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FSF interim report on stability of the global financial system

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11 Feb 2008

The Financial Stability Forum's (FSF) Working Group on Market and Institutional Resilience has presented an Interim Report to G7 Finance Ministers and Central Bank Governors at their meeting this past weekend in Tokyo.

The IASB is a member of the Working Group. The report discusses the Working Group's views to date on current conditions in the global financial system and the causes of and weaknesses revealed by recent market turbulence. The report proposes broad policy directions for strengthening the resilience of key elements of the financial system in six areas:
  • supervisory framework and oversight;
  • underpinnings of the originate-to-distribute model;
  • the uses and role of credit ratings;
  • market transparency;
  • supervisory and regulatory responsiveness to risks; and
  • authorities' ability to respond to crises.
The policy proposals address a number of accounting and auditing issues. Here are two examples:
  • Financial institutions need to improve the usability of disclosed information about risk exposures and valuations, including those related to structured products and off-balance sheet vehicles. Investors, industry representatives, and auditors should work together to identify the types of relevant and useful disclosures, including those about valuation methodologies and the key valuation assumptions and drivers of changes in value.
  • Authorities should encourage market-led improvements in market transparency and disclosure standards. But a more prescriptive approach by securities market regulators, bank supervisors, and accounting standard setters may prove necessary if these are inadequate.

Click to view Interim Report (PDF 49k).

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