Origins
International financial institutions have been around for decades, serving as lenders of last resort to countries with unsustainable public debt. Their actions and policies have generated much controversy. The recent round of austerity measures in Eurozone countries has contributed to popular discontent. Borrowing countries are often forced to implement painful policy reforms in order to balance their budgets. Today, international financial institutions exert significant policy influence on governments around the world.
After the Second World War, major capitalist countries gathered in Bretton Woods, New Hampshire, to establish multilateral institutions to manage the postwar expansion and restructuring of the global capitalist economy. The result was the World Bank and the International Monetary Fund. Today, the European Investment Bank is the largest IFI in the world, lending 61 billion euros to global projects in 2011.
Functions
International financial institutions play a vital role in the global economy. They provide financing to developing countries to help them develop and improve their living standards. These institutions include the World Bank, the IMF, and regional development banks. However, they also come with their share of risks. As such, managing risk is essential for these institutions.International financial institutions are governed by international law and have a variety of functions, including lending, stabilizing exchange rates, regulating currency conversion, and assisting countries in times of financial crisis. Some of these institutions are government-controlled while others are run by private investors.
Structure
China is committed to developing a more sophisticated international monetary and financial system. This can help protect global financial stability and address the challenges of globalization. It can also lay the foundation for a new round of global growth. This paper examines the various aspects of the international financial infrastructure and how these can be improved.One of the major challenges faced by international financial institutions is the management of substantial asset portfolios. These assets typically consist of contributions from governments and other sources and should be managed with safety, liquidity, and competitive return in mind. The World Bank Treasury is well experienced in managing such portfolios and has a successful track record of outperforming policy benchmarks. Similarly, the Food and Agriculture Organization of the United Nations has a head of investment management, cash and liquidity management, and foreign exchange operations.
Human rights implications
Human rights practitioners should not simply look at the legal aspects of global finance as an issue; instead, they should explore how global finance can advance human rights. Historically, human rights have been considered an issue that is incompatible with global finance. However, recent developments in the financial sector reveal that human rights are in fact a fundamental part of global finance.
The role of international financial institutions in globalization has become a growing topic of interest. A recent paper by the Thun Group highlights the human rights implications of private sector banks. It discusses how these institutions are involved in human rights abuses, as well as the relationship between human rights and global finance.Relationship with the U.S.The Treasury Department leads the U.S.'s engagement with international financial institutions, including the World Bank and multilateral development banks. The department also provides reports and statements on these institutions' operations, including exchange rate policy and international economics. These reports are required by law, including the Omnibus Trade and Competitiveness Act of 1988.
As the recent financial crisis illustrates, the global economy is tightly linked. While the United States is not the most integrated economy, its close links to other economies provide a powerful connection between countries and contribute to the efficient operation of global markets. As long as the United States continues to be a key player in the global economy, these linkages can prove beneficial for U.S. investors.