Leaders from the European Union (EU) member states endorsed measures on Friday to restore stability on financial markets and supported a voluntary code of conduct for sovereign wealth funds (SWFs).
"The situation (on the financial markets) has been challenging recently, which prompted us to take certain decisions and directions," Slovenian Prime Minister Janez Jansa, whose country holds the EU presidency, told reporters after wrapping up a two-day summit here on Friday.
This year EU leaders kicked off their spring summit at a time when difficulties in the international financial sector are still working their way through the system.
Six months after European financial markets were victimized by the U.S. sub-prime mortgage market crisis, EU leaders were tasked to find a way out of the persistent turbulence, which has become a major downside risk to the economy of the 27-nation bloc.
Since last summer when the U.S. sub-prime mortgage crisis broke out, European financial markets has been under tremendous pressure of credit squeeze as financial institutions were reluctant to lend for fear of being implicated in trouble.
Nobody knows how big the losses of the turmoil would be. The continuous uncertainty has undermined trust and confidence of investors and consumers, clouding the economic outlook of the EU.
In a bid to restore confidence on the markets, EU leaders called on financial institutions to promptly and fully disclose their exposures to the turmoil.
"Prompt and full disclosure of exposures to distressed assets and off-balance-sheet vehicles and/or losses by banks and other financial institutions is essential," they said in a conclusion.
Saying primary responsibility in responding to the turmoil is with the private sector, EU leaders warned authorities in the EU stand ready to take regulatory and supervisory actions where necessary.
In this regard, they called for enhancing transparency of investors, markets and regulators, improving valuation standards, reinforcing the prudential framework and risk management in the financial sector and improving market functioning and incentive structure, including the role of credit-rating agencies.
They also decided to improve financial supervision and enhance the management of cross-border financial crisis situations, tools and procedures.
