Financial_JJ Innovation_NN1 Observers_NN2 have_VH0 cited_VVN surging_VVG financial_JJ innovation_NN1 as_II a_AT1 big_JJ factor_NN1 in_II the_AT markets_NN2 bubble_VV0 before_II 2008_MC and_CC in_II the_AT crash_NN1 that_CST followed_VVD ._. 
New_JJ and_CC often_RR little-understood_JJ financial_JJ products_NN2 were_VBDR blamed_VVN for_IF reducing_VVG transparency_NN1 ,_, and_CC for_IF leading_JJ investors_NN2 to_TO rely_VVI excessively_RR on_II rating-agency_JJ judgments_NN2 about_II those_DD2 complex_JJ assets_NN2 ._. 
Stephen_NP1 Fidler_NN1 of_IO The_AT Wall_NP1 Street_NNL1 Journal_NN1 moderated_VVD the_AT task-force_JJ discussion_NN1 on_II ways_NN2 of_IO reducing_VVG risks_NN2 to_II the_AT financial_JJ system_NN1 brought_VVN about_RP by_II financial_JJ innovation_NN1 ._. 
Here_RL are_VBR edited_VVN excerpts_NN2 from_II the_AT presentation_NN1 of_IO their_APPGE priorities_NN2 ._. 
STEPHEN_NP1 FIDLER_NN1 :_: There_EX is_VBZ a_AT1 theme_NN1 that_CST runs_VVZ through_II these_DD2 five_MC recommendations_NN2 ,_, and_CC that_DD1 is_VBZ to_TO resist_VVI believing_VVG that_DD1 regulation_NN1 can_VM solve_VVI all_DB ills_NN2 ._. 
Issuers_NN2 and_CC investors_NN2 must_VM perform_VVI their_APPGE own_DA due_JJ diligence_NN1 ._. 
There_EX was_VBDZ a_AT1 sense_NN1 that_CST extreme_JJ regulation_NN1 could_VM introduce_VVI another_DD1 element_NN1 of_IO moral_JJ hazard_NN1 that_CST was_VBDZ a_AT1 problem_NN1 in_II the_AT current_JJ crisis_NN1 ._. 
The_AT first_MD recommendation_NN1 was_VBDZ to_TO restore_VVI investor_NN1 confidence_NN1 in_II rating_VVG agencies_NN2 ._. 
Michael_NP1 A._NP1 Spencer_NP1 :_: Clearly_RR there_EX was_VBDZ a_AT1 material_NN1 malfunction_NN1 by_II the_AT rating_NN1 agencies_NN2 during_II the_AT financial_JJ crisis_NN1 ._. 
We_PPIS2 had_VHD an_AT1 unprecedented_JJ number_NN1 of_IO complex_JJ securities_NN2 which_DDQ received_VVD very_RG ,_, very_RG high_JJ ratings_NN2 ,_, only_RR subsequently_RR to_TO collapse_VVI rather_RG precipitously_RR ._. 
It_PPH1 was_VBDZ clearly_RR a_AT1 failure_NN1 that_CST needs_VVZ to_TO be_VBI looked_VVN at_II and_CC ,_, if_CS possible_JJ ,_, addressed_VVN ._. 
First_MD ,_, we_PPIS2 need_VV0 to_TO separate_VVI the_AT remuneration_NN1 of_IO the_AT agencies_NN2 ,_, if_CS possible_JJ ,_, so_CS21 that_CS22 the_AT issuers_NN2 or_CC the_AT promoters_NN2 of_IO financial_JJ products_NN2 are_VBR not_XX the_AT ones_NN2 who_PNQS are_VBR paying_VVG the_AT rating_NN1 agencies_NN2 ,_, to_TO see_VVI if_CS we_PPIS2 can_VM go_VVI back_RP to_II an_AT1 environment_NN1 in_II which_DDQ an_AT1 "_" investor-pays_VVZ "_" model_NN1 is_VBZ possible_JJ ._. 
There_RL also_RR needs_VVZ to_TO be_VBI a_AT1 distinction_NN1 between_II the_AT rating_NN1 of_IO vanilla_NN1 products_NN2 ,_, such_II21 as_II22 fixed-income_JJ securities_NN2 ,_, whether_CSW corporate_JJ or_CC government_NN1 ,_, and_CC more_RGR complex_JJ instruments_NN2 ._. 
On_II31 top_II32 of_II33 that_DD1 ,_, we_PPIS2 are_VBR rather_RG restricted_JJ in_II the_AT number_NN1 of_IO rating_VVG agencies_NN2 ;_; we_PPIS2 thought_VVD it_PPH1 was_VBDZ a_AT1 good_JJ idea_NN1 if_CS an_AT1 environment_NN1 for_IF creating_VVG new_JJ rating_NN1 agencies_NN2 was_VBDZ possible_JJ ._. 
At_II the_AT Future_NN1 of_IO Finance_NN1 Initiative_NN1 in_II England_NP1 ,_, Michael_NP1 Spencer_NP1 ,_, CEO_NN1 of_IO ICAP_NP1 PLC_NN1 ,_, Thomas_NP1 Callahan_NP1 ,_, CEO_NN1 of_IO NYSE_NN1 Liffe_NP1 U.S._NP1 ,_, and_CC Eraj_NP1 Shirvani_NP1 ,_, managing_JJ director_NN1 at_II Credit_NN1 Suisse_NP1 and_CC chairman_NN1 of_IO ISDA_NP1 ,_, discuss_VV0 their_APPGE ideas_NN2 on_II financial_JJ innovation_NN1 ._. 
Thomas_NP1 Callahan_NP1 :_: Lack_NN1 of_IO transparency_NN1 was_VBDZ one_MC1 of_IO the_AT core_NN1 issues_NN2 of_IO the_AT financial_JJ crisis_NN1 ._. 
It_PPH1 manifested_VVD itself_PPX1 on_II many_DA2 different_JJ levels_NN2 ._. 
If_CS we_PPIS2 as_II an_AT1 industry_NN1 are_VBR going_VVGK to_TO be_VBI allowed_VVN to_TO continue_VVI to_TO innovate_VVI --_JJ and_CC there_EX is_VBZ unanimous_JJ agreement_NN1 on_II our_APPGE panel_NN1 that_CST innovation_NN1 is_VBZ critical_JJ to_II our_APPGE industry_NN1 and_CC to_II the_AT growth_NN1 of_IO the_AT global_JJ economy_NN1 --_NN1 we_PPIS2 need_VV0 to_TO address_VVI this_DD1 lack_NN1 of_IO transparency_NN1 head-on_RR ._. 
There_EX can_VM be_VBI many_DA2 types_NN2 of_IO modification_NN1 :_: greater_JJR transparency_NN1 around_II how_RRQ deals_NN2 are_VBR structured_VVN ;_; embedded_JJ leverage_NN1 and_CC embedded_JJ derivatives_NN2 are_VBR important_JJ ;_; certainly_RR we_PPIS2 need_VV0 greater_JJR modeling_NN1 that_CST will_VM show_VVI equally_RR the_AT downside_NN1 and_CC the_AT upside_NN1 based_VVN on_II price_NN1 performance_NN1 so_CS you_PPY can_VM no_RR21 longer_RR22 just_RR say_VVI ,_, "_" Well_RR ,_, the_AT rating_NN1 agency_NN1 told_VVD me_PPIO1 it_PPH1 was_VBDZ AAA_NP1 ._. "_" 
Very_RG importantly_RR ,_, there_EX is_VBZ a_AT1 greater_JJR need_NN1 for_IF transparency_NN1 around_II price_NN1 ._. 
In_II new_JJ products_NN2 especially_RR ,_, we_PPIS2 need_VV0 greater_JJR price_NN1 transparency_NN1 around_II where_RRQ transactions_NN2 are_VBR occurring_VVG in_II real_JJ time_NNT1 ._. 
Distributing_VVG that_CST to_II the_AT market_NN1 will_VM be_VBI very_RG important_JJ to_II gaining_VVG public_JJ confidence_NN1 in_II our_APPGE ability_NN1 to_TO innovate_VVI ._. 
The_AT Top_NN1 Five_MC Recommendations_NN2 1_MC1 ._. 
Overhaul_VV0 Rating_NN1 Agencies-Restore_VV0 investor_NN1 confidence_NN1 in_II rating_VVG agencies_NN2 by_II eliminating_VVG conflicts_NN2 of_IO interest_NN1 between_II agencies_NN2 and_CC issuers_NN2 ,_, returning_VVG to_II an_AT1 "_" investor-pays_VVZ "_" model_NN1 ,_, distinguishing_VVG between_II ratings_NN2 of_IO corporate_JJ debt_NN1 and_CC structured_JJ financial_JJ products_NN2 and_CC promoting_VVG new_JJ entrants_NN2 to_II the_AT credit-rating_JJ business._NNU 2_MC ._. 
New-Product_NN1 Transparency-Improve_VV0 structural_JJ and_CC price_NN1 transparency_NN1 of_IO new_JJ products_NN2 ,_, using_VVG modeling_NN1 and_CC stress_NN1 testing_VVG to_TO ensure_VVI that_DD1 downside_NN1 scenarios_NN2 are_VBR as_RG visible_JJ as_CSA upside_NN1 scenarios._NNU 3_MC ._. 
Resist_VV0 Over-regulation-Because_JJ financial_JJ innovation_NN1 is_VBZ central_JJ to_II growth_NN1 and_CC critical_JJ to_II a_AT1 speedy_JJ recovery_NN1 ,_, the_AT G-20_FO and_CC successors_NN2 should_VM recognize_VVI that_DD1 new_JJ rules_NN2 and_CC protocols_NN2 should_VM not_XX thwart_VVI innovation_NN1 ,_, and_CC the_AT cost_NN1 of_IO regulation_NN1 must_VM be_VBI balanced_VVN against_II the_AT benefits._NNU 4_MC ._. 
Promote_VV0 Risk_NN1 Management-Boards_NN2 should_VM be_VBI required_VVN to_TO demonstrate_VVI a_AT1 full_JJ understanding_NN1 of_IO risks_NN2 inherent_JJ in_II new_JJ products_NN2 ._. 
Elevate_VV0 risk_NN1 managers_NN2 to_II at_RR21 least_RR22 the_AT same_DA level_NN1 as_CSA product_NN1 makers_NN2 and_CC give_VV0 them_PPHO2 adequate_JJ representation_NN1 at_II board_NN1 level_NN1 ._. 
Create_VV0 globally_RR recognized_VVN qualifications_NN2 for_IF risk_NN1 managers_NN2 ,_, and_CC implement_VV0 standard_JJ certification_NN1 through_II a_AT1 risk_NN1 "_" driving_JJ test_NN1 ._. "_" 
5_MC ._. 
Strengthen_VV0 Infrastructure-Ensure_VV0 financial_JJ infrastructure_NN1 is_VBZ commensurate_JJ with_IW the_AT innovation_NN1 that_CST it_PPH1 supports_VVZ ,_, both_RR at_II the_AT firm_NN1 and_CC the_AT market_NN1 level_NN1 ._. 
Do_VD0 n't_XX Over-Regulate_VV0 Mr._NNB Fidler_NP1 :_: The_AT third_MD item_NN1 was_VBDZ "_" resist_VV0 over-regulation_NN1 ._. "_" 
I_PPIS1 think_VV0 there_EX was_VBDZ a_AT1 strong_JJ feeling_NN1 in_II the_AT room_NN1 that_CST financial_JJ innovation_NN1 yields_VVZ significant_JJ net_JJ benefits_NN2 to_II the_AT economy_NN1 and_CC society_NN1 ,_, and_CC that_CST it_PPH1 was_VBDZ important_JJ that_CST these_DD2 benefits_NN2 not_XX be_VBI lost_VVN by_II too-heavy-handed_JJ regulation_NN1 ._. 
Thomas_NP1 Callahan_NP1 Eraj_NP1 Shirvani_NP1 :_: There_EX was_VBDZ a_AT1 broad_JJ consensus_NN1 that_CST instead_II21 of_II22 restricting_VVG innovation_NN1 we_PPIS2 should_VM be_VBI thinking_VVG of_IO how_RRQ we_PPIS2 encourage_VV0 innovation_NN1 ,_, given_CS21 that_CS22 it_PPH1 is_VBZ absolutely_RR critical_JJ to_II economic_JJ growth_NN1 ._. 
So_RR ,_, besides_II some_DD of_IO the_AT macro_JJ issues_NN2 ,_, there_EX are_VBR pragmatic_JJ issues_NN2 to_TO think_VVI about_II ,_, such_II21 as_II22 how_RRQ do_VD0 you_PPY regulate_VVI product_NN1 innovation_NN1 and_CC who_PNQS would_VM actually_RR do_VDI it_PPH1 ._. 
Instead_II21 of_II22 focusing_VVG on_II whether_CSW to_TO restrict_VVI or_CC encourage_VVI innovation_NN1 ,_, how_RRQ do_VD0 we_PPIS2 create_VVI a_AT1 framework_NN1 around_II it_PPH1 so_RR there_EX is_VBZ proper_JJ infrastructure_NN1 and_CC more_RGR robust_JJ risk-management_NN1 ._. 
Mr._NNB Fidler_NP1 :_: For_IF the_AT fourth_MD recommendation_NN1 ,_, we_PPIS2 discussed_VVD elevating_VVG responsibility_NN1 for_IF risk_NN1 management_NN1 to_II the_AT board_NN1 level_NN1 ,_, and_CC better_JJR education_NN1 of_IO risk_NN1 managers_NN2 ._. 
It_PPH1 was_VBDZ noted_VVN how_RGQ few_DA2 risk_NN1 managers_NN2 or_CC people_NN with_IW expertise_NN1 in_II this_DD1 area_NN1 are_VBR emerging_VVG through_II universities_NN2 ._. 
Mr._NNB Spencer_NP1 :_: Clearly_RR over_II the_AT past_JJ 25_MC years_NNT2 we_PPIS2 have_VH0 seen_VVN an_AT1 extraordinary_JJ change_NN1 in_II the_AT wholesale_JJ financial_JJ market_NN1 --_NN1 in_II31 terms_II32 of_II33 the_AT globalization_NN1 of_IO the_AT financial_JJ markets_NN2 ,_, in_II31 terms_II32 of_II33 product_NN1 innovation_NN1 ._. 
The_AT whole_JJ OTC_NN1 market_NN1 has_VHZ come_VVN from_II nowhere_RL in_II the_AT early_JJ 1980s_MC2 to_II the_AT biggest_JJT financial_JJ set_NN1 of_IO products_NN2 in_II the_AT universe_NN1 at_II the_AT moment_NN1 ._. 
Still_RR ,_, paradoxically_RR the_AT level_NN1 of_IO knowledge_NN1 and_CC expertise_NN1 on_II these_DD2 instruments_NN2 frequently_RR remains_VVZ woefully_RR low_JJ ._. 
Risk_VV0 management_NN1 has_VHZ not_XX kept_VVN pace_NN1 with_IW that_DD1 level_NN1 of_IO innovation_NN1 and_CC needs_VVZ to_TO be_VBI elevated_VVN significantly_RR ._. 
Frequently_RR ,_, the_AT people_NN at_II the_AT top_NN1 of_IO the_AT firms_NN2 knew_VVD the_AT products_NN2 well_RR many_DA2 years_NNT2 ago_RA ,_, and_CC are_VBR not_XX so_RG conversant_JJ with_IW the_AT newer_JJR products_NN2 today_RT ._. 
Therefore_RR ,_, we_PPIS2 felt_VVD that_CST a_AT1 very_RG major_JJ and_CC fundamental_JJ rethink_NN1 of_IO the_AT understanding_NN1 of_IO risk_NN1 management_NN1 at_II the_AT top_NN1 of_IO organizations_NN2 ,_, both_RR at_II the_AT suppliers_NN2 side_NN1 and_CC the_AT buy_NN1 side_NN1 ,_, was_VBDZ needed_VVN and_CC critical_JJ to_II improving_VVG the_AT durability_NN1 of_IO our_APPGE financial_JJ structures_NN2 going_VVG forward_RL ._. 
Supporting_JJ Role_NN1 Mr._NNB Fidler_NP1 :_: The_AT final_JJ item_NN1 was_VBDZ "_" strengthen_VV0 infrastructure_NN1 ._. "_" 
Financial_JJ markets_NN2 are_VBR moving_VVG so_RG fast_RR ,_, driving_JJ innovation_NN1 ,_, that_CST the_AT structures_NN2 of_IO markets_NN2 and_CC the_AT regulatory_JJ structures_NN2 are_VBR sort_RR21 of_RR22 being_VBG dragged_VVN in_II their_APPGE wake_NN1 ._. 
