More transparency and less complexity will promote recovery in the mortgage markets, Federal Reserve Board governor Randall S. Kroszner said Friday.
“Greater transparency and less complexity in credit instruments will help to promote broader scrutiny of credit risk,” Kroszner said at the Boston College Carroll School of Management Center for Asset Management, according to prepared text of his speech, released by the Fed.
“Investors with more and better information from originators and sponsors of credit products will be able to more easily conduct proper due diligence and verify evaluations of credit risk,” he said. “Financial institutions that develop and hold these instruments and that have similar or correlated exposures through various business lines should also strengthen risk-management practices. And supervisors of these institutions must insist on effective risk management and take the steps necessary to ensure that changes are implemented where needed.”