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“Policymakers need to adopt a comprehensive but targeted set of policies”, Charles Dallara, Managing Director of the IIF said. “The difficulties facing the global economy have become critical and calls for decisive leadership now by national authorities, central bankers and regulators, as well as by financial services firms”, he continued. Mr. Dallara stated that considerable risks remain which can potentially causing a downward spiral.
He announced the release of the IIF Interim Report on Best Market Practices which will address several issues such as:
- Risk management: correcting gaps in firms’ design and implementation of risk management, and suggesting strengthened standards in risk management governance, technical risk management issues, and stress testing.
- Liquidity risk management and conduits: underscoring the need for firms to consider the risk of over-dependence on any form of funding and to strengthen disclosure and risk management in the use of structured finance vehicles.
- Valuation: strengthening internal governance and framework around valuation processes, and considering means of enhancing the effectiveness of fair value accounting in circumstances where market liquidity has dried up.
- Ratings: considering the need for independent review of internal governance and ratings models, and to provide insight and transparency on a range of risk factors pertaining to structured products, so as to help restore confidence in ratings of structured products while at the same time encouraging investors to assume greater responsibility for evaluating investment risks.
- Incentives and compensation: developing principles that could align compensation with long-term performance and shareholder interests.
- Credit underwriting standards: ensuring that robust and broadly consistent standards of due diligence are implemented.
The report will be released on April 9.
Attached policy brief see below