I will mention three issues, which I believe are especially important in a longer-term perspective: first, mitigating procyclicality; second, correcting incentives towards short-termism and third, enhancing transparency by improving the availability of data important from a financial stability perspective. First, there is a need to mitigate procyclical effects stemming from the current regulatory framework.
A number of potential sources need to be investigated, including capital requirements, valuation and leverage, banks’ compensation schemes and provisioning regimes. In this context, I welcome the work to be carried out under the auspices of the FSF. Second, markets have excessively rewarded short-term profits at the expense of lower longterm performance or plain losses.