A new working paper from the World Economic Forum recommends ways for governments to manage and resolve their equity stakes in financial institutions.

The paper recommends that governments should: deal with their equity stakes separately from other types of crisis intervention; aim for a rapid exit while protecting investment value; establish an independent process to manage these ownership stakes; restrict government influence on owned institutions to board-level issues; raise transparency beyond public disclosure of financial performance; and, “be realistic about securing and incentivizing the best available talent”.

“Much time and energy is being devoted to discussing important issues of economic and regulatory policy. However, resolving government equity stakes in financial institutions is a critical piece of rebuilding the financial architecture that is currently being neglected in the public discourse,” said Paul Achleitner, member of the board of management at Allianz SE.

“Government officials, with the support of private sector experts, must ensure that the same principles that define good management in the private sector – leadership, governance and transparency – are applied in this current public sector situation. And getting it right is crucial; not only is considerable taxpayer money at stake, but so is the long-run soundness of the financial system,” said Julia Hobart, partner at Oliver Wyman and senior adviser to the working paper.