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Leadership: understanding the US sub-prime collapse
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The Institute’s latest leadership report examines the roles of the stakeholders and issues involved in the United States sub-prime mortgage market collapse.  
 
Collapse of the United States sub-prime mortgage market provides an insight into the many factors involved in the credit crisis environment, with emphasis on the effects to financial statements of financial institutions and investors in mortgage backed securities around the world.  
 
The key findings of the report include:

  • All stakeholders: borrowers, investors, preparers, investment banks, credit rating agencies and brokers and those who protect them: preparers, auditors, standards-setters and regulators, each had a role to play in the sub-prime crisis that exists today
  • A recommendation to companies to improve disclosures of exposures to risk and the assessment of fair value for investments
  • The identification that investors, large and small, must take more responsibility and be more sceptical about investments and critically examine fair values.
The report details the challenge for banks and financial institutions in making financial reporting more dynamic, in terms of reporting changes in risk or other forward thinking information, which could be required by regulators. 
 
The report also states that it is important that blame not be laid upon the traditional scapegoats, being the accounting and auditing profession and says that regulators and standard setters need to ensure they consider all parties in any legislative changes.  
 
The paper is one of the Institute’s leadership initiatives which aim to look ahead, question and positively influence the growth of the accounting profession.  
 
Members can view the paper on the Institute’s website. 
 
Relevant links:  
 
 
Last updated: Thursday, 5 June 2008