2nd UPDATE: IMF Convening Board Meeting Later Sunday

WASHINGTON (Dow Jones)--The International Monetary Fund will hold an informal board meeting later Sunday to discuss how to proceed following the arrest of IMF Managing Director Dominique Strauss-Kahn for alleged sexual assault in New York City, the IMF said.
In Strauss-Kahn's absence, the IMF named John Lipsky, the No. 2 official at the fund, as acting managing director. The IMF said Nemat Shafik, deputy managing director who oversees the IMF's work in a number of European Union countries, will attend Monday's Eurogroup meeting with finance ministers in Brussels.
"The IMF Executive Board is expected to convene an informal session later Sunday to be briefed on developments related to the Managing Director," the IMF said in a statement.
The IMF board is not expected to come to a decision. Rather the board and staff members are in the midst of conference calls and informal discussions to try to figure out what steps to take next.
IMF watchers say they expect Strauss-Kahn to resign, possibly within a few hours after the IMF chief faces a judge in New York on the attempted rape charges.
One former IMF board member who maintains close ties at the fund said there will be a lot informal pressure on Strauss-Kahn to step down immediately. Not only can't he practically serve effectively in regards to the European debt crisis while in custody of authorities in New York, but with the case would be a major distraction to the IMF's immediate task of trying to prevent Europe's woes from worsening.
The IMF chief was scheduled to meet with German Chancellor Angela Merkel on Sunday and financial ministers in the Euro Group on Monday and Tuesday. Besides putting the finishing touches on the EUR78 billion Portugal bailout package, the main focus of the meetings was how to resolve Greece's deteriorating sovereign-debt crisis. But Merkel said the meeting was canceled.
It is unlikely that Strauss-Kahn can represent the institution during meetings while dealing with arrest and legal issues, at least over the next week, said officials.
Strauss-Kahn has played a key role in coordinating the joint response to the emergency bailouts of Greece, Ireland and now Portugal from their sovereign-debt crises. Strauss-Kahn's arrest would likely complicate these negotiations as well as those over the Portugal loan and a re-drafting of the Greek rescue package, the member said.
"It's certainly difficult to establish coordination between all the parties, and in some ways he helped to play that role," the member said.
"I expect the market to react on Monday morning given that perception," the member added.
"Mr. Strauss-Kahn has retained legal counsel, and the IMF has no comment on the case," the IMF said in a statement. "The IMF remains fully functioning and operational." Strauss-Kahn's personal attorney, William Taylor, said the IMF chief would plead not guilty to the charges today.
Officials Obama Administration, including the U.S. Treasury Department, declined to comment. The U.S., the only member country of the IMF with effective veto power, plays a central role in determining who will succeed Strauss-Kahn, should he leave his office early as expected.