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.
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