Basel Committee Issues Final Rules on Banks’ Disclosure of Capital Composition
The Basel Committee on Banking Supervision has issued its final rules on the information banks must disclose when detailing the composition of their capital.
Entitled Composition of capital disclosure requirements – Rules text, the publication sets out a framework to ensure that the components of banks’ capital bases are disclosed in standardised formats across jurisdictions.
During the financial crisis, market participants and supervisors were hampered in their efforts to undertake detailed assessments of banks’ capital positions and make comparisons across jurisdictions. Adding to these difficulties were insufficiently detailed disclosure by banks and a lack of consistency in reporting across banks and jurisdictions.
This lack of clarity may have contributed to uncertainty during the financial crisis and could have masked how far banks were relying on forms of capital that were insufficiently loss-absorbent. The disclosure requirements published today should help to improve market discipline by enhancing both transparency and comparability.
Today’s publication aims to improve the quality of Pillar 3 disclosures in respect of the capital that banks use to meet their regulatory requirements. Improvements to the disclosure of banks’ capital requirements (ie the composition of risk-weighted assets) are also under consideration as part of the Committee’s review of Basel III implementation.
Mr Stefan Ingves, Chairman of the Basel Committee on Banking Supervision and Governor of Sveriges Riksbank, Sweden’s central bank, noted that “the disclosure requirements adopted by the Committee will let banks demonstrate the improvements to the quality of their capital bases as they proceed towards Basel III implementation. Clear and comparable disclosure is the key to improving both market confidence and financial stability.”