Banks agree new FSA code for reporting

THE MAJOR UK-based banks have agreed to implement a new code for financial reporting which aims to address investor concerns over the disclosure of complex, risky products.<br /><br />The Financial Services Authority (FSA) yesterday confirmed that the institutions &ndash; including bailed-out banks Lloyds Banking Group and Royal Bank of Scotland &ndash; have agreed to apply the code to their 2009 year-end accounts.<br /><br />The FSA said the code formed part of proposals designed to &ldquo;enhance investors&rsquo; confidence&rdquo; in financial reporting following the financial crisis, and to help them &ldquo;compare and contrast banks&rsquo; performance&rdquo;.<br /><br />The code focuses on increasing the comparability of financial reports &ndash; both to other banks&rsquo; reports and over time &ndash; and reducing their complexity by removing detail and language which makes them unnecessarily difficult to understand.<br /><br />The Institute of Chartered Accountants in England and Wales (ICAEW) welcomed the proposal, but warned of the dangers of standardising financial reports too much.<br /><br />&ldquo;The difficulty is that different banks have different business models,&rdquo; said the ICAEW head of financial services faculty Iain Coke. &ldquo;It&rsquo;s about getting a balance between telling a story about the business and getting everyone to report in the same way.&rdquo;<br /><br />The FSA worked with institutions and the British Bankers&rsquo; Association to develop the code, and is now entering a consultation period. It has set out two possible approaches to enhance the disclosure, a &ldquo;template&rdquo; approach &ndash; which would involve institutions providing reports in a pre-defined format &ndash; or a more flexible &ldquo;code&rdquo; approach.<br /><br />But the FSA, led by chief executive Hector Sants, fell short of recommending that banks should give full quarterly reports.