Rebuilding stable financial markets

The financial crisis marks the beginning of a new era on financial markets. Massive change has set in. This creates the opportunity to rebuild a strong system that operates on a sufficient capital base, where the risks accumulated in financial institutions balance sheets correspond to their risk-bearing capabilities, where corporate behavior is aligned to long-term return incentives instead of short-term leveraging and speculation and where investors and borrowers can count on long-term stability and are advised in their best interest. Business models will have to change, we need better regulation and more effective international supervision, with a holistic view on risks, combining micro- and macro-prudential perspectives.

In the end we should strive to create financial markets where

Consumers are financially literate and making independent decisions on their financial needs, choosing from a wealth of solid and comprehensible financial products for saving, financing and risk management.

Corporations have sufficient access also to long-term financial funds and can draw on proven instruments of risk management to shield them against various calamities and financial risks.

Institutional Investors are capable of analyzing the inherent risks of their portfolios based on concise information on the financial products they buy; if using external expertise such as rating agencies they understand their models and underlying assumptions.

Financial Service Providers operate under prudent supervision and are able to absorb risks on behalf of their customers; they strive to develop a business relationship into a long-term partnership by offering high quality advice and transparent products.

Governments concentrate on setting an internationally agreed regulatory
framework and need not interfere into the businesses of banks and insurers.

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