The Committee of European Banking Supervisors (CEBS) has published two reports on the outcome of its work on monitoring banks' transparency.
The first report assesses the 2008 year-end disclosures of a sample of EU (and to a lesser extent non-EU) banks and reveals that the good practices set out in the CEBS June 2008 report (Report on banks’ transparency activities and products affected by the recent market turmoil) have been covered quite extensively in many cases.
However, the report notes certain areas within the CEBS June 2008 good practices where disclosures could be improved. There are notably disclosures on:
- Fair value measurement, particularly disclosures on valuation models and the underlying assumptions and adjustments could be further improved.
- Methodologies used to determine the impact of own credit spreads and to account for day one differences.
- Disclosures on consolidated and in particular derecognised entities and related exposures.
CEBS states in the report that rather than prepare a new assessment its next step will be to develop a set of high-level disclosure principles to help banks prepare disclosures covering areas or activities that warrant particular attention.
The second report looks at the CEBS analysis of the Pillar 3 disclosures made by 25 banks.
The purpose of Pillar 3 - market discipline - is to complement the minimum capital requirements (Pillar 1) and the supervisory review process (Pillar 2), while allowing market participants to assess the capital adequacy of a bank through key pieces of information on capital, risk exposure and the risk assessment process.
In its report CEBS states that it has found that banks have made a huge effort to provide market participants with information, allowing a better assessment of their risk profile and their capital adequacy. Banks have increased the level of quantitative and qualitative disclosures on their credit risk and securitisations activities.
However, CEBS also found certain areas where disclosures could be enhanced including:
- The composition and characteristics of own funds.
- The back-testing information for credit risk and market risk.
- The quantitative information on credit risk mitigations and counterparty credit risk.
- The granularity of information on securitisations.
CEBS will continue to closely monitor Pillar 3 disclosures. At present it does not envisage issuing guidance in the area of Pillar 3 disclosures but intends to foster further convergence of Pillar 3 disclosure practices through liaison with industry. It intends to hold an open meeting in the early autumn of 2009.
View Follow-up review of banks' transparency in their 2008 audited annual reports, 24 June 2009
View Assessment of banks' Pillar 3 disclosures, 24 June 2009