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Second Annual Survey of Market Practitioners:
Questionnaire and Survey Results - Part Two
Note: All responses given in percentages (%)
Part B: Reducing and managing risks, priorities for action
| We will define transparency as the proportion of transaction-related knowledge that can be considered a public good available to all at zero or very low access cost, as a result of: regulatory constraints; including reporting and disclosure requirements; tools and networks available to implement these regulatory obligations; market practices. |
3. Enhancing Transparency
-
To avoid another "Enron", do you think measures to increase market transparency are:
49
A priority 43
Relevant but limited 7
Without effect 1
Counter-productive - How do you assess the present level of transparency in the market with which you are most familiar?
21
Satisfactory 56
Only partially satisfactory 21
Insufficient 2
It already absorbs too much time and resources - Which of the following measures would significantly reduce information-related risks in capital markets?
22
Using IAS accounting standards globally, US included 17
Tightening reporting requirements 15
Harmonizing reporting requirements across jurisdictions 24
Banning accounting firms from doing consulting work for their audit clients 11
Tightening regulation of auditors (end of self-regulation) 6
Increasing the amount of available market data 5
Opening market data consolidation to competition
4. Reinforcing market technology and infrastructures after September 11
| With September 11 in mind, we'll define resilience as the capacity to absorb unpredicted shocks and continue operating in the face of major disruptions in physical and human systems. |
- How do you assess the performance of infrastructure and technology in your specific market?
In terms of resilience
15
Very satisfactory 69
Satisfactory 11
Generally insufficient 5
Insufficient for cross-border activity
In terms of efficiency
11
Outstanding 62
Satisfactory 21
generally insufficient 6
Insufficient for cross-border activity - Which one of the following five measures would work best to strengthen capital markets?
In terms of resilience In terms of efficiency Generalization of Internet-based solutions
22 10 Use of XML standards
7 7 T+1 settlement
16 4 Global initiatives in Straight-Through Processing (GSTPA, Omgeo, etc.)
26 39 Generalizing the use of central counterparties (CCP) and netting in as many markets as possible
29 40 - Is the best way forward for the integration of market infrastructures through:
21
higher integration of trading, clearing and settlement activities ("vertical silos")? 11
Integration of cash markets with their related derivatives markets? 34
Horizontal consolidation across borders? 34
An "open network architecture" that lets markets decide?
5. Regulatory harmonization and the fight against money laundering
| With the Barings and Asian crises in mind, we will ask whether and how regulatory harmonization can significantly reduce risks. |
- When trying to curb instability and risks in capital markets, do you think that harmonizing national market regulations is:
32
a key priority 62
Relevant but limited 4
Without effect 2
Counter-productive - In your opinion, is the "fight against terrorism" going to substantially accelerate coordination of regulators across borders?
51
Yes 49
No - Which of the following regulatory measures could significantly reduce credit and market risks in capital markets?
25
Tightening internal compliance procedures of banks and financial intermediaries ("know your customer", reporting, etc.) 27
Tightening controls on offshore-centers' regulation and practices 16
Creation of a "Securities and Exchange Commission" in Europe on the US model 19
Much higher cooperation between regulators in fora like the Financial Stability Forum, IOSCO, etc. 7
The adoption of IAS accounting standards globally 5
The elaboration of "sovereign bankruptcy procedures"
6. Improving Risk Management processes and systems
| With the Enron and Japanese banking crises in mind, we will ask how new approaches to risk definition, measurement and reporting can improve financial stability. |
- Do you feel that the new Basel Capital Accord and the IAS accounting principles reflect a fundamental change in the perception of risk today?
64
Yes 36
No - Do you feel that these developments will induce financial institutions into implementing radically different risk management practices?
43
Yes 44
Yes, but only for large international institutions 13
No - Do you think that mark to market ("fair value") should be applied to all aspects of corporate and banking accounting even if it can create much higher volatility?
56
Yes 44
No - Do you think that the combination of mark-to-market ("fair value") and the new "McDonough ratios" could have the unwanted effect of making banks more vulnerable to recessions and market crashes?
53
Yes, at least for some key banking activities 47
Not significantly
7. Bridging the cultural divide
| We'll define a market culture as the set of procedures, habits, mutual expectations and other forms of "tacit knowledge" needed to operate successfully in a given market. |
-
In assessing and managing risk, how important is it for your company to adapt to the market cultures of the countries/zones it operates in?
5
Not relevant for our type of markets 21
Useful 39
Very important 35
Absolutely critical - Do you think that market cultures have a major influence on the actual level of capital markets' openness?
90
Yes 10
No - Are "fair value" and "mark-to-market" providing the basis for a convergence of risk-management cultures across sectors (insurance, banking, etc.) and across markets?
42
Yes 53
Not to the point of overcoming present differences in risk and market cultures 5
Not at all
Part C: More About You
Would you specifically describe yourself as a:
Return to Questionnaire and Survey Results - Part One.
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