London: U.S. Treasury officials said on 13 September that governments from the Group of Seven top economies will ask the G7’s financial stability watchdog to give a detailed report on the root causes of the current credit market crisis to its October meeting of finance chiefs.
Writing in the Financial Times, the U.S. Treasury’s undersecretary for international affairs David McCormick and its undersecretary for domestic finance Robert Steel said the U.S. planned to work with its G7 counterparts to assess the causes of recent market uncertainty and “determine appropriate actions.”
“This report’s recommendations will be an important input towards targeted, balanced and multilateral action,” they wrote.
The authors said Treasury Secretary Henry Paulson and the rest of the G7 would ask the group’s Financial Stability Forum to report -- a group of finance ministers, central bankers and regulators set up after the emerging market crises of the late 1990s -- to examine four main issues.
First is financial institutions’ liquidity, market and credit risk practises -- including the treatment of complex credit products and conduits. The second is accounting and valuation procedures for financial derivative instruments, particularly for complex, narrowly traded products that become difficult to price in times of stress.
Third is the issue of supervisory oversight principles for regulated financial entities. And fourth is the role of credit rating agencies in evaluating structured finance products.