This chapter describes the IMF and the World Bank, the two big international financial institutions created after World War II to stabilize the global economy. The two have similar goals and mechanisms but work with different instruments and in different contexts. Both pool the resources of their members and use the money it raises to make loans to governments with specific needs. The IMF lends to countries experiencing critical balance-of-payments problems. It makes short-term loans of foreign currencies that the borrowing country must use to finance the stabilization of its own currency or monetary system. As a precondition to the loan, the Fund generally requires that the borrower change its policies in ways that the Fund believes will enable monetary stability in future. The World Bank makes longer-term loans to pay for specific projects related to development or poverty reduction. Most Bank loans are tied to a particular project undertaken by the borrowing government. The Bank and the Fund are twinned institutions in the sense that they share a common origin and many structural features, but their practices and purposes are very different. As a result, they contrast each other in ways that are useful for exploring the mix of law and politics in global affairs.

In the absence of an international framework applicable to cross-border capital flows, there is little doubt that the Fund had to assert its authority over capital movements. Without the Fund, a legal lacuna would exist and financial movements would go largely unregulated. Yet, it is less certain whether the Fund ever had the formal legal authority to empower itself to act as a de facto financial authority. A strict reading of the Articles of Agreement suggests that the Fund historically had no mandate over capital movements. Yet, several decades ago the Fund began slowly but steadily appropriating and assuming authority over capital movements. This chapter explores the legal instruments used by the Fund to organise the shift and expansion of its mandate. The chapter makes two major points. First, while the Fund grounded its mandate expansion on the text and wording of the Articles of Agreement, it relied on an Article IV byroad to interpret its constitutive instrument to escape the historical distinction between capital movements and current international transactions. Second, the Fund’s Institutional View of 2012 was not a radical break from tradition but merely a formalization and crystallisation of the ideas and direction it has pursued since 2008.