Topics: International trade, Investment, Financial services Pages: 2 (495 words) Published: April 17, 2013
Why Transparency is so important for International Financial Institution A lot of people take about the importance of transparency in international financial institutions but they rarely explain why it is so important. It is just taken as a given that it is important. There are actually a number of reasons why they are important but the main one is trust. No matter how sophisticated our economy has become all transactions still come down to trust, you have to trust the person that you are trading with. This requires transparency so that you can see what the other party is doing. The main reason that transparency is so important for international financial institutions is that it is really the only way to make sure that everybody is following the rules. This is especially true when it comes to financial relationships between countries because there is really no legal enforcement that will make countries follow the rules. The only thing that can be done is to make sure that everybody else knows what they are doing so that they can put pressure on any country that is not playing by the rules. It is this pressure that is the only thing that will actually keep countries in line. Transparency is also important because it is necessary for everybody involved to actually know what the rules are. International finance has long been hampered by the fact that in a lot of cases the rules for investing or trading with a particular country are not clear and in many cases they will simply change as the country sees fit. This is hardly the way to encourage trade since nobody is going to invest their money if the rules are not clear and stable. Transparency makes it difficult for countries to just change their rules on a whim. Transparency is also required because of the need for currency exchange as part of international trade. It is very possible for one country to follow a reckless monetary policy that can damage the currencies of a number of other countries. Obviously this is...
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