Mar 31 2008 Peter Elstob
Banks and securities firms must be more transparent about the extent of their exposures and the poorly performing assets both on and off their balance sheets, the Financial Stability Forum said. In a statement on Saturday following its two-day meeting in Rome at the end of last week, the FSF said financial institutions also needed to improve their valuation of structured finance products.
The FSF warned that the financial system still faced a number of significant near-term challenges. "With many securitisation markets effectively closed, assets are accumulating on bank balance sheets. Together with valuation losses on mortgages and other assets, this is straining capital positions and contributing to tightening credit conditions," it said. "Hoarding of liquidity and counterparty concerns are leading to a shortening of the maturity of banks' funding profiles and causing severe strains in interbank and other lending markets."
Next month the FSF will deliver the report by its Working Group on Market and Institutional Resilience to G7 finance ministers and central bank governors, setting out "concrete and operational" policy recommendations in the areas of:
The FSF also discussed the developing voluntary codes of practice for hedge funds and sovereign wealth funds. It said it would welcome regular reports on how well the hedge fund industry standards were increasing transparency and improving risk management practices. It welcomed the work of the International Monetary Fund and the Organisation for Economic Cooperation and Development in drawing up guidelines for SWFs, and the funds' participation in the process.
