The sub-prime crisis showed that financial markets require much greater transparency. Incomplete loan credit analysis, faulty disclosure of lending terms and the questionable practices of credit-rating agencies caused the crisis; securitisation of complex financial products, an opaque financial architecture of off-balance-sheet structured investment vehicles (SIVs), shadow-banking, and bad auditing practices also played a part. Contributors to the situation inflicted the damage on themselves. They would have benefited from greater transparency. In the Financial Times David Pitt-Watson suggested that "the lessons of the credit crisis are not just for regulators. The failures that caused the current credit crisis are the same ones that brought down Enron, Worldcom and Parmalat: lack of accountability, lack of responsibility, and lack of transparency."
Clarity is needed
Transparency has become a central issue in financial law. It has several elements: know-your-customer obligations for financial institutions and other service providers; financial institutions' and other service providers' disclosure of...