From Fitch Ratings
Enhanced risk disclosure by banks is needed to assist comparison and restore investors’ confidence, Fitch Ratings says. The Financial Stability Board published Monday a report compiled by the Enhanced Disclosure Task Force (EDTF) with recommendations which would make it much easier for investors to compare the risk profiles of major banks, and could increase the confidence of market participants in bank data.
The volume and form of public data that banks provide on many areas of risk varies significantly between institutions, making meaningful peer comparisons difficult.
While we receive additional data on a confidential basis, public disclosure would also make this more consistent. Disclosure around funding and liquidity is particularly poor.
Banks do not disclose these details on a consistent basis, and estimating them from other sources can be difficult. The recommendations in the report address this by proposing a simple table providing a breakdown of encumbered and unencumbered assets by asset type, and also by whether unencumbered assets are likely to be readily available as collateral.
See the full comment ($) Fitch: Better Disclosure Would Aid Bank Comparisons, Raise Trust
From the Financial Stability Board
In its free report Enhancing the Risk Disclosures of Banks the Enhanced Disclosure Task Force (EDTF) identified seven principles:
- Disclosures should be clear, balanced and understandable.
- Disclosures should be comprehensive and include all of the bank’s key activities and risks.
- Disclosures should present relevant information.
- Disclosures should reflect how the bank manages its risks.
- Disclosures should be consistent over time.
- Disclosures should be comparable among banks.
- Disclosures should be provided on a timely basis.
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