The De Larosiere Group (headed by Jaques De Larosiere former head of the International Monetary Fund) has published their report. The group was established to create a more efficient, integrated and sustainable European system of supervision.
The report offers a two-level approach to reform including a new oversight of broad, system-wide risks and a beefing-up of coordination among national supervisors in day-to-day oversight.
The report calls for a "new regulatory agenda" to improve risk management, to reduce pro-cyclical market trends, to strengthen transparency and to overhaul incentives such as bonuses and salaries but stopped short of calling for a single regulator.
With respect to accounting rules the Group considers that a wider reflection on the mark-to-market principle is needed and in particular recommends that:
- expeditious solutions should be found to the remaining accounting issues concerning complex products;
- accounting standards should not bias business models, promote pro-cyclical behavior or discourage long-term investment;
- the IASB and other accounting standard setters should clarify and agree on a common, transparent methodology for the valuation of assets in illiquid markets where mark-to market cannot be applied;
- the IASB further opens its standard-setting process to the regulatory, supervisory and business communities;
- the oversight and governance structure of the IASB be strengthened.