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By Lesley Wroughton

WASHINGTON, July 12 (Reuters) - The International Monetary Fund board on Thursday agreed on a procedure to select the next IMF chief even as Europe clings to a long-standing custom that it should appoint the head of the world's financial guardian.

The board said it would accept nominations from any of the IMF's 185 member countries and would weigh the choice of candidates in September, before IMF Managing Director Rodrigo Rato steps down at the end of meetings in October.

"The nomination period will commence immediately and will close on Aug. 31, 2007," the board said in a statement, saying the successful candidate must have a record in economic policymaking and have managerial and diplomatic skills.

The endorsement of a selection process by the 24-member board comes as many countries, particularly in the developing world, question the tradition that a European national heads the IMF and an American leads the World Bank.

Europe, wary of the increased pressure for change, this week moved quickly to hold on to the job, naming a former French finance minister, Dominique Strauss-Kahn, as its nominee. Britain, however, said it would support developing countries' push for a transparent process, saying Europe could no longer insist "the position is ours."

While a European could still be selected to run the IMF at the end of the newly endorsed procedure, Thursday's statement gives the process more legitimacy and opens it to wider competition.

Meanwhile, South Africa, which chairs the Group of 20 forum that includes developing countries, said on Thursday it was disappointed by Europe's nomination of a candidate without broader consultation with other IMF members.

Canada also weighed in on Thursday and said it supported an open process, declining to back the idea that the process should be limited to Europeans.

"We think there are a lot of very good candidates out there for the job," Bank of Canada Governor David Dodge told reporters in Ottawa.

U.S. Treasury Secretary Henry Paulson this week failed to immediately endorse Strauss-Kahn, but that does not mean the United States would not eventually back the European nominee.

The debate over selection of the IMF head is critical to broader IMF reforms underway that seek to recognize the rise of economic powers China and India and give developing countries more say in the running of the fund.

Without reforms, the 63-year-old IMF risks losing legitimacy, making it tougher for the fund to police a more-integrated global financial system.

"The objective is not to take it away from Europe but to make the process merit based," said one IMF board director.

Other board officials, who agreed to speak on condition of anonymity, said while several potential non-European candidates had already expressed interest in the IMF job, they feared the status quo would win over change.

The former IMF chief economist, Raghuram Rajan, on Thursday questioned what Europe and the United States would gain from a tradition that failed to serve the goals of the international financial system.

On the other hand, Rajan also questioned why China and India were so silent on the issue.

"I would conjecture that they have little faith that the system can be changed or produce outcomes they can buy into," he wrote in the Financial Times. "Far better to keep quiet now, and allow the EU to dig a deeper grave for the multilateral financial system."

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