A recent report from the ACCA argued that financial services need to reform beyond Lord Turner’s recent recommendations in order to forestall future crises.
The accounting body welcomed the Turner Review but warned that a new regime would have to include a robust early warning system to ensure ongoing financial stability.
“In future we need a system where sound regulation, supervision and good corporate governance reinforce each other”, said Dr Steve Priddy, ACCA’s director of technical policy and research.
The report also argued that there were several failings in corporate governance that were to blame for the current economic crisis, and offered the following advice for policymakers currently reviewing the system:
- Be clear on the purpose of regulation.
- Pursue coordinated national action.
- Ensure that reforms are clear and comprehensible at every level.
- Segmented regulation: Adopt a risk-based approach to concentrate regulatory efforts on institutions that wield disproportionate market influence and whose failure would pose the greatest threat to the financial system.
- Capital adequacy: Encourage stability and not pro-cyclicality with regard to capital requirements.
- Supervision: Many of the present problems arose from poor supervision of existing regulation rather than insufficient regulation. Additional resources and skills are required to ensure that institutions are properly supervised.
The report was released ahead of next week’s G20 summit in London, at which finance ministers and central bank governors from 19 of the world’s largest national economies, plus the EU, will gather to discuss measures to tackle the economic downturn.