Creating transparency in the market would be more effective at restoring public confidence than changing accounting rules, a former US Securities and Exchange Commissioner has argued.

Roel Campos, a former commissioner, made the comment in an address to accountants and senior banking executives at the International Federation of Accountants' World Accountancy Forum in New York yesterday.

His comments come on the back of banks writing down massive profits following subprime losses owing to subprime debt which was not held on the balance sheet.

'The regulator's tools for the most part are disclosure. I don't know that it is appropriate to expect regulation, regulators, and standard setters to essentially prevent the next restructuring or subprime mortgages,' he said, responding to a question from Financial Accounting Standards Board Chairman Robert Herz.

Herz had told the conference: 'Maybe there is a different way of thinking about the risks in the system and how to govern the financial system. I don't know where the balance is, but we're somehow not getting it right,' said Herz.

Loose lending standards, rising interest rates in 2005 and 2006, and falling house prices led to an increase in the number of less-credit-worthy U.S. borrowers and contributed to a U.S. housing market slump, Reuters reported.

Thousands of Americans with weak credit who obtained so-called subprime mortgages have defaulted on their loans and lost their homes.

Herz said he felt the subprime issue had damaged the reputation of U.S. capital markets.

'I have to tell you, when I go abroad nowadays, we're losing credibility,' he said.

Further reading:

Subprime could be 'as bad as Enron'

UK banks face further writedowns