G20 risk disclosure suggestions aim to restore faith in banking

City A.M. Reporter
A TASKFORCE set up by the G20’s regulatory arm, the Financial Stability Board (FSB), last night proposed seven recommendations to improve banking risk disclosures.

The recommendations include listing risks from the bank’s business model, outlining sources of funding, how risk-weighted assets are calculated, forbearance of loans and how this affects the reported level of impaired or non-performing loans.

“Disclosures that describe risks and risk management practices transparently help to build confidence in the firm’s management, which is particularly important in attracting debt and equity investors and may in turn support higher equity valuations.”

The taskforce, made up of banks, investors and accounting firms, said many of the recommendations would start to be weaved into annual reports for 2012 or 2013 onwards. The move was broadly welcomed in the City last night.

“Confidence in financial services is a vital component in the recovery of economies across the world,” said Deloitte’s Mark Rhys.

“The recommendations should make it easier for investors and analysts to understand the risks a bank has, and help to restore trust in the industry.”

HSBC said the recommendations were “comprehensive and timely”.