(The article featured
below is a selection from International
Securities and Financial Reporting Update, which is available to subscribers
of that publication.)
IASB, FASB Name Financial Crisis Advisory Group Members
The first meeting of the joint IASB-FASB advisory
group created to consider financial reporting issues arising from the global
financial crisis will occur this month. The group is co-chaired by Hans
Hoogervorst, Chairman of the Netherlands Authority for the Financial Markets and
former SEC Commissioner Harvey Goldschmid. Hoogervorst also serves as
Vice-Chairman of the IOSCO Technical Committee and is a former Dutch Finance
Minister. The SEC and the Basel Committee have been named as observers.
The advisory group is comprised of auditors,
investors, regulators and preparers of financial statements and will help ensure
that financial reporting issues arising from the crisis are considered in an
internationally coordinated manner. It is expected that the work of the advisory
group will be completed within a four to six month period.
Recently named members of the advisory group are
Jerry Corrigan, former President of the NY Federal Reserve Bank and chair of the
Counterparty Risk Management Policy Group, and Gene Ludwig, former U.S.
Comptroller of the Currency. Other members are Lucas Papademos, Vice President
of the European Central Bank and Don Nicolaisen, former SEC Chief Accountant.
Recommendations from the advisory group will be
jointly considered by the two boards. Any decisions to act upon the
recommendations will be subject to appropriate due process. In the interest of
transparency, the advisory group will meet in public session with webcasting
facilities available to all interested parties.
In recent remarks at a U.K. seminar on restoring
confidence in the financial markets, Chairman Hoogervorst said that a global
response to the financial crisis is critical in order to prevent regulatory
arbitrage and a regulatory race to the bottom. He also believes that the moral
hazard created by a public safety net of central bank lending and government
bailouts, which he concedes were needed, must be counterbalanced by strong
regulation.
Thus, while providing a safety net is inevitable to
contain systemic risk, more regulation will also be needed in the opaque
over-the-counter market for derivatives. In addition, the credit default swap
market is in obvious need of enhanced transparency and a sound clearing and
settlement system. For the longer term, the entire institutional regulatory
structure will have to be reformed, he said, since the crisis makes clear that
this review needs to include not only prudential regulation, but also
conduct-of-business regulation.
More broadly, he noted a need to make sure that
regulatory reform is structured nationally, regionally and globally. For this,
regulators should look to the recommendations of the Financial Stability Forum,
the European Union and the International Monetary Fund.
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