A quiz for the candidates to Managing Director of IMF

Sir, as a humble contribution for the selection of the best Managing Director of the IMF may I submit the following little quiz the candidates should answer:

Q1. Which type of bank clients can generate such a massive exposure so as to trigger a systemic bank crisis?

a. Those perceived as risky (small businesses and entrepreneurs)
b. Those perceived as not risky (triple-A rated)

Q2. The needs of which clients do we most expect our banks to attend to?

a. Those perceived as risky with no access to capital markets (small businesses and entrepreneurs)
b. Those perceived as not risky and with access to capital markets (triple-A rated)

Q3. The Basel Committee allows for much lower capital requirements for banks (five times less) when lending to those perceived as not risky (triple-A rated). Based on your previous answers, which would be your most likely opinion?

a. I fully agree with the Basel Committee
b. The Basel Committee might have got it all completely upside down.

Note: The responses of “b, a, and b” would qualify the candidate to proceed to further tests.

Choosing based on merits defined by the group is often another source of dangerous group-think.

Sir I could not agree more with the arguments presented by Martin Wolf when he writes that “Europe should not control the IMF” May 25, summing it all up in the phrase “The person chosen [as managing director of the IMF] should be willing to take the risks of leading… though, of course, that risk-taking leader could be a European.

The recent Independent Evaluation Officer’s report on the “IMF Performance in the Run-Up to the Financial and Economic Crisis” comes to the conclusion that “The IMF’s ability to correctly identify the mounting risks was hindered by a high degree of group-think”.

This would indicate that the willingness to accept and push for diversity in thinking is one of the most important qualities we need to look for in the next managing director of the IMF.

That said, and fully agreeing with the managing director being chosen by the members based on merit, let us not forget that choosing based on the merits defined by the group, could turn out to be just the mother of all sources of group-think.