RSS FeedBy M. Isi Eromosele
During the past three years, the world has collectively suffered a most severe financial crisis. Nations across the world, especially the developed ones, have endured high unemployment, failing businesses, falling home prices and declining savings. Governments and Central Banks have been forced to take extraordinary actions to revive the global financial system.
The causes of this continuing global financial crisis go back decades. Through the late 1990s and early 2000s, the world economy enjoyed an unprecedented boom that fostered a spirit of complacency among financial institutions, intermediaries and investors. This in turn bred exaggerated expectations about the resilience of the global financial markets and the firms within them. Rising asset prices, in particular within the real estate market, hid weak credit underwriting standards and masked the growing leverage throughout the system.
At most large global financial companies, risk management systems failed to keep pace with the complexity inherent in new sophisticated financial products and services. There was pervasive lack of transparency and standards in the securitized loan markets, which resulted in the weakening of underwriting standards.
Market discipline basically broke down as investors increasingly relied on credit rating agencies. Compensation practices throughout the global financial industry rewarded short-term profits at the expense of long-term value.
The standards for access to consumer credit were dramatically lowered, especially in the real estate market in the United States. This resulted in a binge of borrowing by consumers who did not have the monetary means to pay back the funds they were borrowing from diversified financial companies.
Consumers were not educated enough to realize the financial trap they were falling into.
With the ongoing severe financial crisis in Europe as a backdrop, it is imperative that the regulations governing the global financial system need complete retooling and reorganization to restore confidence in the integrity of global finance. There is an urgent need to reform the global financial regulatory system to put the world economy on track for a sustained recovery.
A new foundation for financial regulation and supervision must be built from the ground up. It must be simpler and more effectively enforced, designed to protect consumers as well as investors while it rewards innovation and is able to adapt and evolve with changes that may occur within the global financial markets.
At Oseme Finance, we propose the following financial reforms:
The Promotion Of Robust Supervision and Regulation Of Financial Firms
Stringent supervision and oversight should be established to closely monitor those major financial institutions that are vital to global marketing functions. There should be clear accountability in financial oversight and supervision.
Stronger capital requirements must be established for all financial firms, especially the very large ones. Loopholes that allowed some financial institutions to evade bank holding regulations should be eliminated forthwith.
The Establishment of Comprehensive Supervision of Financial Markets
Major financial markets must be strengthened enough to withstand system-wide stress as well as global financial shocks. There must be enhanced regulation of securitization markets, including the establishment of new requirements for market transparency as well as stricter regulation of credit rating agencies.
Added Protection For Consumers and Investors From Financial Manipulation
There is a need for strong and consistent regulations and closer oversight of consumer financial services and investment firms. This would include close scrutiny of the practices of transparency, simplicity, fairness, fairness, accountability and credit access.
Global Regulatory Standards Need To be Vastly Improved
The challenges to the world financial system are global ones. The level of cooperation among the developed nations and the newly empowered emerging nations must rise beyond it has been to affect finding long-lasting solutions to the long running financial crisis as well as ensure that it does not happen again.
These international reforms should include improved oversight of global financial markets, coordinated supervision of international cross-country firms and enhancement of world-wide crisis management components.
M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance
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