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