Bank audits are expected to be crystal clear about the risks investors face – if improved disclosure rules go ahead.
A top level meeting in New York of regulators, accountants and banking figures has led to renewed efforts for greater disclosure in the lending sector of dangers which were previously obscured but exposed during the global credit crunch.
The changes would mean that auditors must make clear in their reports the precise relationship between a bank and 'off balance sheet' vehicles, which include hedge funds and special purpose vehicles.
Valuation is also being further discussed as many suggest mark-to-market rules are not adequate.
The liquidity issues which emerge when a bank's liabilities are due before the value of assets are realised, are also to be further thrashed out since these posed the greatest problems during the credit crunch as lenders stopped lending each other.
Although the regulation could take up to two years, banks area expected to voluntarily adopt some of the new rules by the end of this year, following the pressure from auditors and regulators, the Mail on Sunday reported.
The International Accounting Standards Board, the Financial Reporting Council, the Securities and Exchange Commission and the six large accounting networks were also at the meeting.
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