In the face of mounting evidence of financial fraud and its continued negative impact on recovery efforts, the Group of 20 should swiftly implement financial reforms that ensure ethical corporate governance of financial institutions, said Transparency International, the anti-corruption organisation, ahead of the G20 finance ministers and central bank governors meeting in Washington, D.C. this week. Good corporate governance is critical to sustainable financial institutions.
“The time to act is now. It is two years since the onset of the financial crisis and the critically needed reforms to protect the general public from fraud must be fully implemented. The current scandals underline the need for better oversight and efficient law enforcement,” said Huguette Labelle, Chair of TI.
TI is calling for the G20 to implement the financial regulations they outlined at the end of 2008 as the main structural solutions to averting future crises. The complexity involving new regulations needed on derivative trading, hedge funds, “too big to fail” institutions or prudential standards should not be a cause for any delay.
Regulatory bodies should continue to strengthen the transparency of all financial products marketed to investors, ensure clear requirements for comprehensive disclosure, and prevent abuses of off-balance sheet instruments. Individuals as well as firms should be sanctioned for fraud.
“Lack of corporate governance, weak ethics and poor regulation was at the heart of the financial crisis. This should not be allowed to happen again. Any corporate communication to investors and to the general public should be designed to inform them, and not to purposely sell weak products or publish dressed up quarterly figures,” said Labelle.
“If anyone has any doubt about the urgent need for the G-20 to make integrity a crucial issue in global financial reform, then they just have to look at today’s newspaper headlines,” said Labelle.
In 2009, the financial meltdown directly prevented 50 million people in the developing world from escaping abject poverty, according to the World Bank.
Transparency International urges this week’s meeting to consider its comprehensive analysis of the G20 Action Plan. The integration of good governance and anti-corruption measures are critical to the sustainability and effectiveness of the reform measures.
Transparency International is the civil society organisation leading the fight against corruption
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