Industry group to address credit risk

In response to the credit crisis, a group of financial industry executives unveiled a plan today to improve risk management.
The 60-point plan, titled “Containing Systemic Risk: The Road to Reform,” calls for compelling banks to account for more assets on their balance sheets, tougher rules for marketing complex financial instruments and tougher tests of firms’ liquidity.
It was presented by the Counterparty Risk Management Policy Group III, which is co-chaired by Gerald Corrigan, a managing director at Goldman Sachs Group Inc. of New York and a former president of the Federal Reserve Bank of New York.
However, there are some significant drawbacks to the new proposals, including their high cost to financial institutions at a time when new cash is tight.
“Quite a few things went wrong in the last 12 months,” Mr. Corrigan told the Wall Street Journal, adding that Wall Street needs to “step back and aggressively think” about changes to the current system.