HORSHAM, England, Dec. 8, 2009 (GLOBE NEWSWIRE) – The Wall
Street Journal Future of Finance Initiative concluded its second conference
today with the release of urgent priorities for rebuilding the global
financial system. The priorities ranked by the Journal's Future of Finance
participants address the most pressing issues facing both the private sector
and international regulators.
More than 100 leading CEOs and international financial executives, top fund
managers, policy makers, officials from G-20 nations and prize-winning
economists gathered in West Sussex, United Kingdom at South Lodge Hotel for
the conference, which began Monday evening. The program included Rt Hon
David Cameron, leader of the Conservative Party; Rt Hon Alistair Darling,
chancellor of the Exchequer; Robert E. Diamond, Jr., president, Barclays PLC
and chief executive officer, Corporate and Investment Banking, and Wealth
Management; Mario Draghi, governor, Bank of Italy and chairman, Financial
Stability Board; Richard Gnodde, co-chief executive officer, Goldman Sachs
International; James H. Leigh-Pemberton, chief executive officer, United
Kingdom Credit Suisse; Alessandro Profumo, chief executive officer,
UniCredit Group; George Soros, chairman, Soros Fund Management, LLC; and
Paul Volcker, chairman, President's Economic Recovery Advisory Board Former
Chairman, U.S. Federal Reserve.
This international meeting builds on the results from the first Future of
Finance Initiative held last March in Washington, D.C., and is designed to
ensure that many perspectives are heard at this critical time, as
governments are in the midst of decisions that will redefine the
international financial system.
After discussions with leading finance experts and policy makers, the
participants met in working groups charged with identifying key priorities
in four of the most urgent areas of finance: too big to fail, international
regulation, regulatory frontier, and financial innovation.
The 20 priorities ranked in order that were set include:
1) HIGHER CAPITAL REQUIREMENTS
Financial institutions whose systemic importance requires national
authorities to underwrite them if they fail should be required to hold more
capital. This should include increasing risk weightings, asset/liability
limits based on business model rather than simple capital ratios, as well as
contingent capital and dynamic provisioning.
2) EMPOWER FSB
The Financial Stability Board should be empowered to define and seek
agreement on broad-based principles which national regulators should try to
make operational in consultation with market participants.
3) PROMOTE RISK MANAGEMENT
Require board to demonstrate a full understanding of risks inherent in new
products. Elevate risk managers to at least the same level as product makers
and give them adequately representation at board level.
Create globally recognised qualifications for risk managers, and implement
standard certification through a risk 'driving test.'
4) IMPROVE REGULATOR RESOURCES
Assure regulators are high quality and have deep knowledge of the industries
and institutions they oversee. Regulator compensation should be competitive
with compensation in regulated industries. Industry should "second" senior
people to support FSB and regulatory bodies.
5) BETTER GOVERNANCE
Hold systemically important institutions to higher standards of governance.
Chief risk officers should report to the board and not the chief executive.
Achieve greater transparency.
6) AVOID REGULATORY ARBITRAGE
To make global co-operation feasible and promote a level playing field,
regulations should be of an achievable scope. Financial activities of
similar substance and economic reality should be regulated in the same way.
7) OVERHAUL RATING AGENCIES
Restore investor confidence in rating agencies by eliminating conflicts of
interest between agencies and issuers, returning to an 'investor-pays'
model, distinguishing between ratings of corporate debt and structured
financial products and promoting new entrants to the credit-rating business.
8) MARKET INFRASTRUCTURE
Create a market structure to facilitate orderly unwinding of failed
financial institutions, including greater use of central clearing.
9) COUNTRIES SHOULD FOLLOW FSB
G20 countries should commit to implement in their jurisdictions the
regulatory provisions put to them by the FSB, without significant amendment
or supplementation.
10) NEW PRODUCT TRANSPARENCY
Improve structural and price transparency of new products, using modelling
and stress-testing to ensure that downside scenarios are as visible as
upside scenarios.
11) REGULATORS ADOPT PRIORITIES
Global regulators over the next 18 months should achieve agreement on the
adoption of IFRS accounting standards and appropriate capital and liquidity
standards.
12) EFFECTIVE ENFORCEMENT
The consequences of bad actions must include real "wallet harm" in order to
be effective and enforcement must be consistent across national boundaries.
13) GLOBAL IMBALANCE FOCUS
G20 should focus on resolving global economic imbalances and integrate that
process with discussions on financial stability.
14) REBUILD RESPONSIBILITY
Regulation alone is not the cure. The financial services industry must show
cultural leadership and promote responsible behaviour by all practitioners.
15) STRENGTHEN INFRASTRUCTURE
Ensure financial infrastructure is commensurate with the innovation that it
supports, both at the firm and the market level.
16) RESIST OVER-REGULATION
Because financial innovation is central to the growth and critical to a
speedy recovery, the G20 and successors should recognise that new rules and
protocols should not thwart innovation and the cost of regulation must be
balanced against the benefits.
17) REGULATORY MANDATE
Regulators should have a clear and strong mandate for financial stability,
and should cooperate across borders and maintain a level playing field.
18) LIVING WILLS
Systemically important banks should present regulators with living wills
demonstrating how they would wind down business in the event of
unsustainable losses. Cross border arrangements should provide for
burden-sharing in the event of failure.
19) DON'T REGULATE BORROWERS
Regulators should focus on the source of credit, not borrowers, using
capital requirements to restrict excessive leverage among borrowers,
including alternative-asset managers.
20) CLARIFY IMF ROLE
IMF should focus on global imbalances and defer to the FSB on financial
stability principles while continuing to have surveillance responsibilities.
IMF quotas should be revised to reflect global economic realities.
The results of the Wall Street Journal Future of Finance Initiative will be
covered in a global Journal Report to be published on Dec. 14.
For more information and a list of key participants at The Wall Street
Journal Future of Finance Initiative, please go to
https://futurefinance.wsj.com.
About The Wall Street Journal
Founded in 1889, The Wall Street Journal is the world's leading business
publication. Boasting more than two million subscribers, the Journal is the
largest newspaper by total paid circulation and has the largest individually
paid circulation of the top 25 U.S. newspapers. The Wall Street Journal
franchise, with a global audience of 3.8 million, also comprises The Wall
Street Journal Asia, The Wall Street Journal Europe and The Wall Street
Journal Online at WSJ.com, the leading provider of business and financial
news and analysis on the Web with more than one million subscribers and 26
million users per month. WSJ.com is the flagship site of The Wall Street
Journal Digital Network, which also includes MarketWatch.com, Barrons.com
and AllThingsD.com. The Wall Street Journal Radio Network services news and
information to more than 375 radio stations in the U.S. The Journal holds 33
Pulitzer Prizes for outstanding journalism, and, in 2009, was ranked No. 1
in BtoB's Media Power 50 for the 10th consecutive year.
Contact:
Emily J. Edmonds
Dow Jones & Company
(212) 416-2635
emily.edmonds@dowjones.com
Kate Dobbin
Dow Jones & Company
+44-20-7842-9684
kate.dobbin@dowjones.com