The global economy is in the middle of the worst financial crisis since the Great Depression and vast efforts have been made to improve it, but what can be done to prevent or protect stocks, exchange traded funds (ETFs) and other investment tools from losing significant market value in such a financial downfall?
There are seven principles that should define any system of global financial regulation and monitoring, states Blackstone CEO Stephen Schwarzman in an opinion piece for the Wall Street Journal.
First, he suggests that a common set of accounting guidelines and principles must be set up across borders. Next, he states that the federal regulatory agencies of the world’s major markets need to all be structured in the same manner.
Thirdly, full transparency of financial statements is a must. His fourth suggestion is full disclosure of all financial instruments to the regulator. Fifth, the regulator should have oversight over all financial institutions that participate in the markets.
Sixth, mark-to-market accounting needs to be abolished for hard-to-value assets. Lastly, a principles-based regulatory system shall be implemented instead of a rules-based regulatory system.
Schwarzman also states that in order to implement this new system of global financial regulation and monitoring, it is imperative that a new global organization of regulators, one that will enable world markets to communicate and share information effectively and efficiently with one another, be formed.
Let’s hope that we learn from this crisis and don’t repeat the same errors in the future.