Harmonizing Global Regulations: Joe Knows
In a post a few months back, I offered a series of policy recommendations given what I had observed during the credit crisis:
Is the financial system somewhat broken and in need of reform?
Absolutely. But is the increasingly liberalized system in place today
an essential element of a healthy, integrated and global financial
marketplace? I think the answer is also a resounding yes. So where have
things broken down, and what can we do to fix them? Here are some ideas:
- Increase transparency among regulated institutions
- Homogenize global accounting standards
- Homogenize global regulatory frameworks
- Aggressively strip conflicts of interest out of the system
- Clarify the roles and responsibilities of fiduciaries
- Develop common sense compensation policies and practices
Today, Josef Ackermann, the CEO of my former employer Deutsche Bank, came out with a subset of my prescriptives when speaking at a conference (as reported by Thomson Financial News):
‘The nationalistic approach (to regulation) is just too narrow …
the crisis has clearly revealed, not caused, this fundamental flaw,’ he
said, referring to the drought in credit markets sparked by bad
mortgage debts in the U.S.Speaking at a conference here on financial market regulation hosted
by the London School of Economics and Deutsche Bank, Ackermann also
acknowledged the importance of transparency to restore confidence in
markets — but he said there must be limits…Meanwhile, accounting standards and practices should also be
harmonized for complex financial instruments, Ackermann said. The
differences between U.S. GAAP and IFRS regulations are significant, he
added.
Joe hit my top three dead on. He is at the helm a ~$1 trillion (asset) global behemoth, operating in something like 100 markets and jurisdictions every day. He knows the difficulty, first hand, of having to deal with such a complicated amalgam of rules, regulations and standards. It places enormous friction on global transactions and doesn’t really protect investors any better than under a standard, global, common sense regime. It is possible for countries to maintain their unique identities, even if their accounting rules and market regulations are similar to those of their neighbors. While market efficiency has grown along with global capital flows and market liberalization in general, disparate rule sets continue to place a tax on investors and advisers alike.
And it is high time that the leaders of nations get serious, get busy and get to work hammering out common standards. Because the markets need all the help they can get. And this is a step in the right direction.
