Banks agree to new reporting accounting code

The UK’s largest banks have agreed to a self-imposed financial reporting code, in a move designed to avoid regulators imposing their own reporting requirements in the wake of the crisis.

The British Bankers Association (BBA) released the new code which commits the largest banks - including HSBC, Lloyds TSB and Barclays - to increase and enhance the standard of their financial reporting.

The Financial Services Association (FSA) became frustrated at the poor level of consistency surrounding how banks report to the market and, in particular, their complex financial assets. These assets have no market inputs into their value and must be measured according to an accounting model.

The FSA felt there was little consistency in how banks valued these instruments, pointing the finger at auditors who it claimed failed to apply enough professional skepticism.

However, banks themselves have seized the initiative in the code promising to meet and discuss accounting issues and promote more consistency in how they measure their financial assets.

In the new code, banks promise to go beyond strict interpretation of accounting rules to provide more meaningful notes to the market, and to deliver a more consistent standard.

Angela Knight, BBA chief executive, described the code as an “example of the industry working together to enhance market practice”.

“It surpasses all of the current international and local reporting requirements and fits with the call from the G20 and others to identify the types of risk disclosure that are relevant and useful to investors," she said.

Banks are trying to avoid a tick-box system being enforced upon them when the FSA releases its thoughts on the issue in coming months.

Further Reading:

BBA publishes new code for financial disclosures

Proposed rules may cost largest banks £37m each