FSF calls for changes to the financial system

The Financial Stability Forum is calling for changes to be made to the financial system in order to address the current market downturn.

While no alterations have been decided or announced the coalition of countries including the UK, US, Canada, Italy, France, Germany, Japan and Switzerland, are considering the suspension of capital requirements and the public purchase of mortgage-backed securities as options.

The options are set out in a discussion paper compiled for a FSF meeting in Rome last week.

One tactic being considered is getting a large group of significant banks together to disclose their financial positions based on a common template.

The institiutions would disclose prices for different securities and also the methodologies used to determine those prices.

A release from the FSF, says: “The FSF discussed the report to be delivered to G7 Finance Ministers and Central Bank Governors in April that identifies the key weaknesses underlying the turmoil and recommends actions to enhance market and institutional resilience going forward.

“The report has been prepared by a working group comprising senior officials from major financial centres and from the international financial institutions and the chairs of international supervisory and regulatory bodies.

“It sets out specific policy recommendations in the following areas: prudential oversight of capital, liquidity and risk management; transparency, disclosure and valuation practices; the role and uses of credit ratings; the authorities’ responsiveness to risks and their arrangements to deal with stress in the financial system.

“These recommendations are concrete and operational and, if approved, the FSF will report on their prompt implementation.”