TRANSPARENCY IN THE FINANCIAL STATEMENTS OF BANKS - A REQUIREMENT FOR MARKET DISCIPLINE
TRANSPARENCY IN THE FINANCIAL STATEMENTS OF BANKS - A REQUIREMENT FOR MARKET DISCIPLINE

Summary/Abstract: One of the latest important changes in the banking system, as a result of the globalization, is the implementation of the Basle II Accord, designed to enhance risk management for banks, thus strengthening financial stability, as well. Its third pillar is aimed at making effective use of market discipline by developing a more detailed set of disclosure requirements to the supervisory authority and to the public. The increase in transparency diminishes informational asymmetry and thus risks may be more easily assessed. Banking supervisory authorities, as users of banks' financial statements, have a strong interest in promoting sound and high quality accounting standards, as well as transparent and comparable financial statements that would strengthen market discipline and enhance financial stability. That's why the Basle Committee strongly supports efforts to harmonise accounting practice internationally, so that it could strengthen and make more transparent the link between measurement standards, public reporting and prudential requirements.

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