The aim is to reinforce market infrastructures, in order to minimise contagion and spill-over effects among players that have become more and more interconnected. These initiatives increase market transparency through a number of measures: contract standardization, the requirement to trade on regulated markets, settlement through central counterparties, the reporting of the terms and conditions of transactions to trade repositories.
But further progress is needed in important areas. Capital and liquidity regulation must be accompanied by improvements in internal risk control arrangements and by actions aimed at correcting incentives to excessive risk-taking. Board members and senior managers should possess a thorough understanding of the bank’s overall operational structure and risks. It is also fundamental that supervisors regularly assess banks’ corporate governance policies and practices.