A “gentlemen’s agreement” dating back to 1944 puts a European in charge of the International Monetary Fund, but other countries now challenge that agreement. (Brendan Smialowski/AFP/Getty Images)

In July, Christine Lagarde, managing director of the International Monetary Fund (IMF), announced she would resign to take a new job as president of the European Central Bank.

Like the January 2019 resignation of Jim Yong Kim from the helm of the World Bank, the vacancy at the top of the IMF was unexpected. Lagarde’s resignation has sparked an unconventional race to fill the position. Here’s what you need to know.

The IMF is a key international organization of 189 countries that provides last-resort loans and monitors global financial stability. A “gentlemen’s agreement” dating back to 1944 puts a European in charge of the IMF, and a U.S. citizen at the helm of the World Bank — but other countries now challenge that agreement.

The IMF’s 24-member executive board to date has upheld the practice. High-income countries have more votes than developing countries, and the United States has a veto right on the board. In practice, decisions — nominally consensus-based — reflect each board member’s balance of votes.

Critics from developing countries, academia and civil society argue that the IMF has operated as an agent of creditor countries for too long, and this has hampered its ability to design effective policies. The strong grip that creditor countries have over management and policy design, these critics believe, underpins this bias. And, the argument continues, if developing economies continue to see the IMF as the long arm of creditors, the institution will ultimately become less relevant.

Europe’s candidate doesn’t qualify under the current rules

After an acrimonious selection process coordinated by France, European Union countries agreed to support Bulgarian Kristalina Georgieva, currently chief executive of the World Bank. However, even if Georgieva meets the approval of the IMF executive board, she doesn’t meet the formal requirements of the job. IMF bylaws stipulate that the appointee must be below the age of 65; Georgieva is 66. But the IMF executive board recently proposed scrapping that age limit, and the 189 member-states are expected to pass the move in September.

Other countries may put forward their own nominees

Nominations for the managing director post close on Sept. 6, and the selection process should be completed by Oct. 4. A number of countries are assessing the level of support for their own candidates. There have been backstage discussions, but none has officially put forward a nominee.

Mexican President Andrés Manuel López Obrador has said that his government would back Agustín Carstens, a Mexican economist who currently heads the Bank for International Settlements, should he decide to seek the job. Carstens ran against Lagarde in 2011 for the top IMF post.

The Bretton Woods Project, an IMF watchdog, reports that there are other potential top contenders, including Colombian economist José Antonio Ocampo. A board member of the Colombian central bank and a former minister of finance and senior U.N. official, Ocampo recently outlined a plan for IMF reform.

In a move that will likely irk the E.U., Britain is actively promoting former chancellor of the exchequer (or treasury secretary) George Osborne for the post, and British Prime Minister Boris Johnson has lobbied Donald Trump for his support. However, many IMF watchers don’t consider Osborne’s candidacy viable, given the E.U. support for Georgieva.

The competition may heat up

The “gentlemen’s agreement” governing the leadership of two of the top global financial institutions has become increasingly controversial. In 2010 the Group of 20, a group of major high-income and emerging economies, agreed to modestly expand representation of emerging-market countries in running the IMF.

Last year, an “eminent persons group” appointed by the Group of 20 nations proposed an “open, transparent and merit-based process” for selecting the IMF managing director — but fell short of advocating for scrapping the geographical preference. A 2018 independent evaluation of IMF governance reported that many member-states view the managing director selection process as “insufficiently transparent and merit-based as well as too limited by nationality considerations.”

The IMF faces other challenges

These discussions take place against the backdrop of two daunting challenges. The first is an external one — hints of a possible new global economic crisis have already appeared. Global debt is at record levels, capital flows have been volatile, and there is relatively little investment in halting climate change, which — beyond the physical costs — also poses major systemic risks for the global financial system. The Trump-sparked trade wars, along with the threat of a currency war, add to global economic uncertainty.

Restoring the IMF’s credibility is the second immediate challenge. Controversies include IMF engagement in the euro zone crisis, its lending to Argentina — and its recent record of selecting managing directors.

Of the IMF’s four directors since 2000, three have faced major legal trouble. Rodrigo Rato, a former Spanish finance minister, is serving a prison sentence for embezzlement. Dominique Strauss-Kahn, a former French finance minister, resigned following sexual assault charges. Lagarde herself received a verdict of negligence from a French court in 2016, related to her actions as French finance minister.

Developing countries and external critics have long voiced concerns about the lack of “evenhandedness” by the IMF — some countries get special treatment compared with others in similar circumstances. In part, this is made possible by leadership that is chosen by the world’s richest countries and is highly responsive to their policy priorities. That is one of the reasons they are pressing for reforms under which the top IMF job would no longer be effectively reserved for Europeans.

Alexander Kentikelenis (@kentikelenis) is assistant professor of political economy and sociology at Bocconi University in Milan.