High business standards aid world financial stability
Washington, 26 April 1999 - Providers and users of financial services can make a valuable contribution to a more stable international financial system by ensuring that they conduct their business according to the highest professional standards, business experts said today.
Speakers at a press conference on the eve of the World Bank and IMF spring meeting, listed stringent risk management, strict credit procedures and accounting, careful documentation of every stage of a transaction and the provision of dependable information as key factors in a more resilient and robust financial system.
They said the quality of a firm's corporate governance was increasingly seen as evidence of its ability to attract equity capital and of its overall corporate performance. Good corporate governance could reassure investors at times of financial turmoil, thereby encouraging stable capital flows.
Top executives of major international companies gave their views after a meeting of the Commission on Financial Services and Insurance of the International Chamber of Commerce (ICC), whose membership represents the full spectrum of the financial services sector, including providers, brokers and users of financial and insurance products.
One recommendation by Thomas A. Russo, Managing Director, Lehman Brothers, was that firms should create a risk management structure that is independent of a firm's core business. Ideally, he said, this independent department should report directly to the firm's chairman or chief executive officer.
Mr. Russo said: "If large numbers of firms improve their financial practices and safeguards, the global financial system will be strengthened. Companies have no need to wait for implementing legislation or regulatory authorization to put into effect these practical measures."
Bradley D. Belt, Vice-President of the Center for Strategic and International Studies, said a task force sponsored by the Center was looking for bipartisan consensus in the U.S. Congress for a "constructive international financial architecture that provides a higher degree of certainty and consistency in the operation of global markets." He said cooperation between the government and private sector in building the framework was crucial.
The CSIS Task Force on Global Financial Stability seeks to develop a framework for responding to global financial crises. Composed of public and private-sector participants, the panel is led by Senator William Roth, chairman of the Senate Finance Committee, Senator Joseph Lieberman, and Representatives David Dreier and Robert Matsui.
The task force will engage economists, business leaders and policy experts in discussions over the next several months that will explore the primary f
actors behind financial crises. It will examine the roles and motivation of borrowers, banks, hedge funds and international financial institutions, and the interconnection between trade patterns, exchange rates, and financial volatility. The task force will offer recommendations for strengthening the international financial system.
Financial Services and Insurance Commission