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FRB Chairman Alan Greenspan comments on IFRS

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10 Mar 2003

In Remarks titled Global Finance: Is It Slowing? delivered via satellite to a symposium in Paris, US Federal Reserve Board Chairman Alan Greenspan said improved international accounting and disclosure standards are needed to make cross-border investing more equitable: As international accounting and reporting standards become better, information asymmetries that currently exist between foreign and domestic investors will diminish.

Adequate disclosure will, one hopes, accompany the development of institutions that will reduce corruption, and improve corporate governance, respect for private property and the rights of minority shareholders....

We must remember that as financial globalisation matures it will have consequences to economies that we cannot ignore. Global capital flows will increase in size and will switch directions more easily. As a result, temporary imbalances will naturally occur from time to time. To counter these, we need to consider various multilateral policy initiatives, from international accounting standards to international capital requirements for banks, from a "New Financial Architecture" to crisis prevention and resolution mechanisms. Also, market participants will need to enhance their ability to manage vast quantities of collateral that are integral to globalised modern finance. Our goals should include not only global financial stability, but also the promotion of free flowing capital directed to its most productive uses throughout the world. That goal will bring about greater financial stability and a more prosperous future for all who choose to participate in the global economy.

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