Financial services executives were wrong if they thought reforms to expose their companies' inner workings had ended with the signing of the Sarbanes-Oxley Act this week.
At least that is the gist of remarks Wednesday from Federal Deposit Insurance Corp. Chairman Don Powell, who said at a conference here that in the wake of recent accounting scandals and pending changes to international capital standards he would form a joint public-private task force to recommend new disclosure policies for banking companies.
"Under the new regime, disclosure will have to be enhanced and the ensuing market discipline will serve as an additional line of defense against poor judgment, a faulty strategy, or a flawed assumption," Mr. Powell said. "But we regulators have to be disciplined about how we approach this. There is a balance to be achieved here and we should work together with the industry to find it."
Wachovia Corp. chairman and chief executive officer G. Kennedy Thompson alluded to the Enron and Worldcom accounting scandals and the pressure that such events have put on top executives. Like many CEOs recently, Mr. Thompson emphasized the need for better disclosure and said it was essential to the restoring of investor trust.
"Full disclosure simply must become best practice in corporate America," he said at a luncheon speech at the conference.
Mr. Thompson said it was this belief at Wachovia that led to its decision, announced two weeks ago, to begin expensing stock options. Mr. Thompson said he was surprised that some CEOs were alarmed at a new requirement from the SEC that top executives must swear to the accuracy of their companies' financial statements.
"The piece of paper Pitt wants me to sign is simply legal confirmation ... of the moral obligation I already feel," he said, referring to SEC Chairman Harvey Pitt. "We need to rebuild trust in corporate America one step and one decision at a time."
Mr. Powell said the task force's recommendations would be based on four principles -- to provide the market with timely, important information; ensure a level playing field between U.S. banks and overseas rivals; enhance the stability of the financial system; and facilitate the proper and timely implementation of the so-called Basel II capital accord.
The announcement expands on an idea Mr. Powell sketched in …