Jane Diplock AO Chairman, Securities Commission New Zealand
Jane Diplock AO Chairman, Securities Commission New Zealand & Executive Committee, IOSCO Corporate governance: An effective tool for rebuilding the financial world Financial Services Academy and Securities and Exchange Commission of Sri Lanka Continuous Professional Development Programme 28 September 2010, Colombo, Sri Lanka The lessons of the global financial crisis The interconnectedness of global markets disruption in one market can cause major disruptions in others
markets are global Markets matter Prudential regulation if institutions virtuous twins needed Governance matters Traditional standards of conduct overwhelmed by unregulated market forces a crisis of ethic proportions Why corporate governance matters
Good corporate governance is good business Vital plank in investor protection Enhances investor confidence Without investor confidence, securities markets stagnate or decline What is good governance? Codification of sound ethical standards Prevents self-interest getting out of hand
NZ Securities Commissions nine corporate governance principles set a minimum standard Increasing public expectation that governance be comprehensive: environmental, social and corporate governance Reporting on environment, social and governance aspects Good governance is good business 84% of 200 global institutional investors willing to pay premium for shares in a well-governed company 11% of US assets tied up in socially responsible investment
US Securities and Exchange Commission (SEC): companies must disclose any information "material" to investors World Federation of Stock Exchanges report: move towards more sustainable business models Integrated reporting
Presents panorama rather than just snapshot Combines ESG and financials in single report Ties governance into basic business processes Mainstreams non-financial goals International awareness of integrated reporting growing and deepening The International Integrated Reporting Committee Steering committee of 33: CEOs of global companies, leading accountancy professionals, standard setters sustainable development experts, regulators, academics
Remit: to create a globally accepted framework for accounting for sustainability in a consistent and comparable format Companies to disclose overall performance to meet needs of more sustainable global economic model IOSCO Recognised standard setter for world's securities markets 119 jurisdictional members regulating more than 95% of world's securities markets Works closely with sister organisations responsible for banking and insurance standard setting
Exists to promote global financial stability Holds to three basic premises: markets are global market stability is crucial to economic health good market conduct is crucial to market stability IOSCOs work on financial reporting Sound financial reporting a necessity:
enhances market transparency mitigates systemic risk levels the playing field for investors enhances investor confidence encourages people to invest in securities markets grows the economy IOSCO and members: comment on International Accounting Standards Board (IASB) draft standards contribute to development of IASs
closely involved in work of IASB Monitoring Board and Financial Crisis Advisory Group (FCAG) Financial Crisis Advisory Group Formed 2008 to investigate and advise on implications of the GFC for financial reporting Comprises 18 recognised financial market leaders July 2009 report recommendations:
importance of effective financial reporting recognition of the limitations of financial reporting convergence of accounting standards standard-setter independence and accountability Conclusion Old securities market models no longer work Vital to recognise importance of the virtual twins Network thinking helps us understand systemic risk and develop regulatory tools Jurisdictional frameworks will be pulled into broader international framework: this is where our best interests lie
"To now rebuild without rethinking would expose the financial system in the future to a repeat of the crisis just passed. Australia Securities and Investment Commission Chief Economist Alex Erskine Thank you Jane Diplock AO www.seccom.govt.nz www.iosco.org
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