The International Organization of Security Commissions (IOSCO) has published the final report of its Technical Committee's Task Force on the Subprime Crisis. The report contains an analysis of the underlying causes of the subprime crisis, the implications for international capital markets and recommendations that address the issues facing securities regulators.
The report focuses on the market for structured finance products and the specific areas where failings were identified by the task force in November 2007, IOSCO says.
The paper contains a comprehensive analysis of the particular problems encountered in four key areas and contains recommendations by the Technical Committee for future IOSCO work to counter these issues in three of these areas: issuer transparency and investor due diligence, firm risk management and prudential supervision, and valuation and accounting issues.
‘This report makes clear that, while financial innovation is to be encouraged and plays an important role in the allocation of capital and risk, new financial products need to be accompanied by a thorough analysis of the risks as well as benefits they may bring,’ says Christopher Cox, U.S. Securities and Exchange Commission chairman and co-chair of the IOSCO Task Force. ‘This report also highlights the need for all market participants, institutional investors and financial regulators to focus on adequate risk assessment and risk management.
‘Recent events have shown how closely linked the world's capital markets are and how great is the need for increased cooperation between regulators in developing and implementing international principles of regulation,’ he adds. ‘The future work that we have committed ourselves to will help enhance that already deep cooperation.’
Source: IOSCO
