The Hindu Business Line : G7 forum focuses on standards in financial regulation

THE Financial Stability Forum (FSF) of the Group of 7 industrial countries has highlighted risks and vulnerabilities in the international financial system and the progress and challenges around the world associated with the implementation of standards in financial sector regulation.

Concluding its two-day deliberations in Washington led by Mr Roger W. Ferguson, Vice-Chairman of the Board of Governors of the Federal Reserve, the members of the forum by and large felt that the macroeconomic backdrop for financial markets had improved since their last meeting in Rome in March. They discussed various issues, including the potential impact of removing policy stimulus, the potential impact of sustained high oil prices on growth and inflation, continuing fiscal and external imbalances in several countries and ongoing uncertainties about the trajectory of the Chinese economy and the resilience of emerging market economies to these developments.

An official release from Basel where the FSF Secretariat is quartered at the world's central bankers' central bank, the Bank for International Settlements (BIS), said that in the Washington meeting members considered ways to improve the implementation of regulatory standards in the banking, securities and insurance sectors, based on the experience of the joint IMF/World Bank Financial Sector Assessment Programme.

FSF was convened in April 1999 to promote global financial stability through information exchange and international cooperation in financial supervision and surveillance. It brings together on a regular basis national authorities responsible for financial stability in significant financial centres, international groupings of regulators and supervisors and committees of central bank experts. The Forum seeks to coordinate the efforts of these various bodies in order to promote international financial stability, improve the functioning of markets and reduce systemic risk.

The FSF members also took note of progress by the IAIS in the preparation of the first global reinsurance market reports, which would analyse the size and structure of the global insurance market. Members anticipated that publication of the report, scheduled by the end of this year, would further enhance the transparency of the reinsurance industry. They also took note of a proposed reinsurance study by the Group of Thirty.

Members were informed of the latest developments in the realm of international accounting standards, including future plans of the International Accounting Standards Board (IASB) and discussions on convergence between IASB and the US Financial Accounting Standards Board. An FSF roundtable in October 2004 would consider challenges associated with the implementation of international accounting and auditing standards.

On audit quality and auditor oversight, members were concerned about delays to the establishment of the public interest oversight board (PIOB) to oversee IFAC's standard setting activities and they urged its speedy formation. On strengthening capital markets against financial frauds, members were informed of the efforts of the Chairman's Task Force comprising two reports on a description of the events concerning the Parmalat case and on key issues for consideration in light of recent financial scandals. The next meeting of the FSF would be held in Tokyo, Japan on March 11, 2005.

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G7 forum focuses on standards in financial regulation