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FSB creates "Enhanced Disclosure Task Force"

  • FSB (Financial Stability Board) (lt green) Image

May 14, 2012

The Financial Stability Board (FSB) has announced the formation of a private sector "Enhanced Disclosure Task Force" (EDTF) to develop principles for enhanced disclosures by financial institutions that are based on current market conditions and risks, including ways to enhance the comparability of disclosures.

The FSB was established through the G7 and G20 to (1) coordinate, at the international level, the work of national financial authorities and international standard setting bodies (including the IASB) and (2) develop and promote the implementation of effective regulatory, supervisory, and other financial sector policies.

The creation of the EDTF follows an FSB hosted roundtable on risk disclosures by financial institutions held in December 2011. The FSB issued a summary of the outcomes from the roundtable in a March 2012 press release (link to the FSB Web site), which also noted the intention to form a task force.

In addition to developing principles for enhanced disclosure, the task force is also to identify leading practice risk disclosures presented in annual reports for year-end 2011 that are based on broad risk areas.

Click for the FSB press release (link to the FSB's Web site). A summary of the key messages from the December 2011 roundtable is presented below for the convenience of our readers.


Key Messages From the December 2011 FSB Rountable

Risk disclosure foundations — Participants generally preferred risk disclosure requirements in accounting standards and securities regulatory requirements that are principles-based rather than rules-based, but investors also called for measures to improve comparability, such as more consistent risk disclosure formats or templates.

Improvements needed in financial institution risk disclosures — Investors and analysts stressed that disclosure that enhances the transparency of risks and risk management practices helps to build confidence in the firm’s management, which can be particularly important to attract debt and equity investors. Given the current financial market environment, participants expressed the view that enhanced qualitative and quantitative disclosure is particularly important in the following areas:

  • Information on governance and risk management strategies —Disclosure should be put in the context of the financial institution’s business model to facilitate market understanding of risk management practices.
  • Summary disclosure and benefits of achieving comparability.
  • Credit risk — Participants encouraged improved disclosure about exposures to sovereign debt and to other financial institutions.
  • Liquidity risk — Given the increasing role of collateral, participants shared the view that the degree of asset encumbrance should be disclosed at a reasonable interim frequency as well as annually.
  • Capital adequacy and risk weighted assets (RWAs) — Participants said that disclosures on capital planning were important, and further disclosure about RWAs and their calculation methods
    would be helpful.
  • "Pillar 3" disclosure — Participants generally supported more integrated presentation that would, for example, better link and allow navigation between the Pillar 3 and financial report (e.g., IFRS 7) risk disclosures, align the timing of their publication, and achieve more comparability across jurisdictions and banks.
  • Scenario and sensitivity analyses — Including the possible disclosure of stress tests in financial reports.

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