Risk-related disclosures practices in the annual reports of Portuguese credit institutions: an exploratory study

This study assesses the risk-related reporting practices of 190 Portuguese credit institutions based on a content analysis of their individual annual reports for 2006. Risk-related disclosures are found to lack comparability because of different maturity time bands that report exposures to credit, market and liquidity risks; different Value-at-Risk and sensitivity analysis assumptions; and different practices for reporting capital structure and adequacy. The misalignment of quantitatively based disclosures and related narratives led to problems of relevance, reliability and understandability. We assess the extent to which reforms of risk-related reporting practices in 2007 in International Financial Reporting Standards and the Basel II Accord address each of the deficiencies identified. We highlight areas needing further reform, and recommend that Portuguese supervisory authorities adopt more effective enforcement mechanisms to broker compliance with minimum mandatory risk disclosure requirements

Compliance of Corporate Governance of the State Owned Commercial Banks : An Empirical Study

The paper is an effort to scrutinize the prevailing accounting standard for the private Commercial Banks in Bangladesh and find out the extent of compliance by them. Banking industry’s nature of operation is totally different from others. Recognizing this aspect some specific IASs (International Accounting Standards) have been prescribed for them. One of which is IAS#30 (Disclosures requirements for Banks and similar financial institutions). Institute of Chartered Accountants of Bangladesh (ICAB) prescribed to comply with IAS#30 from on or after 1st January, 2010. Hence compliance of IAS 30 (superseded as IFRS 7) is of importance here. Scrutinization has been operated on 10 private commercial Banks. As per requirement, all the Commercial Banks are required to comply with the standard to uphold the stakeholders’ interest .And the result of the study shows that all of the private Commercial Banks compliance almost 87.5% of the IAS#30 (IFRS 7) requirements. Finally this study recommend on the degree of compliance for the Commercial Banks financial reporting. Keywords: Compliance, CG, IFRS, Bank, Private Commercial Banks

Market risk reporting by the world's top banks:evidence on the diversity of reporting practice and the implications for international accounting harmonisation

The increasing adoption of international accounting standards and global convergence of accounting regulations is frequently heralded as serving to reduce diversity in financial reporting practice. In a process said to be driven in large part by the interests of international business and global financial markets, one might expect the greatest degree of convergence to be found amongst the world’s largest multinational financial corporations. This paper challenges such claims and presumptions. Its content analysis of longitudinal data for the period 2000-2006 reveals substantial, on going diversity in the market risk disclosure practices, both numerical and narrative, of the world’s top-25 banks. The significance of such findings is reinforced by the sheer scale of the banking sector’s risk exposures that have been subsequently revealed in the current global financial crisis. The variations in disclosure practices documented in the paper apply both across and within national boundaries, leading to a firm conclusion that, at least in terms of market risk reporting, progress towards international harmonisation remains rather more apparent than real

The effect of banking supervision on the recognition and disclosure of impairment of financial assets

Mestrado em Contabilidade, Fiscalidade e Finanças EmpresariaisO presente estudo investiga o papel da supervisão bancária no reconhecimento e divulgação das perdas por imparidade de ativos financeiros. Em concreto, é feita uma comparação das práticas de divulgação entre países cujos supervisores bancários apresentam diferentes abordagens à imparidade do crédito e estabelecida uma relação com o grau de reconhecimento destas perdas. A amostra é constituída por 60 bancos de 15 países da União Europeia. Os respetivos supervisores nacionais foram classificados como intervencionistas/não intervencionistas no processo de imparidade do crédito considerando a sua interferência nas divulgações destas perdas. Dados financeiros e práticas de divulgação foram recolhidas manualmente dos Relatórios e Contas disponíveis em inglês para os exercícios de 2012 a 2015, tendo sido construídos índices de divulgação. Os resultados das análises univariadas e das regressões lineares revelam que bancos cujo supervisor tem uma abordagem intervencionista ao processo de imparidade do crédito apresentam um maior cumprimento com a IFRS 7 e são sujeitos a divulgações adicionais exigidas pelos respetivos supervisores nacionais. Esses bancos, contudo, apresentam um menor cumprimento com o Pilar 3 comparativamente com bancos cujo supervisor apresenta uma abordagem não-intervencionista ao processo de imparidade do crédito. As diferenças entre países são persistentes, mesmo após o Banco Central Europeu assumir a responsabilidade pela supervisão bancária na União Europeia, não obstante dos sinais de melhoria e harmonização das divulgações. Por último, conclui-se que o reconhecimento das perdas por imparidade no crédito está positivamente relacionado com o seu nível de divulgação.This paper investigates the role of banking supervision in the recognition and disclosure of impairment of financial assets. Specifically, disclosure practices are compared between countries whose supervisors present different approaches to loan loss provisioning and related with the recognized level of loan loss allowances. The sample includes 60 banks from 15 European Union countries. The respective supervisors were categorized as interventionist or non-interventionist to loan loss provisioning according to their interference with loan loss provisions' disclosures. Financial data and disclosure practices were hand collected from the financial statements available in English for the financial years between 2012 and 2015 and indexes of disclosure were constructed. The results of univariate analysis and regression model show that banks whose supervisors have an interventionist approach to loan loss provisioning are the most compliant with IFRS 7 and provide additional impairment disclosures that are required by their national supervisor. However, these banks present a lower compliance with Pillar 3 in comparison with banks whose supervisors have a non-interventionist approach to loan loss provisioning. Country differences are persistent even after the taking over of European Union's banking supervision by the European Central Bank, despite signs of improvement and harmonization of disclosures. Finally, recognition of loan loss provisions is found to be positively related with the level of disclosure.info:eu-repo/semantics/publishedVersio

FSB transparency initiatives

Artículo de revist

THE VALUE RELEVANCE OF IFRS 7. EVIDENCE FROM EUROPEAN BANKING SECTOR

Before 2007, European banks and other financial activities were characterized, on the one hand, by high income, many assets on and off balance and strong recourse to the use of leverage; on the other hand, the inappropriate use of derivatives, securitization containing collateralized debt obligation and (CDO) and credit default swap (CDS), and the conceding of subprime loans have created the conditions of the financial crisis. The lack of confidence generated in the financial market has made it increasingly pressing need for better disclosure to all stakeholders, as an important element to ease the funding of other venture capital and/or debt aimed at improving the competitiveness and growth. The quality of the relationships between the bank and the market is linked to the ability to communicate their economic and financial performance, highlighting the risks that characterize its core business. The information opacity of credit intermediaries is often caused by both managerial opportunism phenomena and by excessive cost of disclosure. The predominant literature, indeed, claims that there are many advantages of a good disclosure that results in reduction of the cost of capital (Diamond and Verrecchia, 1991), easy access to found (Linsey and Schrives, 2005), creation of more stability in the whole banking industry and consequent reduction of systemic risk (Nier and Baumann, 2006), and effective tool for avoiding banking crises (Financial Stability Board, 2012). However, other Authors argue that there are some disadvantages related to the excessive disclosure due to the complexity of financial instruments because markets are unable to incorporate additional information in a beneficial way (Hodder et al., 2001; Hassan et al., 2009; Hassan and Mohd-Saleh, 2010; Siregar et al. 2013). In addition, banks often oppose to requirements asking for higher disclosures because they determine significant costs (Mozes, 2002, Gebhardt, 2004). In order to respond to the aforementioned situation of crisis, the International Accounting Standards Board (IASB) has issued the IFRS 7: Financial Instruments Disclosure, an ad hoc accounting standard which identifies the minimal disclosure requirements that entities must meet to communicate to investors the risks arising from financial instruments used. The value relevance of financial instruments risk disclosure is an important key factor for a transparent relationship between banks and stakeholders, in particular investors, because, first of all, the last financial crisis has revealed the weaknesses of the European banking system and related disclosure; secondly, banks’ regulatory framework is complex, so it is possible to detect cases of information opacity, because it is formulated by a range of different bodies (i.e. local banking authority, Basel Committee and European Banking Authority - EBA); lastly, a gap in the literature of the relevance of financial instruments risk disclosure in the banking sector exists. On this basis, the aim of this thesis is to test the value relevance of the financial instruments risk disclosure (FIRD) from the users’ perspective, as recommended by the IFRS 7 in the European banking sector. In particular, UK, Germany, Italy, Spain and France are investigated because they are countries with highest capitalization in Europe from 2007, year of IFRS 7 entry in force, to 2014, last year available. Final results show that only qualitative index has a positive effect on banks’ value, meaning that qualitative disclosure recommended by IFRS 7 is value relevant. Maybe qualitative information can be easily found because it is supposed to have a clearer language (Pucci and Tutino, 2012). Instead, the quantitative disclosure index is not relevant for investors because of uncertainty, multi-person settings with conflicts of interest, and information asymmetry

An evaluation of users and preparers perceptions on the management of risk disclosures: a service quality perspective

The extant risk disclosure literature has explored the determinants and incentives for risk disclosure. However, no study to date has examined the design process of risk disclosures. The purpose of This study is to fill this gap, while using a qualitative case study approach within the context of a UK listed Bank. The research examines the management of risk disclosures, with particular focus on users’ expectations for risk disclosure quality, and the degree to which these are incorporated in the decision choices taken by management when deciding what to disclose and what not to disclose. It explores a set of discrepancies between what a user of risk disclosure expects of the quality of such an information and their perceptions on the actual disclosures they get mainly from the annual report and the pillar 3 risk disclosure report. Drawing on the Gaps Model of Service Quality from the marketing literature (Parasuraman et al., 1985; Zeithaml et al., 2002;2016), it is argued that this overarching discrepancy is influenced by the degree to which preparers perceive and understand the expectations of their users and the disclosure designs they establish to reflect how they have perceived these expectations. Even though the authors of the Gaps Model refer to disclosure designs as the decision choices made by management in relation to how the disclosures should be presented, the Model provides little scope for examining these decision choices. For this reason, the Gaps Model is amalgamated with the Disclosure Management Framework from the accounting literature (Gibbins et al., 1990; Mayorga, 2013; Johansen and Plenborg, 2018) to provide an explanation on how the internal decision - making process is undertaken by management when translating their perceptions of users’ expectations into risk disclosure quality specifications and a new framework is developed in the process.The findings indicate that even though user participants express a desire for an access to the bank’s regulatory reporting, reduction in the volume of the disclosures and reliability of the information provided, it is evident that they recognise these may not always be possible. The findings support the notion that user expectations for the quality of risk disclosure is a key antecedent to the corporate disclosure process. However, in meeting these expectations, management faces multiple challenges when deciding what to disclose and what not to disclose including the risk of misinterpretation and the disclosure of commercially sensitive information. It is also evident that, irrespective of users’ expectations, there are a number of challenges embedded within their risk reporting process

Basel II: Panacea or a Missed Opportunity

At the end of June 2004, the Basel Committee on Banking Suspervision (henceforth, the 'Basel Committee') finally issued the 'New Capital Accord' (henceforth called "Basel II"), following endorsement by G10 bank supervisors. This Accord replaces the original accord (now temed "Basel I") agreed in July 1988 and implemented by most major banks around the World since 1993. Publication follows years of exhausting work by the Basel Committee to improve upon the original in the light of market devleopments, advances in risk management and revealed deficiencies in the operation of the current scheme (which will remain in place until end-2006 for all banks and, for mny, very much longer). This article traces the evolution of Basel II form its inception in June 1999 to agrement on its final form, focussing on the period since the publication of a revised set of proposals for a new Accord in Jauary 2001. The impact of the consultation entered into with intersted parties (there were three formal rounds of consultation) on the final shape of the Accord is explored, as is the role played by the Quantitative Impact Studies (particularly, "QIS3") in the moulding of Basel II. Finally, the agreed package of proposals is assessed form a "cost-benefit" standpoint, and outstanding concerns are identified. In particular, the question of whether or not the Committee has done enough to try and ensure that its ultimat objectives are realised is addressed, as is the posibility that it overlooked a gold opportunity to more fully embrace market discipline within the supervisory process.Reform, banking

A comparative analysis of African Bank Limited's credit risk disclosure

Abstract: Banks play an integral role within the financial system of a country and when a bank thrives or fails, this systematically impacts the economy of a country. The curatorship of African Bank by the SARB was an attempt to reduce the losses that would have been experienced by the users (creditors, investors, customers and employees and other banks) of African Bank. The purpose of financial statements in the Conceptual Framework is centred around the users of financial statements, that is, the financial statement should provide relevant information that is useful for decision making purposes such as to invest or not. Thus, the study’s first intent is to determine, through in-depth analysis of African Banks’ credit risk disclosure for the 2009 to 2013 financial periods, whether a pending crisis in the bank could have been detected by users to a certain extent. The second intent is to ascertain whether any lessons had been learnt in the new African Bank for the 2016 to 2017 financial periods...M.Com. (International Accounting