EDTF Submits Report Pertaining to Enhancement of Risk Disclosure of Banks to FSB

Thursday, November 1, 2012 Print Email

The EDTF has submitted a report to the FSB, suggesting key changes to the risk related disclosures that banks make. The report outlines 7 basic principles for the enhancement of risk related disclosures that underpins all the recommendations that have been made as well as are considered to offer a structure for work to be conducted in future with regard to risk related disclosures as well the yardstick through which the banks can pass judgment regarding the quality of the future as well as existing disclosures.

The Enhanced Disclosure Task Force was incepted in the month of May in 2012 owing to the initiative of the Financial Stability Board. The task force has participants from asset management entities, analysts and investors, credit rating firms, external auditors and global banks. The task force has also tied up with standard setters as well as regulators in accepting its work.

The task force had set up 6 work streams that reflects the banks’ main risk related areas such as risk management and risk governing related strategies/model of business, adequacy of capital as well as risk-weighted assets, funding and liquidity, credit related risk, risk related to market as well as other types of risks.

Every work related stream was responsible for analyzing existing disclosure in its risk zone by simply reviewing a sample of the recent interim as well as annual reports of the banks, information available from public and reports pertaining to ‘Pillar 3’. The recommendations that have been made by every work related stream were thereafter evaluated by the task force and also discussed by numerous international as well as other groups. The seven basic principles that have been figured out are:

· Disclosures must be understandable, balanced and clear.

· Disclosures must be all-inclusive and also consist of all the key risks and activities of a bank.

· Disclosures must offer useful information.

· Disclosures must reflect the manner in which a bank performs management of risks.

· Disclosures must be unchanging over time.

· Disclosures must be easy to compare among banks.

· Disclosures must be offered on time.

Each and every principle has been further explained via guidelines as well as with examples of the manner in which they are supposed to be met. 

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