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Improved accounting rules vital in boosting investor confidence

Improved accounting rules vital in boosting investor confidence
By Florence Bupe
Tuesday August 28, 2007 [04:00]

THE strengthening of regulatory and legal frameworks and improved accounting rules are vital in boosting investor confidence, International Monetary Fund (IMF) managing director Rodrigo de Rato has observed. De Rato said investors were more attracted to economies that offered solid and stable economic regulations.

“Derivatives markets can make an important contribution to risk management and diversification,” he noted.

De Rato said adequate protection for investors and borrowers should be put in place, based on the conventional tools of risk weighting, capital adequacy and loan classification.

De Rato also said the enhancement of equity markets and corporate bonds were important in the development of economies.

“Another important area for development is corporate bonds and equity markets. There are a number of steps that governments and regulators can take to increase the demand for and supply of such bonds,” de Rato said. “Developing a well-functioning market for public debt helps establish benchmark yields and supplies infrastructure that can be used in other markets.”

De Rato said improved equity markets could also ease the settlement of pensions for governments in developing economies. He advised that transparency in lending and equity market transactions should be encouraged for enhanced economic development.

“Transparency in lending should be encouraged. This means giving consumers information that is relevant,” de Rato. “Financial advice should be readily available from governments and regulatory agencies.”

He said macroeconomic stability was needed to further develop credit markets.
“Clearly, the fundamental condition for the development of all credit markets, including household credit, is macroeconomic stability. We have learned time and again that credit markets will only take off when certainties about inflation, interest rates and the exchange rate are reduced to reasonable levels,” said de Rato.

Labels: ACCOUNTING, IMF, RODRIGO DE RATO

posted by MrK @ 3:11 AM