The Organization for Economic Cooperation and Development (OECD) has established
a set of key principles to guide financial policy makers as they look to fundamental
reform that will achieve strong, resilient financial systems that play their part
in driving economic growth.
Among the issues the principles address are the need for increased
transparency, more effective surveillance and greater accountability to the public.
The ten key principles for financial regulation are elaborated in an OECD study
which is already providing the basis for more targeted OECD analysis, for example,
of ways to address the specific challenges of designing a proper regulatory
approach to financial innovation.
Welcoming the agreement of member countries on the principles, OECD Secretary-General
Angel Gurría underlined the importance of well-thought out reform for
sustainable economic growth:
“The systemic importance of the financial
system was clearly demonstrated by the huge human and social impact of the crisis."
"To prevent its recurrence, we need to correct a number of failures, including
of regulation, supervision, corporate governance and risk management. This is
a major task and to accomplish it, we cannot rely only on incremental, piecemeal
reform” continued Mr Gurría.
“We must get the whole system right
so that the financial sector can effectively resume its vital role in the functioning
of the global economy.”
Increasing transparency is key, according to the OECD study. The complexity
and opaqueness of products made risk assessment difficult for firms and investors
and hindered market transparency, a major cause of the crisis.
The principles
call for domestic and international efforts to ensure that comprehensive, relevant,
up-to-date and internationally comparable statistics and indicators are available.
Governmental authorities should have the legal powers to compel the collection
and dissemination of data, the OECD argues.
The OECD would like to see surveillance and analysis of the financial system
strengthened, involving close cooperation among governments. Market failure
analysis should be carried out to assess the efficiency of the system and understand
evolving problems.
The OECD also underlined the need for greater accountability of governments.
Governmental authorities, including regulators, should publish annual reports
that give an overview of developments in the financial system, identify key
risks and explain how they are addressing them, the Organization suggested.
According to the OECD it sees ongoing review and reform as critical to ensure that governmental
authorities stay on top of innovation, develop a comprehensive view, coordinate
their actions, and are held to account.
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