The Financial Stability Forum met in Rome over the weekend to discuss the current challenges in financial markets, the steps that are being taken to address them, and policy options.

The FSF said that financial institutions should continue enhancing their disclosures of risk exposures and improving valuation of their structured credit activities, and poorly performing assets, on and off the balance sheet. Banks, securities firms and financial guarantors have made progress in replenishing capital levels and should continue to do so where necessary, it added.

It also said that central banks must continue providing liquidity to address market pressures, as long as needed.

The FSF discussed the report to be delivered to G7 finance ministers and central bank governors in April that identifies the key weaknesses underlying the turmoil and recommends actions to enhance market and institutional resilience. The report sets out specific policy recommendations for: prudential oversight of capital, liquidity and risk management; transparency, disclosure and valuation practices; the role and uses of credit ratings; the authorities’ responsiveness to risks and their arrangements to deal with stress in the financial system.

On the subject of hedge funds, the group said it would welcome reports on the implementation and efficacy of best practice standards have been developed by the UK-based Hedge Fund Working Group for increasing transparency and improving risk management practices.

The FSF also discussed work underway at the IMF and OECD with regard to sovereign wealth funds. It welcomed their efforts to identify a set of voluntary best practice guidelines for SWFs, and the OECD’s work on guidance for recipient countries’ policies toward investments from SWFs.