“Anything other than general and high level recommendations in response to the turmoil at the global level could produce negative unintended consequences for the financial system as a whole”, the International Banking Federation underlines stressing that the sub-prime crisis has affected financial centres to differing degrees around the world. Recently-adopted capital rules be given time to be completed before conclusions are reached regarding the effectiveness of the rules, it recommends.
IBFed suggests that the market may demand greater transparency relation to:
- the nature and risks of various asset classes;
- the transfer of risks and commitments assumed, if any, by the issuer of the securitised vehicle for the purpose of ensuring market predictability and preventing the potential of a liquidity crisis in the market; and
- monitoring asset classes involved in re-securitisation transactions.
The federation underlines the need for flexibility in accounting treatment since firms should be able to look at actual value, not theoretical current exit values. The IBFed paper questions the effectiveness of the full fair value approach to accounting during the recent market events and makes a number of concrete suggestions as to how the situation could be addressed.
© International Banking Federation
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