New disclosure rules for banks

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

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.

Further reading:

urged to disclose risks

Standard setters outline response to credit crunch

Banks face rules for ‘strict and detailed’ disclosure

Related reading

Fiona Westwood of Smith and Williamson.