a Member.
Consensus-minus-one

24. Read More
Links to OECD Codes of Liberalisation of
Capital Movements and of Current
Invisible Operations
Link to The Revised Code and User's
Guide - OECD Report to G20 Finance
Ministers and Central Bank Governors
Link to the OECD Codes of Liberalisation
of Capital Movements and Current
Invisible Operations: Users' Guide