On 12 January 2010, HM Treasury published a discussion paper on developing non-bank sources of finance for UK businesses. The paper explores the different factors that can impact on access to non-bank lending, including the role of corporate transparency. The paper discusses the possibility of adopting an enhanced corporate disclosure regime to reduce uncertainty regarding a company’s credit. This will enable investors to be more certain when they price the risk of lending to the company, which will in turn reduce the cost to the company of borrowing as investors will not charge the company a premium to protect themselves from uncertainty.

HM Treasury recognises the need to weigh this benefit against the burden of providing the information. It comments that it is suggested by some that the disclosure regime in the US is more transparent than that in the UK and that reporting there is more frequent. HM Treasury reports that the Financial Services Authority is currently developing a database similar to that of the US Securities and Exchange Commission’s “EDGAR” to improve access by investors to information disclosed by issuers.

HM Treasury seeks views from companies that do not currently use non-bank lending channels (for example, bonds or loan markets) as to why they do not do so and whether they find current levels of corporate transparency or regulatory controls burdensome. Also, where the use of non-bank lending has not been successful, views are sought as to the extent that corporate transparency played a part in this failure. Investors’ views are sought as to the extent to which increased corporate transparency would result in them getting more involved in the corporate debt market.

(HM Treasury, Discussion paper on non-bank lending, including enhanced corporate disclosure, 12.01.10)