Regulators seek transparency from fin firms

Banks and financial institutions must provide greater "transparency" while reducing their market positions to repay their debts so as to create greater confidence in the wobbling global financial markets, the world's top financial authorities said after a meeting in Rome on Saturday.

Worried over the continued tight conditions in the money markets and the ongoing "deleveraging" whereby banks and hedge funds sold their market positions to repay their debts as happened in the commodity markets, the world's leading financial authorities issued a stern message calling for greater "transparency" to face several short-terms threats to financial markets the world over.

The Financial Stability Forum, which includes central bank governors and other financial regulators, met in Rome to chart out a course of action for grappling with the precarious financial market conditions.

"While the necessary deleveraging has been ongoing since last summer, the process is being complicated by the lack of transparency and valuation difficulties for some credit instruments," the Forum said in a press release.

It said the "financial institutions should continue enhancing their disclosures of risk exposures and refining valuation judgements concerning structured credit activities and poorly performing assets on and off the balance sheet," implying that banks and financial institutions must come forward to disclose all their positions.

With "securitisation markets effectively closed" following the deathly sub-prime mortgage crisis that engulfed banks and financial institutions in the United States and other countries, the Forum argued that "together with valuation losses on mortgages and other assets, this is straining capital positions and contributing to tightening credit conditions".

Consequently, "hoarding of liquidity and counterparty concerns are leading to a shortening of the maturity of banks' funding profiles and causing severe strains in interbank and other lending markets".