Davos World Economic Forum generates support for government transparency, but divides remain over private sector transparency.
Discussions at the 2011 meeting of the Davos World Economic Forum, “Shared Norms for the New Reality,” focused on increasing transparency in government and in the financial-services industry through regulation. Greek Prime Minister George Papandreou discussed his government’s efforts to improve transparency by putting its records online, and other European leaders called for increased transparency throughout the Eurozone (i.e., the countries that share the Euro as their currency).
Conference attendees were apparently less open to transparency in business than in government. One speaker reported that “there was little disagreement — until we switched from transparent government to transparent business.”
Banking executives are said to have
argued that they have already increased transparency sufficiently since the economic downturn began, and that regulations requiring even more would cause needless economic harm. Gary Cohn of Goldman Sachs reportedly
expressed concern that government officials were regulating only certain kinds of financial institutions. By allowing hedge funds and other unregulated institutions to invest in riskier business ventures, these officials were moving risk “from the regulated, more transparent banking sector to a less regulated, more opaque sector,” Cohn claimed. Other banking delegates reportedly
argued that new restrictions would raise banking prices and encourage banks to invest in instruments, like sovereign bonds, that may not be as low-risk as they once were.
Some government officials agreed with the banks’ views. Larry Summers, the former U.S. Treasury Secretary, is said to have
predicted that activity would move to an unregulated “buccaneering sector” if capital and liquidity rules imposed too high a cost in the regulated sector. Summers apparently has said that the “world is more likely to suffer from excessive risk aversion over the coming years, rather than insufficient risk aversion.” David Cameron, the Prime Minister of the UK, also
supported ending “restrictive rules” of financial regulation in Europe.
Other officials disagreed with the banks. Phillip Thorpe, the head of the
Qatar Financial Centre Regulatory Authority, a corporate body owned and funded by the state of Qatar, reportedly
said that with “no change, we can expect there will be another” financial crisis.
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