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: Jim Hamilton's World of Securities Regulation

By Jim Hamilton

Financial Crisis Advisory Group Members Named; First Meeting Scheduled

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. Mr. Hoogervorst also serves as Vice-Chairman of the IOSCO Technical 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 US 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 UK 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 was 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.

Full post as published by Jim Hamilton's World of Securities Regulation on January 12, 2009 (boomark / email).