Basel Committee publishes final rules for banks on disclosure

26 June 2012

The Basel Committee on Banking Supervision (BCBS) has issued its final rules on the information that banks must disclose when detailing the composition of their capital. Its publication, relevant to the looming Basel III stipulations, is entitled ‘Composition of Capital Disclosure Requirements’. It sets out a framework to ensure that the components of banks’ capital bases are disclosed in standardised formats across jurisdictions.

The BCBS observes that during the financial crisis, market participants and supervisors were hampered in their efforts to undertake detailed assessments of banks’ capital positions and make comparisons across jurisdictions. Adding to these difficulties were insufficiently detailed disclosures by banks and a lack of consistency in reporting across banks and jurisdictions. It says that this lack of clarity may have contributed to uncertainty during the financial crisis and could have masked how far banks were relying on forms of capital that were insufficiently loss-absorbent.

The BCBS believes that the newly-published disclosure requirements should help to improve market discipline by enhancing both transparency and comparability.

The Basel Committee adds that its new publication aims to improve the quality of Pillar 3 disclosures in respect of capital that banks use to meet their regulatory requirements.

Improvements to the disclosure of banks capital requirements (i.e. the composition or risk-weighted assets) are also under consideration as part of its review of the pending post-crash Basel III implementation process.

Stefan Ingves, chairman of the BCBS and governor of Sweden’s central bank, Sveriges Riksbank, noted that: “the disclosure requirements adopted by the Committee will let banks demonstrate the improvements to the quality of the capital bases as they proceed towards Basel III implementation. Clear and comparable disclosure is the key to improving both market confidence and financial stability.”

By Neil Ainger

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