The need for transparency in financial markets

Leaders of the four largest European economies – the UK, Germany, Italy and France – have this year repeatedly urged financial institutions to boost transparency and better monitor risks. This is because the current financial crisis has revealed shortcomings in the processes and performances of corporate boards which have led to high-profile corporate failures and the wiping out of billions in stocks and shares.

Furthermore, this recession, like every one before it, will undoubtedly bring with it another unwelcome side-effect – an increase in financial crime, such as attempted frauds and money laundering.

These crimes will not simply be limited to people creating false suppliers or not recording some cash sales, but will extend to multi-layered international transactions. While financial crime cannot be stopped, it can more easily be detected in an environment where corporate transparency is encouraged and embraced.

A commitment to transparency creates an environment in which those who fall short of good practice may find it more than a little uncomfortable when their stakeholders – and regulators – begin to ask questions about what they might have to hide.

Comments

[Melinda storer]

Really nice article I think that in some cases there is need of transparency must.

[Rajeeb Hassan]

Though the issue of transperency has been much stressed upon for the global corporates by global leaders off late, I believe the same call has not been adequately reciprocated for the state-owned companies.

Just look at the recent debt crisis in Dubai. As it stands today, we are yet to conclusively know how much Dubai government and its affiliated companies actually owes to investors? Is it $100bn as S&P says or more than that?

I believe banks and financial institutions that have invested in Dubai have been subject to less than adequate disclosures and transparency. If state-owned enterprises do resort to alleged foul play regarding such basic corporate governance practices, where are the incentives for the private companies?