In a joint statement released this week, Peter Montagnon, head of investment affairs at the Association of British Insurers, and Pierre Bollon, director general of the Association Francaise de la Gestion Financiere, the ABI’s French counterpart, claimed that the introduction of quarterly reports would not greatly improve transparency to accounts and could cause more problems.
‘Quarterly reporting is not a high priority,’ said Montagnon. ‘It has not helped to prevent corporate scandals in the US, and there is a risk that mandatory quarterly reports will encourage short-termism as management becomes overly focused on the next reporting deadline.
‘The Financial Services Action Plan is a great opportunity for Europe to move ahead of the US in introducing sensible regulation of financial markets. This will not happen if Europe copies slavishly from a flawed US model,’ he added.
Both Montagnon and Bollon then asked investors to declare themselves if they are opposed to the proposals and to make a proper argument to the EU of their case. The response to the call to arms from the ABI and AFG-ASFFI was almost instantaneous, with two of the world’s leading bankers expressing their concerns over the proposals.
Josef Ackermann, chairman of Deutsche Bank’s group executive committee, and John Thain, president and co-chief operating officer at Goldman Sachs, both came out against the proposals during the World Economic Forum this week, reflecting the growing concerns among European investors.
Ackermann said that the introduction of these measures would encourage ‘short-termism’, which was one of the issues that led to ‘corporate misbehaviour’ in the US.
Echoing such comments Thain said analysts should focus in companies that offer long-term success and that the world’s best investors would not invest on quarter-to-quarter earnings.
Steve Marshall, ex-chief executive of Railtrack and CIMA special advisor on risk, said: ‘People are reacting against this because US-style prescriptive measures aren’t always appropriate and in this case won’t help investors.
In industries like construction, profitability is a much more long-term issue and quarterly reports aren’t relevant while for smaller companies the relative cost will be enormous.’
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