Banks' disclosures are not transparent enough

Banks have failed to achieve the high level of disclosures required by accounting standards which intended to show greater transparency in how management dealt with risk.

The criticism of the troubled sector comes from a report from PricewaterhouseCoopers which analysed the 2007 annual reports of 22 global banks.

According to PwC's study, disclosures did not achieve the level of transparency that IFRS 7 requires, in accordance with the needs of the users of financial statements have demanded.

The disclosures instead presented a 'less cohesive' picture of the banks' position on areas such as risk, an ongoing focus of the market.

'Faced with a difficult environment, banks have coped well with a number of issues,' said PwC's Edmund Hodgeon of the capital markets group.

'However, with the market challenges racing ahead of regulation, boilerplate compliance is no longer going to crack the problem. Banks have reached a fork in the road – they need to provide quality disclosures that tell the full story. Otherwise, we could be looking at the voluntary disclosure framework giving way to more prescriptive disclosure from regulators,' he said.

Hodgeon suggested that additional guidance be provided with the aim of improving transparency with a focus on a framework for disclosures as opposed to a set of detailed information requirements.

Further reading:

US banks' $5,000bn balance sheet burden on ice