Argumentative guests do not make for a convivial dinner party. A private dinner at the G7 summit between bankers offering a code of conduct to prevent future credit mishaps, and ministers demanding regulation was always likely to be testy. But while regulatory change is needed, if policymakers want to prevent the next financial crisis rather than insure against a repeat of the last, they need the bankers to scrutinise themselves as well.
The Financial Stability Forum’s report to finance ministers of the Group of Seven leading industrialised nations sums up a consensus on regulatory change in response to the credit squeeze. It calls for tougher capital requirements for banks holding structured credit products or lending to off-balance sheet conduits, more prescriptive action on liquidity supervision, tougher review of banks’ risk management, and revamped accounting rules for the valuation of illiquid securities
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