Their risk management system will be also subject to supervision

Horse of battle of the Franco-German couple, the regulation of the banking and financial system was one of the main themes of the Summit. Whereas, to the end, progress seemed very uncertain, several major advances were obtained by participants on many topics, including bonuses, all within a tight schedule: most of the measures must be effective before the end of the year.

One of the most emblematic was the entry in the common law of "hedge funds". More strict control of these funds accused of having amplified declining stock markets and, especially, their managers will be introduced before the end of 2009. The funds will be required to communicate to supervisors and regulators for information about on a regular basis, including their level of indebtedness. This information should allow to assess the systemic risk they pose individually or collectively. Their risk management system will be also subject to supervision. All "hedge funds" are however not concerned: their registration will be subject to criteria of size, the small "hedge funds" not falling within this device.

Amend standards

At the international level, monitoring will be provided by the Financial Stability Board (FSB), enlarged version of the Financial Stability Forum to members of the g-20. The FSB will be charged, before the end of 2009, to develop mechanisms of cooperation between regulators to facilitate the exchange of information. If the funds are domiciled in tax havens, the registration of their managers, based in financial capitals "on shore", will collect and share information when it is not available.

Accounting standards, very dear subject to bankers, will also be amended. The authority to develop accounting standards, namely the IASB, shall improve the valuation of financial instruments: the market value accounting framework was reaffirmed, but with the need to improve the standards when the products are not liquid and their investment horizon. Evidence of the new climate, the guardians of the American accounting law took yesterday the lead by relaxing the doctrine of the "fair value". A measure whose impact on the results of the banks should be fast, which was particularly well received by the markets. Banks will also be able to proceed with "dynamic provisions" to be at the top of the cycle, a mattress of safety. These amendments must be also taken into account before the end of 2009.

Another point of importance: the twenty were agreed on the need to create a simple, comparable at the international level, additional standard for capturing the off-balance sheet of banks, which are housed such securitization vehicles.

A College of supervisors

The question of the treatment of toxic assets on the other hand did not object to new provisions with those of the Summit of Horsham (relating to procedures and the respect of competition).

The financial rating agencies must also register with the regulators, in consistency with the code of IOSCO (International Organization of securities commissions), which brings together the market surveillance authorities. Agencies shall particularly differentiate ratings of structured products and simple debt securities, and communicate more seamlessly their hypotheses of scoring.

Finally, the twenty committed themselves to establish before June 2009, for each international institution, a College of supervisors meeting once a year. This Bank in different countries and will be coordinated between all the concerned regulators control.