Notes from the IASC Foundation Trustees' meeting - Part 1
11 Jul 2008
The Trustees of the IASC Foundation (IASCF) met in Washington on 8 and 9 July 2008. The portion of the meeting on 8 July 2008 was open to public observation.
IASCF Trustees Meeting, Washington, 8 July 2008Constitution Review Proposals |
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Background and Observations on the Roundtables The objective of the discussion was to determine whether the trustees are prepared to publish and invite comment on the first part of the Constitution Review proposals. To facilitate the discussion, the IASCF Director of Operations introduced a paper that summarised the comments made at the 19 June 2008 Roundtables on the draft document Proposals and Issues for the Constitutional Review, as well as a revised version of those proposals after consideration of comments made at the roundtables. The two principal changes being proposed would be:
In summary, there appeared to be support for the concept of creating a Monitoring Group (MG). However, several concerns were raised regarding the independence of the IASC Trustees and IASB and the absence of investor representation on the MG. The proposals on the IASB size and composition generated fewer concerns than the proposal on the MG. However, some comments included concerns around the geographical criteria diluting the other technical competence criteria of IASB membership and the omission of a specific mention of Africa and South America in the geographical spread. Some comments made during the roundtables may not have been reflected in the revised version brought before Trustees at meeting, but the expectation is to consider them with the other written comments received on the proposals. Several Trustees noted that they received positive feedback on the use of roundtables. Regarding the composition of the MG, Trustees asked if the initial composition should also include banking supervisors, since they have a strong influence in emerging markets. The Chairman suggested adding a specific question to the proposals on whether banking supervisors should be represented on the MG. Regarding the geographical composition of the IASB, the Chairman also noted that there was language in the revised proposals that suggests that of the seats appointed from any area, the Trustees would normally appoint at least one member from South America and Africa, but this language had not been added to the marked Constitution changes. He suggested specifically requiring this in the Constitution. Revisions to the draft proposals discussed at the Roundtables The discussion moved to the revisions made to the proposals. The IASCF Director explained the rationale for the revisions from the initial draft provided during the roundtables. Some minor revisions were made for better readability of the document. Other revisions were made to better clarify the concepts or arguments behind the proposal for the MG (for instance, to draw a better link between creation of a Monitoring Group and the objective for public accountability) or to address some of the recurring concerns noted at the roundtables. The more significant revisions include:
Relationship Between the Trustees and the Monitoring Group A discussion started regarding the relationship between the Trustees and the Monitoring Group. One Trustee asked for more information regarding the MOU between the Trustees and the MG. The IASCF Chairman noted that the details of what is in the MOU would not be established in the Constitution amendments. Rather, the proposals recognise that an MOU between the parties must be created and agreed upon by both parties. The MOU is intended to be another public document that will be negotiated between the MG and Trustees after this first part of the Constitution Review is completed. The same Trustee asked if the MOU, as a public document, will also be exposed for a comment period. The Chairman was in favour of a comment period for the MOU. Several Trustees raised concerns around the independence of the IASCF and whether the MG responsibilities will conflict or overlap with Trustee responsibilities. The IASCF Chairman recognised that the negotiation of a reasonable MOU will be central to easing these concerns. He also noted that the MOU cannot change the requirements in the Constitution itself. Before the proposals are published for comment, they will be revised to clarify that adoption of the MOU will require agreement of 'the MG and the Trustees' rather than 'members of the MG and the Trustees'. This is to clarify that each member of the MG is not required to agree with the MOU before it can be effective. The Chairman noted that the proposals as drafted intend to view the MG as a monitoring group akin to an audit committee, not an oversight committee. Any wording in the proposals suggesting that the MG would have oversight capacity would be removed. Several Trustees were also concerned about future disputes between the Monitoring Group and the Trustees and what 'safety mechanism' would be available if the parties are unable to agree. This concern related both to overall disputes and to disagreements on the future composition of the MG since the proposals only define the composition at initial formation. Echoing those concerns, other Trustees highlighted the conflict between independence and the need to obtain sustainable long-term funding, particularly when the proposed members of the MG are also the public authorities organising the funding for that jurisdiction. The IASCF Chairman was hesitant to add a 'safety mechanism' to the Constitution language because it could be perceived to contradict the MG as an independent external group. The intent is that the future composition of the MG would be at their discretion going forward, potentially under guidance written in the MOU. The discussion moved to the reporting requirements between the IASCF and the Monitoring Group. One Trustee suggested that the MG as an external group should also have public accountability and, therefore, should consider providing its own annual report on its activities. The IASCF Chairman noted it was a good suggestion, but would be one that the MG would need to decide when its sets up its operating procedures. Since the MG's operations are outside of the IASCF, it would not be appropriate to incorporate reporting requirements in the Constitutional proposals. Regarding the reporting from the IASCF to the Monitoring Group, another Trustee suggested the IASCF Annual Report should serve this purpose, to ensure IASCF independence and transparency to the public. The IASCF Director of Operations hoped that the IASCF Annual Report would be sufficient reporting to MG due to its extensive disclosures. The Chairman agreed that there should be one public report for the public and Monitoring Group, and the Trustees would incorporate any additional requests from the MG into the annual report. Consistency with Governance Recommendations of European Council One Trustee asked for clarification on how the European Council's suggestions on the governance of the IASCF provided in the materials reconcile with the Trustees' proposals. [See IAS Plus News Story of 9 July 2008 The IASCF Director noted that it is broadly aligned with the Trustee proposals, and meetings with the European Council have confirmed that. Although the language is different, the broad concepts are consistent. Any additional points relating to issues outside of the proposals suggested in part one of this Constitutional Review will be considered in the second part of the review. Changes to the Proposals Agreed by the Trustees Based on these discussions, the following additions would be incorporated to the proposals before issuance for public comment:
Approval and Timing of Proposals The Trustees approved these revisions and approved issuance of the proposals for public comment shortly after the meeting. Comments received will be reviewed at the October IASCF Trustees meeting. Due to timing (August holiday season), a Trustee said that a 15 September 2008 comment deadline seemed aggressive. The IASCF Director noted that there is a clear expectation by regulators that this part will be done by year-end. Therefore, the date cannot be extended much further. Regulators need to make decisions based on completion of this process. Examples of those decisions include:
Regarding second part of Constitution Review, October is the goal for an initial draft of the second part of the Constitution Review proposals. The Constitution Committee will have an interim meeting before October to draft part two proposals to meet the October timing. Additional roundtables will be held for this second part also since there was positive feedback on the roundtable process. This summary is based on notes taken by observers at the IASCF meeting and should not be regarded as an official or final summary. |