- financial supervisory authorities are to cooperate with the private sector in properly implementing new accounting rules,
- requirements concerning the content of reports published by financial institutions on their financial condition will be tightened,
- supervision will ensure completeness and correctness of these reports,
50 J. Stiglitz, Globalizacja, PWN, Warsaw 2004, p. 28-36.
51 J. W. Gołębiowski, J.W.Gołębiowski, Global Governance, Koncepcje-doświadczenia-perspektywy.
Instytut Gospodarki Światowej, SGH, Warszawa 2008, p. 23-25.
52 Forum affiliating industrialized countries and developing countries.
2 / strengthening the control system:
- system of financial market regulation should prevent the crisis from spreading to other sectors of economy,
- international rating agencies will be reformed, so that they can provide objective information to the market. These agencies will be subject to monitoring, and the obligation of registration, - financial institutions should hold capital reserves, such as not to undermine confidence in the
banking systems. The amount of a bank's capital will depend on the structure of its loan portfolio,
- a strong system of supervision of the liquidity of international financial markets will be created,
- a reform of bankruptcy laws applicable to international corporations will be carried out.
3 / market management:
- bank risk management procedures need to be strengthened. Financial institutions should improve internal controls,
- procedures to better manage liquidity will be created,
- protection of the markets from turbulence should be an objective of the banks, and therefore they should reform their management systems with this aim in mind,
- risk management systems in relation to structured products will be created.
4 / promotion of the integrity of financial markets:
- the main objective of the State is to protect investors and consumers,
- the threat to the stability of international markets will be eliminated, through increasing cooperation between national financial supervision authorities,
- fight against money laundering and financial terrorism will be expanded.
5 / reform of international financial institutions:
- Financial Stability Forum will be expanded and new members admitted,
- IMF should become a major center for the analysis of the current crisis and will develop appropriate conclusions,
- capital resources of the World Bank Group should be increased, - credit markets will be more accessible to developing countries,
- Bretton Woods system should be reformed so as to correspond with the evolution of the global economy, the role of developing countries is to be raised,
- IMF surveillance over all countries will be strengthened, and more attention paid to financial sector,
- developed countries should increase their role in supporting economic growth in poorer regions of the world.
The summit final communiqué stated that, with deteriorating economic conditions around the world, there is a need for a broader policy response, based on a closer economic cooperation, in order to restore growth, to avoid a negative domino effect, and to support the emerging-market economies and developing countries.
Other regulatory areas discussed are:
1. Valuation of assets by the so-called fair value – valuation of assets at market prices, regardless of their degree of liquidity. Listed companies using International Financial Reporting Standards (IFRS) estimate the financial instruments (derivatives, bonds and others) at fair value. In the case of companies not complying with these standards valuation is based on historical value (the value of expenses incurred) The use of fair value causes unrealized gains (gains on valuation of assets) in the companies in good times, and during a crisis there are losses resulting from lower valuation. Losses from the valuation, when their level exceeds the value of equity, are the basis for the bankruptcy of companies, which significantly contributes to deepening the crisis. This is particularly true when, to cover losses, other assets
are sold quickly. Both valuation gains and losses are unrealized values, which show the differences between the historical costs of acquisition (construction) of assets, and their market value at the balance sheet. Gains and losses realized may vary significantly from the unrealized gains and losses (resulting from valuation). Valuations are subject to large fluctuations. Changes in the market are automatically reflected in the valuations. The use of historical prices, however, reduces the transparency of financial statements and makes it difficult to compare the financial situation of companies in different periods or to compare different companies.
2. Greater transparency of banks, private equity and hedge funds. These institutions, unlike the so-called public companies, have limited publication obligations. This reduces transparency and comparability.
In assessing the setting of different peaks, it should be noted that the root causes of instability of capital markets were not fully realized, and without this it is difficult to propose appropriate solutions. What was proposed is, in my view, incomplete and too vague, and as usual the problem lies in the details. It is difficult, on the other hand, to imagine that in a crisis situation, with so many conflicts of interest, such a group could come up with something more concrete. I do not think that these meetings could soon translate into practical solutions. Some changes probably will occur, but they will be insufficient to face the next problems. Again, there are demands to introduce a Tobin tax, but its implementation does not appear possible.
A significant change is a departure from the spirit of liberalism, which largely lost its monopoly (at least verbally). We must however add that blaming everything on neo-liberalism is wrong. Not neo-liberalism is the problem, but rather a weakness of market mechanisms. The market coordination is weak. Lack of accountability of decision makers, resulting in excessive speculative capital movements, and speculative bubbles, does not encounter appropriate market barriers or state regulations. Market failures can be dealt with by appropriate state intervention. However, the weakness of states can not be solved by increasing the role of the state.
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