We welcome the IASB's efforts to improve financial reporting for financial instruments. We believe that current guidance under IFRS is complex and requires significant improvements to reduce the inherent complexity.

However, to meet the goal of improving reporting for financial instruments by reducing complexity it is important that complexity is properly defined and that any change made to existing Standards should not result in a mere shift of complexity from one constituent to another.

In addition, the DP fails to address important areas, notably scope and derecognition, of financial instruments accounting that also fall outside the IASB's other concurrent projects or, where they are within existing projects, these would be completed only with a significant time lag to the financial instruments project. We believe that guidance on these issues influences the assessments made on the proposals of the DP.

Furthermore, we do not agree with the implicit assumption of the DP that full fair value accounting would be the ultimate improvement to financial instruments accounting. We believe such a conclusion would be premature at this point. We believe that at the moment, amending existing Standards, possibly over a longer period, would be a feasible way to improve financial instruments accounting significantly for all constituents without undue costs or efforts.

• CEBS's 30 recommendations on liquidity risk management are principles-based and subject to an overarching principle of proportionality.
• The first 18 recommendations are targeted at credit institutions and investment firms established in the European Union to ensure that adequate liquidity risk management for both normal and stressed times is in place. In particular this should build on diversification of funding sources, appropriate liquidity buffers, robust stress tests and regularly tested contingency funding plans.
• CEBS's last 12 recommendations target liquidity risk supervision. Supervisors should consider whether their requirements could be supplemented or replaced by internal methodologies developed by institutions, based on a thorough prior supervisory assessment. Enhanced coordination between supervisors should be pursued, notably through active use of colleges or through delegation of tasks.

So, here's my list of some of the key lessons to be learned and, in some cases relearned, as well as some important questions that I feel need to be asked:

• Remember the risks
• Liquidity matters
• The double edged sword of leverage
• 'Out of sight, out of mind'
• 'Buyer beware'
• Accounting has consequences—but, can we handle the truth?
• Mind the exceptions
• Good reporting requires both sound standards and faithful application of those standards
• Fair value – villain or savior?
• Sound markets require a proper infrastructure
• Fundamental changes may be needed in our capital markets and financial services industry
• Global problems demand global solutions
• Perverse incentives lead to perverse outcomes
• Each crisis brings many challenges, but also many opportunities for change and improvement

Regarding the use of fair value measurements for financial instruments, Mr Herz said:

To be sure, there is no question that implementing fair value in illiquid markets can be challenging and difficult and there are important questions to be asked. Does it lead, reflect, or lag reality? Are there genuine concerns over procyclicality ? These are important questions and issues; but I would ask, what is the alternative? Not to try to be truthful about the current value of your assets, to use original cost or some other smoothed value that ignores current market conditions? Yet, in some cases, that is what some people have asked us to do – suspend the bad news for a while, until things get better. That is what Japan tried to do rather unsuccessfully for over a decade.

Investors have been clear: they want to see the current fair values of a company's financial assets. They believe it is the appropriate method of accounting for such items, and they generally applaud the added transparency provided by the new disclosures under FAS 157 (and indeed would like some additional disclosures like ranges and sensitivities).

We believe that in a number of areas the need for urgent action has meant that the Trustees may not have developed fully the detailed operations of the revised structure, or at least have not articulated these clearly in the proposals. Consequently, they are potentially ambiguous.

Monitoring group: We support the creation of a monitoring group as a way of creating a direct link between the IASC Foundation and very senior levels of official institutions with a legitimate interest in accounting standard-setting and transparency in financial reporting. However, the role of the monitoring group should be more clearly defined than it is in the discussion document.

IASB size and composition: With respect to the proposals affecting the IASB directly, we are not inclined to support increasing the size of the IASB from 14 to 16 members, but are willing to support such an increase to accommodate more part-time members. We do not believe that the Trustees have presented a convincing case to increase the size of the IASB and are concerned that the current size of 14 members is at the extreme upper end of operational efficiency. Nor do we support the introduction of any geographical formulation, quotas or other such limits.