Amid concerns that investors can’t properly assess banks’ capital adequacy under the existing disclosure requirements, global bank regulators are demanding that banks provide greater insight into their capital calculations.
The Basel Committee on Banking Supervision Tuesday published a set of proposed revisions to the disclosure requirements imposed under the so-called Basel III capital adequacy regime, which aims to ensure greater consistency in the way banks disclose information about risk exposures. The regulators are seeking to improve the comparability of capital disclosure between banks.
The changes are being prompted by concerns that the existing disclosure regime doesn’t “promote the early identification of a bank’s material risks” and doesn’t provide “sufficient information to enable market participants to assess a bank’s overall capital adequacy,” they note.
The committee says that the proposed revisions are particularly targeting improvements to the transparency of the internal model-based approaches that banks use to calculate minimum regulatory capital requirements. For example, it proposes that banks be required to disclose “the drivers of changes in risk-weighted assets and the actual versus forecast performance of certain modelling parameters.”
Once these changes are finalized, the Basel Committee plans to expand its review of bank disclosure requirements to include other standards that are currently still under development, not just the capital requirements. It also plans to consider additional disclosure requirements to further improve the comparability of banks’ risk profiles.
Comments on the proposals unveiled today are due by September 26.