19June08Session1part1
Speaker Key
CH
Gerrit Zalm, Chairman IASC Foundation
KE
Kenneth Sullivan, Senior Financial Sector Expert,International Monetary Fund
SH
Henricus Seerden, Head of the IFRS Desk, European Investment Bank
MI
Michael McKersie, Assistant Director, Capital Markets, Association of British
Insurers
JU
Junichi Maruyama, Deputy Commissioner for International Affairs, Financial
Services Agency (Japan)
UM
Unidentified Male
UF2
Unidentified Male2
UF3
Unidentified Male3
UAM Unidentified Australian Male
PA
Paul Lee, Member of The Corporate Reporting Users’ Forum Director,
Hermes Equity Ownership Service
CK
Christian Krohn, Director Regulatory Policy, Securities Industry and Financial
Markets Association
MH
Mikael Hagström, Secretary, CFO Task Force, European Round Table
RD
Ray DeAngelo, Managing Director Member and Society Division , Chartered
Financial Analyst Institute
AN
Antonio Vegezzi, Trustee IASC Foundation
TO
Tom Seidenstein, Director of Operations, IASC Foundation
PH
Philip A Laskawy, Vice Chairman, IASC Foundation
CH
Welcome to a meeting in a very intimate setting. We have four panels today,
to discuss our proposals on the constitution and especially, the proposal on what we
call public accountability and the proposal on the composition of the board. We have
had already, some opportunity to discuss our ideas with European Parliament. I went
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to the Economic and Monetary Committee of the European Parliament. I was allowed
to give a presentation there and there were questions and remarks. I recently was also
in Japan, talked to the regulator, the business community and also politicians and also
the minister for financial services. We’ve had the opportunity to discuss the issues
with the standards advisory council already in February. And my colleagues [unclear]
did the same thing, in the context they had. And we came to the conclusion, that it
would be a good idea to have a kind of final check, before we officially present our
proposals, by having these round tables, before we formally publish them. And then
in July, the idea is that we have a meeting in Washington, as Trustees, then we can
decide on the final proposal we put forward, for public comment, for everybody. The
reasons for the constitution review are simple, in the sense that we are obliged to do it
every five years. What we did decide, is to make a fast track approach as far as the
public accountability and the composition of the board is concerned. Also with the
idea that some countries, in deciding whether or not to apply, IFRS, this may be an
important theme, before they would make such kind of decision. And if we are also
early in the decision on the board composition, we can take it into account with next
appointments at an earlier stage, than when we wait for the complete finish of our
constitutional review. Maybe a few words on the public accountability issue, I have
been in politics in my formal life. I’ve even been a member of parliament. So I can
understand members of parliament who are saying this is a private organisation, it
makes IFRSs, so we cannot change and we have to apply it, so they’re actually setting
law and there’s no link to any democratic institution or public authority. So what we
are trying to do in this proposal is make a link to the public authorities. It should not
lead to the misunderstanding that we are cutting the links we are having with our
stakeholders, in the sense of the preparers, the users and the auditors. We want to
keep that at least, at the same level as it is now, or intensify that. But there must be,
there is a difference of course, between privately interested parties, like users,
preparers and auditors and public authorities, who are of a different kind, so to say.
So that’s why we wanted to make proposals, which filled that gap. At the same time,
we are of course, very keen on keeping any panels off the standards setting process
and the quality of the standards setting process and to guarantee there is no influence
from particular interest groups, or political influence, on the way the standards are set
and the content of the standards. And I think that is an important thing, so that means
a bit of balancing between the public accountability, number one and keeping the
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independence of the standards setting process. What we propose as far as the link to
the public sector is that we make a link to a Monitoring Group. And that Monitoring
Group should also end the self appointment process, which is now the case at the
trustee level; Trustees appoint their successors etc that is a bit of a queer thing. What
we are proposing, is that the Trustees will make proposals as far as new trustee
appointments are concerned, taking into account, also input from our side and also
from the Monitoring Group. We are doing the proposals and the Monitoring Group is
to decide yes or no. They can say no then we have to make a new proposal. And they
can say yes and then of course, things are going quite well. The other thing is of
course, that they should oversee our work. They should check whether we are doing
our job properly, well it’s all documented in the papers we sent you. Talking about
the composition of the Monitoring Group, the idea is that we’ll have four regulators,
representatives from the regulators community, one from the European Commission,
IMF and World Bank, IMF and World Bank, because they take into account the
broader picture and not only the regulators’ view. If the constitution is changed, we
should have a MOU [Memorandum of Understanding] with the Monitoring Group
[MG], about the practical working process. We should at least; meet once a year is
the idea. Either the Trustees as a whole, or a representation of the Trustees with the
Monitoring Group, as I said, one of the jobs of the Monitoring Group will be the
appointment and decision of appointment of Trustees and at the same time, look
whether the procedures are kept well, by the Trustees, as is written in the constitution.
Then the second proposal concerns the composition of the board. We think that we
should stick to the emphasis on professional competence and practical experience. At
the same time, already in the present decision making, we also take into account, the
geographical balance. It would not be understood I think if we would have a board
completely from Europeans or Americans or whatever. So implicitly, we already take
that into account. And we think that it would be reasonable to make that explicit and
to have explicit geographical distribution, without completely fixing it. So in the
proposal we put forward, we would pre allocate four board memberships for Europe,
four for North America and four for Asia, Oceania and then we have four left, which
are flexible. But of course we should take into account that also Africa, South
America, will have the wish to be represented, but we have some flexibility still left,
if we completely honour that wish. We increased the number to 16. One of the
reasons is as more and more countries are now linking to IFRS, there is also a need
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from the board, to fulfil the liaison function in the region and I think that if we have
16 board members, we always have enough capacity in the centre, for real work,
standard settings process. And while at the same time, we have more capacity for the
liaison and the explanation function, which also board members have to do. These
two issues are at the first stage of the constitution review, we will create a discussion
document in October, November this year, for the rest of the constitution review, that
will be a very open paper, so that before we come with a real proposal, it’s more a
questionnaire about what are the ideas of changing issues, which are now in the
constitution. And then in 2009 we’ll come up with a proposal and the consultation
process as usual. So these are my introductory remarks and I propose we now go for
quinquinnial, [?] to say it in English, so you can give your fist impressions on what is
on the table. Then my idea would be that from our side, we react on what you put
forward and then we can have a more informal discussion. And as I said, it’s an
intimate grouping here, so probably there will be better possibility, because of that
also, for discussion in the second part of the meeting. Can I start with you Mr
Sullivan?
KE
Thank you very much. First of all, I’m Kenneth Sullivan from the
International Monetary Fund. And I’m delighted that we’re at this situation, purely
because of the success of IFRS, as it’s evolution as a world class set of accounting
standards, that we have these problems of governance and the need constitutional
review. From the IMF perspective, we would like this review to start from the
assumption, that by the time of the next quinquinnial review, every major economy in
the world, would have either adopted or converged with IFRS and so therefore, we
need the constitutional review, to build a framework that allows for the expansion of
adopters, without putting undue stress on people’s assumptions or perceptions of
appropriateness and representation, within the governance framework. We also very
much to support the idea, that not only must the process of the constitutional review
be transparent, but it also be seen to be transparent. And in that sense, we
congratulate the board and foundation, for these open consultation sessions and also
for the plans going forward, for a transparent review process. I think Gerrit touched
on crucial issue, is that as countries have adopted IFRS, they have surrendered
sovereignty of some form, to a private body and therefore, there is a need for some
form of governance body. And because of that, the IMF supports the idea of the
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constitution of a governance function, to oversee the standards setting process that has
some form of public accountability. The fund is also acutely aware of the problems
attendant to this, because it also runs the risk of over politicisation of the governance
and standards setting process. And we are very keen to avoid this process, but we
need to also be aware that, for ownership of the governance process, we have to be
able to ensure that all the relevant parties, whether it be on a geographic, a sectoral or
functional basis, are able to acknowledge the integrity of the process and accept that
without necessarily having the ability for direct participation in it. And so this is the
challenge for us, to have a forum which allows acceptance, without politicisation. As
far as the composition of the body goes, we need to focus on the fact that this is a
governance function; it is not an operational function. And therefore, the
representation on the board should be those with governance excellence, rather than
technical competence. And I think, if we follow that through, we need to make sure
that the representation on the group, don’t have over representation, or don’t exert any
particular sectoral preference in the standards setting process. This means that this
brings us on to having a look at how we would view the terms of reference, for the
governance body. And I think that really, the equivalent in a private sector
organisation would be something along the lines of an audit committee. Where we
draw very strict lines between the operational activities of internal controls, preparing
accounts, governance and the monitoring of that process and I think it’s very
important for the credibility of the governing board, to be able to draw a clear
distinction in its terms of reference, the memorandum of understanding, between the
governance and operational activity. And I think there are specific examples of this
that we’d need to consider carefully. First of all would be the process of nominating
Trustees and the process of approving Trustees. I think there is a discussion to be had
there, as to whether there is a conflict of interest and being able to nominate the
Trustees that you are able to approve, particularly if you are the only body which is
able to nominate. The other issue is the discussions about, what is the board’s role,
the monitoring committee’s role in setting the agenda, or in the agenda process for the
IE, IASB. And again, I think the audit committee would approve, without necessarily
proposing and I think these are issues, these are very important issues, and I think
they require careful reflection and consideration, before we finalise the arrangement.
I then also, the discussion of the terms of reference and the composition of the
governing committee, also has to reflect the existing, the ongoing role and
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composition of the existing bodies. There is already a high level advisory group, for
trustee appointments, which advise the foundation. And I’m not sure whether the
intention is for that to continue, or whether it’s to be folded into the functions of the
Monitoring Group. And also, I think the constitutional review, really needs to review
the role and duties of the governing committee, in relation to the standards advisory
council. You know, I sit on the standards advisory council and I’m aware, that as
IFRS gains greater international acceptance, there is growing pressure for
representation, not only from legislators, but also from regulators, users, preparers,
investors, analysts, for representation on the body. And I think that, given the fact
that the standards advisory council is a body from the IASCF, that there is a dialogue
that is required there, to ensure that somewhere between the governing council and
the standards advisory council, there is an international framework, that enables all
people to have some form of representation, or some sense of due ownership of the
process. And I’m not sure, we don’t have the answers, we are aware that this is a
difficult problem, but we don’t have the answers. But maybe in the discussions, we
can think laterally about ideas of rotating representation on the bodies, or regional
versions of the bodies, or whatever. I think the fund is of the preference that at the
moment, the establishment of the agenda for the standards setting process is a
function that lies with the IASB and reflects it’s discussions with the full range of
users. It’s amazing, the diversity of the stakeholder groups, for IFRS and you’re
never going to please everyone and I guess it’s the fact that if everyone is grizzling at
you, then you’ve perhaps got it right. But I think this is a hugely fraught issue,
because IFRS, IASB resources are limited, but the demands seem to be expanding
exponentially. And so the reconciliation of the demands is very difficult. And I think
that there’s an issue there, for the IASB to propose and the governing council to
dispose, to approve that the due process has been followed appropriately. The other
issue is that we have some interest in, is the issue of determining representation on the
governing body, and also on the Standards Advisory Council [SAC]. At the moment,
representation in the advisory positions is at the invitation of the IASCF. And I’m not
sure if this is the way going forward, particularly if the membership of the governing
council is non revolving. And that the SAC membership is at the IASCF’s invitation.
And I’m not sure that representation at the pleasure of the IASCF, is the optimal
mechanism to get people to buy into the process, both of standards setting and the
governance. So I think that’s all I wanted to say on the issue of the structure in the
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governing council. As far as the composition of the board members go, I think the
IMF is supportive of the expansion of the geographical representation, but we would
stress the fact that, the criteria for appointment within the geographical allocation, has
to remain technical expertise and practical experience. Thank you very much.
CH
Thank you very much. Mr Seerden?
SE
Yes, thank you chairman. So, I am representing European Investment Bank
here today. We welcome this opportunity to let our voice speak. I will start with the
geographical component that should strengthen the legitimacy of the board. Of
course, we welcome the fact that you want to spread the origin of the board members
all over the planet, but I think we should counter balance that, by requiring and
probably requiring explicitly from each and every board member, that they do not
regard their origin as their constituency. Their constituency should be the whole
world. And we should not have an EU board member act in the interest of the EU, a
US board member only in the interest of the US. As for my constituency the EU,
there is an EU endorsement process, but that should not start within the IS board.
That should start just outside the door of 30, Cannon Street and not inside. So we
would like that to be explicitly and one of the paragraphs where that could be
proposed is 17A of the constitution, where we could ask IASB members to be acting
in the public and international interest. Then as for the m
Monitoring Group, in the current wording of paragraph 18, as it is suggested in the
paragraph over the constitution, we feel the wording is a bit restrictive. I heard from
your introduction, Mr Chairman that you are determined to keep a broad consultation
among all stakeholders, but as written, the text of paragraph 18 seems to indicate that
the Monitoring Group is the only group that will advise the Trustees and it might be
useful to broaden up that text a little bit. And then finally, with regards to I would
say, the border line between the standard setter and the trustee, it is true that the board
should continue to work independently, but on the other side, in the current
constitution, there are some texts whereby, the Trustees also have this power of
setting the agenda, or at least giving the broad outlines of the agenda of the board and
maybe, there in order to avoid criticism, an even brighter border line between the
oversight on the one hand and the standard setting on the other hand, would be
welcome. Thank you.
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CH
Thank you very much. Mr. Mckersey.
MI
Thank you Chairman. I am Michael Mckersey from the Association of British
Insurers in London, representing institutional investors and also indeed, preparers of
accounts in their capacity as providers of insurance services. But I’m particularly
from the investor perspective today. This subject is one which is of importance to
institutional investors who are in many ways, the key users of accounts. The agenda
paper I think, has demonstrated a helpful recognition of some of the political and
public interest dimensions to the ISBs activities. And therefore, the reason why that
needs to be reflected in what Mr Sullivan has quite correctly identified, as governance
structures and arrangements. That is absolutely of fundamental importance to the
effectiveness of the IASB. The particular thing though, where I think concern would
exist, is in respect of precisely what the Monitoring Group is being asked to do and
how the Monitoring Group will be composed. There is a pretty clear evidence of a
regulatory dimension to that Monitoring Group’s role, which possibly goes rather
further than one would want to see, in achieving a proper balance between the
interests of all users of accounts. And we should recognise that the primary purpose
of accounts is indeed to report to shareholders. I think the public interest dimension is
a very important one. I think it is vital that is properly reflected in these overall
governance structures and therefore, the moves being proposed are broadly in the
right direction. But I think that the areas which do need to be very carefully
scrutinised, are those around to what degree regulators should really be exerting a
strong influence on matters, or whether they should be very much in the background,
as a very helpful sounding board perhaps, enabling a bit of reality testing, with the
political realities that exist. But I do not think we want to go very far down that road,
without ensuring that we do address the balance. It is essential that the Trustees
themselves are independent. And I think if the Trustees are beholden to the
Monitoring Group that might be an area of concern. The independence of the
Trustees is vital and that is something which allows the board itself to operate in a
professional and an effective manner, without undue influence being brought to bear.
So I think concerns around the degree of politicisation of this process, but a
recognition yes, that recognition of the public accountability is important. Whether
users should be properly as it where, represented as such, on the Monitoring Group, is
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a matter for debate. There are practicalities around that, but I think they should be
seen as it were, to be the people who are there at the table, being served by what the
Monitoring Group is trying to achieve. Thank you.
CH
Thank you very much, for your clear input. Mr Meriyama.
JU
Thank you Mr Chairman. First of all, I just would like to start my statement
by complimenting IASC and IASB for achieving this kind of great [unclear] since its
establishment in 2001. The private sector in the private sector that you have been
doing marvellous work and I first see now that it’s penetrating into the global, you
know, all over the world. So that’s mean that IFRS has become a public good, so
public good means that’s probably why we starting discussing about accountability
and governance and also reporting to somebody. So probably that the direction that
we have been discussing right now, is that the communication between the regulatory
authorities, the public authorities and stakeholders enhance the public accountability,
very, very right direction I think. And probably looking back at the recent five years,
since last time of the revision or the reviewing of the constitution, two things
happened. The first one is that IFRS has become the public good, so that it has to
carry that more heavier responsibility of the accountability, that’s one thing. The
second one is that while it’s not directly related to the ISCF and IASB their activities,
however, the [unclear] has succeeded, you know it has sort of like enhancing it’s
accountability without resulting in injuring to it’s dependents at all, so that it might be
some sort of a very good example. I’m not saying that we have to take; you know we
have to be similar to those kind of effort as IFAC, but IFAC has done a tremendous
job in their side as well. So having said that that this idea of the establishment of the
Monitoring Group, which is Mr Chairman, you said the link to the public authority,
especially as it is the public authority who carries the responsibility of the
endorsement and enforcement of these standards. It’s a very, very important thing, so
that Japanese FSAs strongly support the direction of this discussion, to establish the
Monitoring Group or monitoring body. A couple of technical comments, but its
nothing to do with that fundamental one, this proposal of the constitution review is
probably that the paragraph 18 as mentioned by Mr Selan, it’s slightly different
prospective, but the first part of this paragraph, under the new arrangement, the
Trustees and the responsibility of the trustee would remain unaltered, is a bit sort of
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like, doesn’t agree perfectly with my mind, because the responsibility of the trustee is
part of the responsibility which is a monitoring responsibility of the procedure of the
standards setting, might be transferred to the Monitoring Group, this is just a matter of
the wording, I think. But basic Trustees and the standard independents, yes of course,
it’s important. And of course the basic governance and the foundation ISF foundation
will remain the way the Trustees are, nothing against it of course. But as a lawyer by
education, that this would remain unaltered, is a bit sort of like, it doesn’t agree with
my mind. And also from para 19 through to 20, 21, and these are describing the
function, the detailed function of the monitoring body, however, if we think about
sector, the function of the monitoring body, the monitoring body is monitoring the
activity of the IASC as well as the IASBs procedure. It’s a bit strange that the person
who should be monitored is describing the function of the monitoring organisation.
So of course, again, nothing against the contents, details of what has been described
here, but in concept it’s monitoring body itself through it’s charter or whatever,
should describe those kind of detailed function, rather than the constitution of the
IASCF, which should be monitored. So that’s the kind of… Of course, I’m not
saying, well this is describing, the description of this one is perfect, so nothing wrong
with that of course, but this is just a kind of conceptual exercise is that the person who
should be monitoring that somebody, should describe that monitoring function, not
the person who should be monitored do, is describing that function.
UM
Can we have discussion about that? I think we can do that. I don’t want to
interrupt your comments.
JU
Go ahead, yeah.
UM
I think you’ve raised an interesting point, one which I disagree with. And
that’s why I’m interrupting obviously. If I agreed with it, I wouldn’t interrupt. I
understand conceptually what you’re saying, that if there’s a Monitoring Group, the
Monitoring Group should maybe set its rules, but I think at least speaking for one
trustee, not speaking for the Trustees. I think there’s a concern, that I think Mr
McKersey mentioned, that if the Monitoring Group has unlimited ability to determine
what they want to do, then we end up potentially, in a politicised situation which, and
conceivably not taking into account, all the other interest groups, such as users,
10
preparers and everybody else, who really does have legitimate interest. So I think we
talk in our paper, about a memorandum of understanding with the Monitoring Group,
so the Monitoring Group is going to have the ability to determine what they think they
have to do, but on the other hand, I for one trustee, would strongly oppose having the
Monitoring Group determine what they should be doing, because I don’t think that
would be healthy for the independents. And that’s why I wanted to stop…
JU
I see your point, your point is taken. However, I’m afraid to say, I don’t agree
with you 100%. My point is like that, of course we have to delicately that the
[unclear] of balanced between not politicising these issues. But at the same time, that
if you are fully describing the function of the monitoring body here, in the
constitution 100%, that might be a bit strange that the monitoring body itself, has to
discuss amongst themselves, their detailed function. Of course, what I’m saying is
this is okay, but it seems to me that you are trying to describe everything in detail. So
that’s I don’t know, probably we can continue this point, this discussion, then I repeat,
I am not against the contents of what is described, just the sort of conceptual formality
is think that the Monitoring Group itself has to discuss it, still requires some detail,
that’s it. We have to leave some room for themselves, that’s it.
CH
But it’s also clear that we have to if, it is private organisation, we have our
own constitution, so we are voluntarily accepting some kind of Monitoring Group, but
not to the extent that maybe some people would want the Monitoring Group to…
JU
Fundamental power that should come from this constitution that’s no doubt,
right?
UF2
The very last point is that there is a need of transparency, so when somebody
reads the constitution, needs to know how it works. If the responsibility of the
Monitoring Group are referred in another document, you’re really giving a very
incomplete picture of the organisation, so there is a way probably formally, to quote
those paragraph, by referring to an agreement with the Monitoring Group and so
forth. But I think for the sake of completeness and transparency, somebody reading
the constitution, needs to understand what are the role…
11
JU
Of course, the charter itself should also be published for the sake of the
transparency, so if somebody like to make comment I would be very happy to…
SE
And also when there’s an opportunity for those who are supposed to become
Monitoring Group member to comment on the proposals that we have here on the
table. So in that sense, they can have an influence also, in the outcome. On top of
that Hamish, the new article 20, where it says that the Monitoring Group shall, after
it’s constitution, develop a charter that sets out organisational operational decision
making procedures, somehow, okay we don’t outline everything for that Monitoring
Group, before it exists. It’s a constitution, so actually the way it will operate, the way
it will put its emphasis, it will be the Monitoring Group itself that determines that, I
guess.
CH
This was an intermediate discussion; we now switch to Mr. Lee.
PA
Thank you. I’m Paul Lee; I come from an organisation called Home Equity
Ownership Service. We represent pension schemes from around the world. I’m also
a participant in the corporate reporting user’s forum. The comments that I’m going to
make are based on conversations that we at the Cruf [?]have had and I’m confident
that they represent the views of many Cruf members and indeed many users, but it’s
not a formal Cruf comment or response. Just to be clear on that. Firstly, to start with
the Monitoring Group, we acknowledge the political necessity of setting this up and
moving in this direction, but we are nervous that there is potential here for mission.
[unclear] The role we believe should be around calling the IASC foundation into
account and in being active in the appointment process for those Trustees. And the
Monitoring Group will be highly influential through that. But we’re nervous that
there may be an expectation that it will have influence over the IASB itself and over
the IASBs agenda. And that would be very troubling. And indeed, the constitution
has drafted and perhaps, later on we can talk in detail about the specific details that
I’m referring to, seems to anticipate that that might be a part of the Monitoring
Group’s role. And that worries users. Mr Chairman and others, you’ve talked about
this being a balancing act, it’s not clear to us that the balance is quite right yet. And I
think in that light, we would note that the public accountability will come at least as
much from the IASB being responsive to the views of users and preparers as it will be
12
to being responsive to public bodies, of other sorts. And indeed, the ISC Foundation
should be congratulated on the work that its done in the last couple of years in helping
the IASB to do a better job in interacting with users and preparers because, certainly,
we from the Croff [?] have noted a very significant improvement in the last year and a
half. So, that’s on the Monitoring Group.
On the Board constitution itself, again, I think, we acknowledge that there’s a political
necessity to increase the geographical diversity of the Board. Our nervousness is that
this might in some way impede bringing on high quality users and preparers to the
Board and that would be very troubling to us. Again, we would say it is more
important to have people with the right skills and the right backgrounds than it is to
have a specific set of geographical backgrounds.
And on the specific issue of the voting majority, I think we are nervous at seeing a
proposal for that to be diluted by staying at nine of an expanded Board. The simple
point’s been made to me that if seven Board members disagree with something,
maybe it’s more problematic and it ought to be thought about again, rather than
potentially going forward. So, we would suggest that the voting majority should be at
least ten of a Board of 16.
Finally, and very briefly, looking forward to the next stage of the constitutional
review, we think that the Trustees should consider having a greater role in helping the
IASB set its agenda going forwards. Users are frustrated by the Board’s apparent
slowness to accelerate some things that we think are extremely important ahead of a
number of things that we, frankly, don’t think are important. And perhaps the
Trustees could take a greater role in helping the Board set that agenda. That’s all I
have to say.
CH
Thank you very much, Mr Krohn?
CK
My name is Christian Krohn, I represent the Securities Industry and Financial
Markets Association, the SIFMA, both on the user side and also from the preparer
side in the accounting world. I’m just going to contain my comments to some very
general remarks. A lot of what has been said; at least from the user and preparer side,
13
I think that we can pretty much subscribe to. So, in very general terms, for us the key
is independence. It’s key for us that the IASB is and remains completely independent.
Setting accounting standards and disclosure requirements for global capital markets
must not be susceptible to interference from the political process, favoured
commercial interests, regional national bias or from any other form of vested interest.
That said, and this is where the balancing act, of course, comes in, the IASB must
demonstrate public accountability so that it can be relied upon as a professional
standard setting body and it’s to be responsive to the concerns of the authorities who
are in charge of protecting the integrity of the capital markets. We expect, we’re
hopeful, that the establishment of a Monitoring Group and with all the detailed
comments that will follow, not just today, but over the course of the next or two or
three months, I expect, to the composition and the exact role of that Monitoring
Group, we’re confident that that Monitoring Group will provide that responsiveness.
But I think a lot of work lies ahead of us in determining that, we’ve heard some of the
discussion today already.
Another important element for us is corporation and that’s not something that’s been
covered a lot today. I don’t know if that’s something for the Stage Two of the
consultation rocket but it relates to corporation, the need to ensure that once global
accounting standards have been set, they are applied, they’re implemented in a
consistent way across the globe. It would be of little use to have beautiful global
standards that are differently applied. With a view to, or looking at that corporation,
we think that one way of ensuring it would be that the Monitoring Group’s
composition reflect the global nature, the global perspective, the global adoption of
IFRS. And we welcome appropriate global representation on the Monitoring Group
from jurisdictions across the world.
And finally, and this is probably more on the practical side, for all of this to work, if
this is going to become primary global standard for high quality global accounting
standards, we have to develop an appropriate, necessary infrastructure to fulfil that
role, including the appropriate technical and industry expertise, a mechanism to
ensure due process to all interested parties and probably, most importantly, a secure
source of funding to achieve and maintain financial stability. And that concludes my
general remarks. I’ve got a whole host of comments and questions and etc on the
14
documents that have been sent out already. I hope we have some time to discuss
those today.
CH
Before giving the floor to Mr Hagström, I first want to say my condolences
about the Swedish Football team.
MH
Thank you very much, we had a tough night yesterday. Thank you for that.
I’m Mikael Hagström, I’m coming from the European Round Table and the CFU
Task Force. My daily work, then, will be responsible for all the group’s financial
reporting. And by that, of course, communicating with USSN [?] and regulatory
agencies, etc, and in respect of using IFRS standards. We could say that we of course
support very much the global principle based standards to be implemented in the
different countries around the world. Even if we now talk about European companies,
these companies of course have operations all over the globe and also then of course
have investors and financing institutions around the globe. So, we would like to of
course support everything that makes this happen. And we think that the Monitoring
Group, as such, could be such step to facilitate implementation of these global
standards.
Then, looking at the Monitoring Group as such, we think that also, the other interests
like the users and preparers, etc, could also be part of the Monitoring Group,
facilitating the development, then, of the standards. We heard here earlier about,
again, the set thing. I think that is the thing that is the most worrisome issue for the
preparers. That we have a lot on the table and we don’t think maybe it’s always in
our interest being preparers and presenting to our shareholders or our operations and
often our communication with the users and so on. So, we share the common fear
from Italy that somehow we need to have some kind of monitoring about, again,
dissecting [?]. Then, if that is the monitoring the group or if that will be the Trustees
in ISC that is of course something to be discussed.
When it comes to the number of members in the IASB, we also think that this is
something that makes it possible to implement the IFRS in different part of the world
to have representation from more countries, or more parts of the world. At the same
15
time I think that, of course, it’s important that was said here that you’re not
representing a single area, but of course the global mindset.
We also think that the voting minority should be somewhat strengthened, like the two
third minority or something like that, to be really sure that we have support for a new
standard when it’s being implemented. Just that.
CH
Thank you, Mr DeAngelo?
RD
Good morning, I’m Ray DeAngelo, I’m here representing the CFA Institute
Centre for Financial Market Integrity and we’re an organisation of professional
investors around the world. And I, too, appreciate the opportunity to provide some
early stage public input into your review process.
As most of my colleagues have already stated this morning, we too are extremely
supportive of maintaining an independent, sustainable standard setting function for
the international financial reporting standards that are free of political influence. We
agree in general with the new proposal to establish structures to ensure the
accountability of the IASB and the Trustees but we also believe that what we consider
the singular objective of these activities be made clear in defining this public
accountability. From our perspective, when all is said and done, the ultimate test of
these standards is not whether preparers find them easy to apply or whether auditors
find them easy to audit or whether regulators find them easy to enforce, but rather, the
ultimate test is whether investors who rely on this information are willing to provide
all the capital borrowers and issuers of securities with the capital needed to grow and
flourish at the lowest possible cost of capital.
Consequently, while we recognise that the Foundation has a wide variety of
responsibilities and corresponding accountabilities, we believe that the highest public
interest accountability must be to the capital markets and investors and that this
accountability must be made explicit in the constitution.
We also support, in general, the Trustees’ proposal to create a Monitoring Group with
responsibility for accountability to public authorities. However, as I’ve mentioned,
16
we believe that IFRS have the primary objective of serving investor interest, and then
the ultimate accountability of the Monitoring Group must be to the capital markets
and investors who rely on IFRS.
We have reviewed the proposed composition of the Monitoring Group and are
generally supportive of the organisations that have been initially identified. However,
as some others have noted this morning, we have found one notable omission in the
proposed membership and that has to do with the absence of any direct representation
from investors in the capital markets. We would suggest that that would be an
important addition to the composition of the Monitoring Group and I would like so
suggest perhaps two approaches for consideration by the Trustees in order to remedy
that particular situation.
One, of course, would be to add directly to the Monitoring Group representation of
several investors who indeed have a deep and direct experience analysing and
investing in the various market sectors, including credit securities, derivatives and
structured finance products, as well as ex would-be securities.
A second approach could be to provide for the appointment of a dozen or so investors
to an investor sub-committee of the Monitoring Group. In this second alternative, the
Chairperson and Vice Chairperson of the sub-committee would serve as designated
full members of the Monitoring Group. We believe it would be important for this
relationship to be a direct one, that is full membership, so that investors would have
the opportunity to directly contribute their knowledge and experience and concerns to
the deliberations of the Monitoring Group.
We also would add to the responsibility of the Monitoring Group the development of
a fully independent and sustainable source of funding for the IASB as has already
been noted this morning. We agree with the proposed expansion of the IASB from 12
fulltime and two part time members to 16. We also believe that the members should
be fulltime with no remaining responsibilities or obligations to any other bodies or
organisations. We think that would be very important.
17
We also concur with the proposed geographic distribution that has been proposed for
the Monitoring Group. I would note, however, that despite the objective of the
standard stated in paragraph F9 of the IASB’s framework, part A of paragraph 14 of
the IASC foundation constitution and principles that have been outlined recently by
SCC Chairman Cox, that the IASB should create standards that meet the needs of
investors, only one part time member or one 26th of the current membership weight,
which is 4%, is devoted to the direct participation of investors. We recommend that
the Trustees mandate a significant increase in the representation of investors on the
IASB. The representation should be sufficiently large and broad that major sectors of
the financial markets and securities can be represented. I would refer you to the
written statement that we have submitted to provide more amplification to the points
I’ve made here and I would like to thank you again for the opportunity to participate.
CH
Thank you very much for all the comments, I will go into a few issues but the
general picture is that the struggle here about balancing between the public
accountability and the independence issue is more or less the same as the struggle we
were doing. For the time being, I still think we did strike a kind of good balance. It
depends a lot, of course, on how the Monitoring Group is actually acting. I’m not too
much afraid that they are going to have a very big hands-on approach, apart from
what we described as their job, because they are all people who have a lot to do.
They’re very high level and I think that they’re also, on average, I dare to say all of
them are reasonable people. They have a financial background and that makes it
already a bit less political than people without a financial background. So, I think we
can make an understanding. At the same time, you must secure, in such, your system;
you must always be prepared for the worst case. So, that’s why we are quite strict in
defending this independence of the standard setting process and also the appointment
procedures, etc. In practice, I don’t expect a lot of conflicts between the Monitoring
Group and Trustees.
Then a few issues, as far as the agenda setting is concerned, of course the board takes
into account what is coming up from the investors’ community and the users,
preparers, etc. Also, they take into account the remarks the RC’s [?] make, at least
that’s the impression they give us. And they’ll also, of course, into account if the
Monitoring Group puts up things as important for the agenda. What we think is
18
important, that the ultimate decision on the agenda is up to the board itself because
independent standard setting and setting the agenda for your work has a close relation.
I think the best example in the past was how to treat options which were given to
management, whether it is costless or whether it’s a cost. That was a heavy political
thing and if there was a political influence on the agenda setting, there might have
been pressure not to put it on the agenda and to leave it as it is. And I think that is an
example which shows that it’s important that ultimately, listening to everybody, but
ultimately the board can set its own agenda.
Maybe Antonio will go into the issue of the due process and also the relation between
Trustees and the agenda setting in that respect. I completely agree with Mr Sullivan
that, within the geography quality aspect should be the only aspect in appointments.
And that has been put forward by a lot of you, that the quality of board appointments,
but also the different backgrounds and also you need people who have characteristics
that they are able to cooperate. They should not only be intelligent and they should
not only have the good background, they should also be able to listen to outside and
also to have a cooperative attitude when the board has to make decisions. These are
all characteristics we also have to take into account, they’re a bit more difficult to
describe, of course, but for a good functioning board, this is also important in my
view.
As far as the remark on the origin should not be the constitution, Mr Selan made, I
completely agree with that. Maybe the governance of the EIB should be looked upon
in that respect. In my former life I’ve made quite some critical comments about the
fact that Vice Presidents of the EIB also have as their working trend their own country
where they’re coming from, which is not making the split between constituency and
origin as it should be. But you have experience with that. I was a governor of the
EIB, so, but I was in a minority position in this field. But I completely agree with you
that we should take care and maybe we should also do something about the wording,
that it’s clear that you’re not representing your country, not representing your region,
but that the public interest and the international dimension should be at your heart.
The geographical distribution is necessary but it should not lead to a kind of
representative system that you’re bringing in the interests of your own country, but
you have a broader view. I think that’s a good point which we can pick up.
19
Mr McKersie stressed independence of the Trustees of the board and of the standard
setting process. I think we discussed that already. We’ll have a look, I say to
Maruyama, the text of paragraph 18. Well, I must make a split in that respect
between that we want the independence of the standard setting process to be unaltered
but of course, there is some change in the responsibilities of Trustees that you appoint.
We can try to split it up and that would make it even clearer.
I’m happy that Mr Lee understands the political necessity. I think that understanding
was all around the table, also from the private sector representatives and I’m happy
because of that, because it’s an impossibility not to do anything on this aspect on
public accountability. And we try to do it in a way that the essential qualities of the
independence and of the structure we have at this moment is not lost.
The agenda setting, we expect Antonio to say something more about that and the
relation between the Trustees and the board, and also between the Monitoring Group
and the board. And the way we check whether the board is seriously taking into
account input form elsewhere, and that’s a typical due process issue.
The faulting procedure, can you say something on that?
AN
It was intended to imply that it would go to ten. If you take 60% of 16, it’s
9.67 or something like that. The intent was ten. We could be more explicit that it
stays at nine up to the point that it goes to ten, but it was to recognise that there would
be some period for transition where we could be at 15, not 16, according to
transitional provisions and so I was trying to state that it doesn’t go from nine to ten
when you’re at 15. So, the intent was to go to ten.
CH
We can make that maybe also clear in the text. As far as Mr Krohne’s
remarks, maybe some word on the funding, there were others also who talked about
the funding. The funding is a bit of a difficult issue, not in an intellectual sense. We
think that we should not be dependent on Forum Three contributions or of individual
firms. At the same time, we are a private institution and if we write in our
constitution there should be a levy in every country which applies IFRS, well, it’s
20
ineffective because it’s up to the governments to decide on levies. We will come back
on the issue probably also in the second part of the constitution, conceptually the idea
is that the more companies contribute the better, and also it should not be on a purely
voluntary basis because then you can get the impression that companies say to you,
well if you are doing this nasty thing, I won’t contribute to your organisation any
more. In practice we haven’t had it except once, from one company, so it is not a very
heavy and serious impediment but to make it quite clear that there’s broad funding,
we are in favour of a kind of levy system or a very broad-based system in the
contribution. But, at the same time it’s not something for us to make the real decision,
we can advise countries to take this approach but we cannot make this decision
ourselves. Then, the agenda setting issue, I addressed that, and Antonio will go on
with it. And, as far as De Angelo’s remarks are concerned about investors and the
Monitoring Group, I do agree with you that we should take the users and investors
interests into account because they’re the ultimate goal of the whole accounting
standard setting process, you could say. But, what I would not propose is to get them
into the Monitoring Group because the Monitoring Group is not a substitute for the
normal influence and relation of our organisation with the investors; it’s purely an
addition for this public accountability so there should only be public officials in it.
Another thing is whether the investor community, which, in our experience is the
most difficult community to get a vote because the auditors are always there, the
preparers are always there, but the users, the investors are very difficult to get into the
process, so we would be very happy with a more active input also from the investors
side. But, probably we should take that into account when we discuss the Standards
Advisory Committee and sub groups of the Standards Advisory Committee, and if we
dilute or make unclear what this Monitoring Group is really going, and we are putting
the users or the investors or the preparers also in that context, then we get a
completely unclear scheme. So, I would like to restrict the Monitoring Group to the
public authorities and get back on the issue of how to get more input and more good
contacts with the investor community, when we discuss in the next phase, the role of
the Standard Advisory Committee and maybe also the sub-committee of the Standard
Advisory Committee, that would be my wish. Antonio and maybe Phil?
AN
I want to start by acknowledging the tension that ISP feels when it comes to
the trade-off between independence and listening to everybody and people willing the
21
most urgent sometimes versus the most important. The risk is that independence, if
it’s over-protected, leads to Ivory Tower Syndrome and listening to, again, to many
people or to the strongest lobbyist or the one that shouts the loudest, that we go for the
most urgent versus the most important. What we have been stressing, certainly at the
trustee level, but in the Due Process Committee, is the importance of the IASB to
reach out in a structured manner. Reach out, first of all, is a behaviour and an attitude,
I want to listen and to learn and to reflect upon, but it also has to be a structured
manner. A structured manner means that we want the interface of IASB is with
representative groups and so we are questioning and the groups are meeting and we
are continually reviewing. Now, somebody mentioned SAC, one of the more
recurring discussions parallel to the process of the constitutional review is how we are
going to restructure SAC to give to SAC a representativeness that is going to enable
and reinforce the spider web around IASB and is going to represent a true proxy of a
very large audience. The second is, the effectiveness of the relationship is not just
paying lip service or going and explaining, but coming with substantive
recommendation that can be agreed upon or not, now that is part of the independence.
So, recently, in addition to all this, Trustees started meeting with IASB, we have
reviews on the agenda and for the sake of respecting the independence of the IASB,
we cannot tell them, well we think point five should go in one, but questioning is all
around what you have heard, when you have heard, have you met these groups, have
you known these groups, what those groups have told you, what are the major
concerns that you have heard out there, how you address them, so the greater structure
process whereby the agenda is not built on the conceptual wishes the IASB, but much
more on a good compromise of what they’ve heard, what they feel is important in the
context of the framework so the agenda is built with large input of the representative
groups. It isn’t over yet, it is a continued process, but is the direction we are moving,
my sense is that we have made significant progress there and a discussion on the
agenda is on that field, what you have heard, from whom you have heard, who your
sources of input are, and are you taking them into account.
PH
I’ll just make brief comments, not specific to anything said. First of all I want
to thank all of you because everybody’s input was both thoughtful and balance and
certainly we get enough unbalance from Mark, so it was nice to have such an
important group of people, and I really mean that, to speak with such balance. I have a
22
specific plea to the few of you who are the users, you have a responsibility which you
have not fulfilled as far as I’m concerned, and that’s identifying and encouraging
board members. I mean, I think we have been, almost from day one, disheartened and
disappointed that we have not been able to identify and recruit people who come from
the investment and user community, to be members of the board. Steven Cooper, our
newest member, we found and recruited to join us from UBS, and David Tweedie, if
he were here, would tell you what a positive addition he has been. So, I really urge
you to really focus and identify the right people that you can put forward so that we
can have some more users on the board. We want that, we just can’t identify them;
maybe they’re just paid to much so we can’t deal with it. The other thing I wanted to
mention is, I just attended on Monday, a Thesbey[?] forum in New York City which
was a round table. Just for those of you who are non-Americans, there is an enormous
support among all the varied constituencies in the US to move as quickly as possible
to adopting IFRS, and in fact the battle cry at that meeting was, let’s set a mandatory
date, the need for time is there, most people think it’s somewhere in the three to five
year range, but there’s really tremendous support from all groups to move forward, so
unless there’s some unusual event that takes place, and it’s obviously in the hands of
the SEC to determine this, I think we’re going to have one international accounting
standard in the near term, that’s why all these issues are so relevant and so important
to get agreement so we move forward, because I really believe we’re going to have
one set of accounting standards for the whole world in the next five years.
CH
Okay, thank you Phil, who wants to go into the rebound?
RA
Thank you chairman, several intervenants[?] here have talked about this, what
I call, the border line between the standards setter and the Trustees. Just to make it a
bit clearer with an example, in article 15E of your current constitution you say on the
one hand that it is the task of the Trustees to review broad strategic issues facing
accounting standards, but on the other hand at the end of the paragraph, it says that the
Trustees shall be excluded in involvement on technical matters related to accounting
standards. But, when is something a technical matter, when is something a strategic
issue? The G7 finance ministers urged the board to reflect on the influence of FairValue Accounting on the credit crunch then Fair Value Accounting which before
might have been regarded as a technical matter, maybe becomes a broad strategic
23
issue, so a broad strategic issue is whatever high political bodies regard as strategic.
So, again I have the fear that it could be a moving borderline and a moving target
unless you fix the volume [?] of standards setting itself more clearly.
CH
What is your suggestion instead, that Trustees should also be able to decide on
technical matters?
PH
That will be a dangerous thing.
CH
Oh, that would mean that also the more strategic approach would be
completely left to deport itself. I think I agree with you that this is a definition an unclarity because some technical matters may be of strategic importance. I think the
issue of, Raphael, your accounting and the credit crunch and all discussions about
that, of course, as Trustees we discuss this issue also with the board, we think it’s a
strategic issue. But, if it would lead to a standard or a change in standard, that is the
way that standard exchange is left to the board and that is not left up to us and that’s a
bit of the way we work. So, in practice I think this strategic on one hand and technical
issue on the other hand, in practice is works reasonably well, that’s our impression.
PH
I would agree with that, and this may be helpful or not but let me give you a
history that maybe all of you know, but maybe some of you don’t. When the ISEF and
the IASB was formed, it was, without question, none of us were part of the forming
group, it was formed as an absolute duplicate of the FASB, every element of it was
essentially FASB-driven. The FAF, FASB and I guess the SEC, had this belief that
there should be a total independence from the FAF or the ISEF in this case and FASB
or the IASB. So, the Trustees and I’m the last of the original Trustees, for better or
worse, started with total independence, just so you understand that, because this was
the US model. We have, relatively aggressively, and Antonio’s been there almost
from the beginning and he has been the big driver in this so he should get a big
portion of the credit. We have continuously moved to not impairing the independence
but holding the board much more accountable than was the original intent under the
first constitution, so I just wanted to point out that there’s been tremendous strides
that have taken place over the last seven years and they continue to take place, and I
personally am sympathetic to your comments, but it is very, very challenging not to
24
cross that line, where you are truly impairing independence. If I were sitting on your
side, my frustration is that it takes so long for a standard to be developed. Now, some
of you are very happy it takes so long because you don’t want that standard, but
leaving aside that element, if there is this need, strategic or political need for a
standard it really should be unacceptable that it takes so long. David Tweedy, if he
were sitting here, would agree with you by the way, so I’m not talking against the
board, but that’s one of the challenges that I think the Trustees are going to have to
deal with going forward. And, I think that’s happening in the US now, along with the
whole credit crunch and these off-balance sheet entities, there’s a great demand for
FASB to do something about it, and they’re trying and moving as quickly as they can,
but moving quickly is a couple of years. For me that is something that has to be dealt
with in the future.
CH
Seerden?
SE
Thank you, I’d just like to pursue this question of the balancing act a bit more,
and Mr Vegezzi’s talked in a highly articulate fashion about the need to maintain the
board’s independence and the limits to the Trustees own role in setting the agenda, or
helping the board set the agenda. I’m just wondering if that’s consistent with what
you’ve drafted in the constitution for the role of the Monitoring Group, and
particularly I’d like to draw your attention to paragraph 19C of the draft, which talks
in it’s final sentence about the Monitoring Group having a role in bringing issues for
timely consideration by the foundation or the board, and also in the body of the
paragraph, in effect requesting meetings with the foundation and with the board,
calling you and the board to account for what you’ve done in response to those
requests, and that seems quite a step beyond what you’ve said are the limits, even for
you as Trustees in helping the board set it’s agenda. Again, is the balance quite right?
PH
What do you think?
SE
I’m concerned that this gives too much power to the Monitoring Group, very
clearly.
25
UAM I think what I’ve heard around the table today, I’d like to endorse your
comments about the thoughtfulness and considered nature of it. But, it’s reflected very
much the multiple conversations I’ve had out in the community about the role and
potential conflicts for the Monitoring Group. Now the Monitoring Group has, given
it’s composition and the regulatory bias towards the Monitoring Group has the
potential of two hats to wear. First of all, regulators have a legitimate role as users in
what accounting standards say, but they’re only one and the regulators attitude is not
identical, in fact, the fair value debate has identified quite divergent positions between
regulators, users, preparers and investors, and so I think there is a fear amongst all
those who are not regulators and going to be on the Monitoring Group, that there is
going to be undue influence in the agenda setting by the Monitoring Group. We’ve
heard it before from contributions around here, about other groups needing
representation on the Monitoring Group. I think that a better case needs to be made,
that the Monitoring Group’s role is to be a governance role, not a standards setting
role and I think that they are there because they are represented as a public agency,
not because they are users and preparers or they have an interest. And, I think that if
we can define the terms of reference for a Monitoring Group to reflect more closely
the accountability public representation issue, and address the concerns which we had
about their potential for undue influence, then that may dilute the demand for multiple
representations. I have a lot of sympathy for the board and the Trustees in trying to
find an appropriate balance of people to sit on the Monitoring Group because I could
you 200 or 300 groups who have a legitimate claim to sit on this board. So, I think
this is an important issue and I think there is more dialogue to address the issue, thank
you.
CH
Well, maybe a remark from my side on this issue. Of course it very much
depends, I think, on how things work out in practice, you can look at it from two
sides, they can put forward issues for timely consideration, but it’s up to the board to
decide. And, of course then if this group of four regulators, European Commission,
IMF President or Managing Director I should say and World Bank President are
saying, well you should look at this and if the board say, well we are not doing that
then I think that they have to explain themselves, why they are not. So, if there’s a
stubborn board and they have the idea that the Monitoring Group has gone a bit crazy,
they can put their proposals aside, and argue that they are not doing it. Of course in
26
practice I think the issues brought up at this level of this monitoring level, given the
composition, are also the broader responsibilities of the World Bank and the IMF
which are also will lead, I think, as a rule to very sensible ideas which are not
conflictuous[?] and probably will be taken aboard by the board. If you say, well
they’re too influential, I can also argue with you the other way around, that ultimately
they have nothing to say, which is not, of course, the idea behind it. The idea behind it
is that there is a reasonable balance and there is the supposition of reasonable people
on both sides and which should lead, as a rule, also to a reasonable outcome of the
process. At the same time, let’s say that the Advisory Committee can put things
forward for consideration to be on the agenda of the IASB. And, so it’s not only the
Monitoring Group that has this possibility but also the Standard Advisory Committee,
in my view should have that possibility and I think it has that possibility. Of course,
that’s a bigger group and it’s more fragmented, and so a group of seven is easier to
make a proposal than a group of 45 or whatever the number is, but there is also that
possibility for that side, yeah, please?
JU[?] Mr Chairman, I fully support what you’ve said, let me put it in this way, for
example as Mr Seerden, the mentioned that the G7 ministers are crying for the
valuation of the liquid asset, whatever, whatever, but at the same time, yes of course
there is the risk of too much politicisation, however those ministers are representing,
in a sense, that they are in a sense, the people’s voice, so they are representing their
nation because having been their nation for a long time, you know that, right? So, the
IASB and ISF [International Stability Forum] can’t ignore it, it’s just a noise, just
ignore it, no, that shouldn’t be the way, so the mechanism is like that, so that then the
moderating board picks up the suggestion or a question. Of course the final authority
to agenda setting is the IASB, it’s a board, it’s clear, it’s crystal clear, so the important
point is that responding to those suggestions or questions, the board has to explain it
in public, so that’s accountability re-defined, so that’s along the line with what we
said, right?
CH
Even before we had this Monitoring Group there was a discussion in the
International Financial Stability Forum about issues related to accounting and were
also requested to the Board, and that has been taken up immediately although there is
27
no official link whatsoever between this International Stability Forum and the board.
And, this presupposes that most of the time, most people are reasonable.
JU
Just responding the Philip’s point, I’m sorry that I’m a member of the
Financial Services Forum, I am a member of the of the drafting of the report of the
Financial Services forum, but Philips point is that you were right, that the Financial
Services Forum has been supporting the direction, supporting the contents, anything,
the frustration is that the speed is slow, slower than they expected, that’s it. So,
nothing wrong, right?
CH
One of the reasons that the speed is not as we would like it is also it’s a
counterpart of due process. We start normally with a discussion paper, we should give
everybody the time, we have the SAC discussion and then we have the proposal, and
again we give everybody the time. This again is the shallow side of due process
[overtalking], maybe we should look at that too but that will be in the second part of
the constitution that in cases of urgency, that you may, well we do already sometimes
skip the discussion proposal phase, which is a possibility already available, and also
maybe in some circumstances, could shorten or should shorten the period for reaction
if it’s really an urgent. This I think we could consider in the second stage of the
constitution because I think everybody agrees it’s a real problem that it takes so much
time before an IFS can be changed, and we should have an emergency possibility or
exceptional possibility in these circumstances, I would suggest, but I think we can
come back on that on the second stage of the review, Tom?
TO
I believe in his opening remarks, Mr Lee used the term, mission creep and I
would suggest, given the discussion today we’ve had today about the role of the
Monitoring Group, that whatever final words appear in the constitution related to their
role, that they be considered extremely carefully so that the possibility of mission
creep is diminished as much as possible.
CH
Well, thanks for that support, I personally think that was a good discussion, I
thank you very much for what you brought up. If we lead for things in the future, but
also some practical changes in the proposals that we’ll make, that we’ll propose that
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to our colleagues, and I thank you very much for being here and for the discussion,
thank you.
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