Skip navigation

What Constitutes Appropriate Disclosure for a Financial Conglomerate?

Authors: White, Lawrence J.
Keywords: Banks;Disclosure;Regulation;Basel II;Market Value Accounting;Subordinated Debt
Issue Date: 22-Nov-2002
Series/Report no.: S-FI-02-14
Abstract: This paper addresses the disclosure issues for financial conglomerates principally from the same perspective as that of the Basel Committee on Banking Supervision: that disclosure is important for the safety and soundness of banks. However, we reach substantially different conclusions with respect to three important disclosure issues: the role of market value accounting; the frequency of disclosures; and the role of subordinated debt. We start by asking why any special disclosure might be required for financial conglomerates. This question immediately leads to a discussion of what is special about financial conglomerates. We also address the question of, "Disclosure to whom?" There are at least two potential audiences for information disclosures: financial regulators; and the public investors/creditors/customers of a financial conglomerate. Issues of the appropriate structure for a financial conglomerate, and the information revelation that should accompany that structure, are also raised. Finally, we return to the title topic: What constitutes appropriate disclosure for a financial conglomerate. Unfortunately, by turning its back on the three most important steps that could be taken to improve information disclosure -- mandating market value accounting (MVA) for banks' reports to regulators, aiming toward daily submission of these reports, and requiring the issuance of subordinated debt -- the Basel Committee has fundamentally undermined its efforts to enhance banks' safety and soundness.
Appears in Collections:Financial Institutions

Files in This Item:
File Description SizeFormat 
S-FI-02-14.pdf102.01 kBAdobe PDFView/Open

Items in FDA are protected by copyright, with all rights reserved, unless otherwise indicated.