Gillian Tett on Corporate Transparency

As ususal, Tett does a great job.  The ending is key.  From The Financial Times:

Idea of 'living wills' is likely to die quiet deathBy Gillian Tett
Financial Times
Published: August 13 2009 19:50 | Last updated: August 13 2009 19:50
Preparing a will is usually an emotionally charged experience. After all, no one really wants to ponder their demise when they are in the prime of health. Nor is it pleasant to spell out difficult issues such as how to divide up all the family silver--or not.

But could the lessons learnt from preparing for death prove useful for the modern banking world? Some western regulators are tossing the idea about.

In recent months Treasury officials in Washington have been scurrying to create a so-called "resolution" regime, which would make it easier to wind up large banks if they fell into a crisis.

The British Treasury and central bank have gone further by suggesting that banks should be forced to write "living wills" as part of a resolution system. These documents would in essence force banks to stipulate in advance how their operations could be wound down in a crisis and how their assets might be distributed, in the hope that such clarity might help to avoid a replay of the type of panic that erupted when Lehman Brothers collapsed last autumn.

What spooked regulators and investors at the end of last year was not just the bank's collapse, but the fact that it was unclear where Lehman’s assets lay, or who could claim them. Thus, by injecting more transparency--and forethought--into corporate structures, another panic might be averted, or so the argument goes.

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