IMF to Bernanke: Thanks For Nothing, As Threat To International Monetary System Looms

We suspect the world was placing a little more 'hope' in Bernanke's willingness to print-and-save-us-all as the IMF just announced the activation of its "New Arrangements to Borrow" for a further six months. Obviously, given the quota subscriptions and the nature of the NAB, we suspect the rest-of-the-world will get pound of flesh (or USD bailout) implicitly.


IMF Activates Standing Borrowing Arrangements for Further Six-Month Period
Press Release No. 11/342
September 21, 2011


The International Monetary Fund (IMF) announced today that its Executive Board has formally completed the process of activation of the New Arrangements to Borrow (NAB) for a further six-month period from October 1, 2011 to the end of March 2012. The expanded NAB became effective on March 11, 2011 and was activated on April 1 for the maximum period of six months (see Press Releases No. 11/74 and No. 11/109).


The NAB is a standing set of credit lines under which 36 members or their institutions have committed to provide supplementary resources to the IMF totaling up to SDR 363.6 billion (about US$571 billion1). Activation requires the consent of participants representing 85 percent of total credit arrangements eligible to vote and the approval of the IMF’s Executive Board. Since the April 1 activation, some SDR 27.7 billion have been committed to Fund-supported programs for which NAB resources could be drawn, and actual drawings under the NAB amounted to SDR 6.8 billion (US$11 billion).


The NAB is supplementary to quota resources, which are made up of the quota subscriptions each member pays upon joining the Fund and in the context of quota increases thereafter, broadly based on its relative size in the world economy. The IMF is a quota-based institution, and the Fund’s Board of Governors has emphasized that each member of the Fund commits to use its best efforts to complete the steps required to make the quota increase under the 14th General Review of Quotas effective no later than the Annual Meetings in 2012.



And from Dow Jones (via Global Finance)


WASHINGTON -- The International Monetary Fund Wednesday re-activated a $571 billion resource pool to ensure it has funds to help cover Europe's worsening sovereign-debt crisis.


The IMF extended activation of its so-called New Arrangements to Borrow for a six-month period from October.


The crisis is entering a dangerous new phase. The risk of a Greek default is rising and Italy and Spain's sovereign debt has come under attack.


According to the IMF, the pool of supplementary resources are only to be activated when "needed to forestall or cope with a threat to the international monetary system." The IMF managing director must first make a special request to tap the special kitty.


IMF Managing Director Christine Lagarde has said recently that a heightened readiness is required given the elevated risks in the global economy.


So far, the IMF has already distributed nearly $11 billion from the NAB. Specific financing programs requiring additional board approval are needed to use the resource pool.


In total, the supplementary fund can provide up to about $571 billion in extra resources to the IMF, but only around $331 billion is currently available for use. Without the special resource pool, the IMF would only have around $60 billion on hand.


It is funded through bilateral loans from countries, unlike normal IMF lending resources, and is designed as a temporary measure. It is expected to be largely replaced by an agreement reached late last year by the fund's board of directors to increase quotas, the share of contributions that each member must give to fund IMF lending.

-By Ian Talley, Dow Jones Newswires,


This is not completely unexpected as we have been discussing the rise in borrowing arrangements/facilities at the IMF for a while - what is notable is the timing - given constant chatter out of Europe that all is 'satisfactory'. No reaction whatsoever in ES so far, a small tick up in EUR and Gold...but mostly noise.