Basel II Pillar 3 benchmarking survey 2009
After recovering from the shellshock of 2008, the banking industry started to rebuild the trust it had lost in the second half of 2009. Certainly the new year will see more progress being made in this domain, pushed forward by the different regulatory initiatives that are being taken. Changes are being proposed and implemented in both the domains of liquidity and solvency, in the area of governance and in particular in the area of risk taking and remuneration, on financial reporting and disclosure and many other topics.
The disclosures on risk exposures that banks are expected to publish under the third Pillar “Market Discipline” of the current capital accord Basel II are at the crossroads of several of these topics. In the present report, we report on our review of Pillar III disclosures of more than 40 European banks, corresponding to the very difficult year end closing of 31 December 2008. Clearly, there is room for improvement in order to make the disclosures evolve from a compliance driven document into a report that enables shareholders to better understand the exposures a bank has and how it manages them. We gladly echo the words of the Walker Report, namely, that its call for a separate risk report should not merely lengthen the reporting, but should actually contribute to enhancing shareholders’ understanding.