Ackermann: Global watchdog could prevent market bubbles
Ackermann believes the new entity should include global experts who would monitor the development of financial markets and warn of any potential dangers on the horizon, allowing regulators and market players to take action. The banker feels such experts could have foreseen and averted the US subprime debacle now sparking a US and global economic slowdown. Leading global banks and securities firms have reported $163 billion in write-downs and credit losses since early 2007 on account of the crisis, and Ackermann predicts more losses are on the way.
Ackermann says all financial crises of the past 30 years have started as bubbles that market experts could have popped before they grew. But analysts contend most crises have gone undetected even by experts within the markets in which they were spawned, and that choosing the right members for a global watchdog would be crucial. Members would need a proven track record in predicting crises and must be free of any potential conflicts. There would also have to be a clearly defined set of tasks and actions for the group.
Some questions may be clarified after the Institute for International Finance (IIF), of which Ackermann is also chairman, issues a preliminary report by April outlining findings of a committee designated to recommend ways for the financial industry to tackle the subprime crisis. The report is expected to include calls for stronger risk management and accounting standards, as well as a goal of introducing global regulations to safeguard financial sector stability.
"Ultimately, banks and regulators must work more closely together to provide greater transparency on the distribution of risks in the global financial system," Ackermann says.