IIF report calls for "significant investment" in risk systems and data
24/07/2009
Our main challenge now is to restore confidence in and stability of the financial system - this is essential for sound financial markets that can finance growth for the future," said Josef Ackermann, chairman of the Institute of International Finance's Board of Directors and chairman of the Management Board and Group Executive Committee of Deutsche Bank.

Fuente: http://www.bankingtech.com   Fecha: 23.07.2009

The IIF, which is the global association of financial services firms with over 370 members across the world, has published a new report Restoring Confidence, Creating Resilience: An Industry Perspective on the Future of International Financial Regulation and the Search for Stability. Dr. Ackermann emphasised that, "We are publishing this report because we recognize that the industry and the public sector have to build a system that can weather storms yet still provide the credit that the global economy depends upon. We are operating in a globally interconnected world where we need to strengthen the system's capacity to minimize the risks and to maximize the benefits of the interconnected global marketplace."

The report, reflecting the views of the industry's leaders, emphasised the shared responsibility between the industry and the public sectors for strengthening the global financial system. It stressed that financial regulatory reforms must better align incentives for sound risk management, improve transparency, and enhance resilience over the business cycle. It noted the overarching need to build a strong international financial system where regulation should work with the market, with investors and creditors to bring market discipline to bear and be framed with the costs and benefits of regulatory measures very much in mind.

Dr. Ackermann added, "We recognise that far reaching regulatory and industry reforms are necessary to guard against systemic vulnerabilities. A return to 'business as usual' is not an option for us. We need to establish a more resilient and stable international financial system, which stimulates and encourages innovation and foster competition to provide cost effective services to customers. We believe that international coordination among regulators and supervisors is essential. For our part, financial services firms are committed to strengthening our own practices and to working with the official sector in the design of necessary structural and regulatory changes to minimize the risk in the future of the kind of crisis that we are still wrestling with."

The IIF report noted that while much work remains to be done, significant advances continue to be made by the industry to act on the lessons learned in critical areas, including the following:

Materially Improved Risk Management, including more robust risk governance, strengthened capabilities in risk aggregation, improved stress testing, improvement of market-risk management and significant investment in risk systems and data;
Increased and Better Quality Capital compared to the position prior to the crisis, in response to market and official demand;
Better Liquidity Risk Management, including more robust analysis of funding needs and sources, wide application of stress-testing techniques, and substantial liquidity buffers;
Substantial Reduction of Leverage, both on a systemic and individual-firm basis, based on the clear recognition of the negative effects of excessive leverage;
Reducing Procyclicality by analysing its causes, refining provisioning practices and making more extensive use of "through-the-cycle" approaches to capital;
Material Improvement on Disclosure and Transparency through Pillar 3, together with Industry Initiatives to Reform Securitization, working toward more transparent, liquid, and standardised markets, and clarifying firms' Off-Balance-Sheet Exposures;
Development with the official sector of a Better Understanding of Systemic Risk, using this understanding in risk management, and working with the official sector on macroprudential means through which it can be identified, addressed, and mitigated;
Significantly enhanced risk management, processing, transparency, and systems and procedures for carrying on Credit Default Swaps and Other Over-the-Counter Derivatives business.
The report, approved by the IIF's Board of Directors on behalf of the Institute's membership, has been developed with inputs from senior executives across the industry under the auspices of the IIF Special Committee on Effective Regulation. The Committee is co-chaired by Walter Kielholz, member of the IIF Board of Directors, chairman of the Board of Directors, Swiss Reinsurance, former chairman of the Board of Directors of Credit Suisse Group from 2003 to 2009, and by William Winters, member of the IIF Board of Directors, co-chief executive of JP Morgan Investment Bank and Member of JPMorgan Chase's Operating Committee.

It is downloadable here >

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