Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience 15 April 2008

The Financial Stability Forum (FSF), of which the Governor of the Reserve Bank of Australia is a member, has presented to the G7 Finance Ministers and central bank Governors a report making recommendations for enhancing the resilience of markets and financial institutions. The recommended actions are in five areas:

• Strengthened prudential oversight of capital, liquidity and risk management.
• Enhancing transparency and valuation.
• Changes in the role and uses of credit ratings.
• Strengthening the authorities’ responsiveness to risks.
• Robust arrangements for dealing with stress in the financial system.

Public sector and private sector initiatives are underway in these areas. The FSF will facilitate co-ordination of these initiatives and oversee their timely implementation, thus preserving the advantages of integrated global financial markets and a level playing field across countries. To restore confidence in the soundness of markets and institutions, it is essential that steps are taken now to enhance the resilience of the global system. At the same time, the FSF recognises the strains under which the financial system is currently operating and will pursue implementation in a way that avoids exacerbating stress in the short term. The FSF will report on progress in June followed by a fuller follow-up report in September. The FSF will continue to closely monitor implementation thereafter.

The full report (<http://www.fsforum.org/publications/FSF_Report_to_G7_11_April.pdf>) and related press release (<http://www.fsforum.org/press/pr_080412.pdf>) are available on the website of the FSF.