GOVERNANCE Transparency
©Larry Downing/Reuters
A transparent roadmap to recovery Huguette Labelle, Chair, Transparency International
Governments must put transparency and accountability at the heart of all rescue and reform measures if they are to regain public trust and investor confidence. Here is why.
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s the effects of the global financial crisis reverberate around the world, millions of people face an uncertain future, while valuable progress on such issues as poverty, human rights and climate change is at risk of stalling. Efforts to steer us out of the financial crisis and back on the road to economic growth have involved unprecedented amounts of money. We have witnessed the biggest corporate bail-outs in history, and leaders at the G20 summit in April announced
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OECD Observer
No 273 June 2009
that countries’ fiscal expansion will total US$5 trillion by the end of 2010. While it is clear that the global financial crisis demands coordinated, bold and decisive action, any steps are likely to be frustrated if they are not grounded in transparency, accountability and integrity. As recently noted in this magazine, the combination of an insatiable demand for high-risk financial products and flawed credit ratings resulted in the markets becoming impenetrably opaque. When this lack of transparency and regulatory failure became apparent, investor confidence disappeared and the markets collapsed. To restore investor confidence and public trust, governments must ensure that transparency and accountability are at the heart of all rescue and reform measures. The public has a right to know how tax money is being used. All the terms and conditions in bail-out programmes should
be fully disclosed. The credibility of governments’ efforts is at risk if companies are not required to disclose information on how taxpayer money is being spent. Failure to do so will only result in public mistrust and frustration at a time when support and collaboration are crucial. The G20 tasked the International Monetary Fund and the newly announced Financial Stability Board to provide an early-warning mechanism to avoid similar crises in the future. Transparency and accountability must be at the forefront of this effort. Civil society must be involved, too, as it is well positioned to provide credible, constructive input and monitoring, and gives a voice to the people most affected by the crisis. A more consistent and internationally coordinated supervisory and regulatory framework of all financial institutions should include agreed accounting standards and the requirement that financial
