Transparency and Market Discipline
Remi Boutant, Dragan Crnogorac and Andrea Resti
Foreword
Introduction
Risk Assessment in the EU
The Single EU Supervisory Reporting
The EU Harmonised Definition of Non-performing Exposures: Origins, Main Features and Possible Improvements
Towards Consistent and Effective Risk Indicators
Data Workflow: From Quality Checking to Risk Dashboards
EU-wide Stress Tests: Rationale and Basics
EU-Wide Stress Test: Methodology
Macrofinancial Scenarios for System-wide Stress Tests: Process and Challenges
Benchmarking of Credit Risk Models For Determining Own Funds Requirements
Benchmarking of Market Risk Models For Determining Own Funds Requirements
The Analysis of Funding Plans
Transparency and Market Discipline
Afterword: The Post-crisis Regulatory Regime and Bank Business Models
The importance of data for supervisory purposes has been the leitmotiv of the book. However, data and information are important for many stakeholders beyond supervisors. Indeed, in many jurisdictions, banks have been subjected to additional disclosure requirements, on top of those generically aimed at enterprises, including listed ones. This trend has been reinforced by international accords (including the Basel II agreement), as well as by several documents reporting transparency principles and best practices that were promoted by supervisors and private sector associations.
In this chapter, we will first look at the benefits of transparency for banks and other financial institutions by surveying a number of relevant contributions from academics and supervisory authorities. We then turn to the main disclosure requirements that have been imposed on banks operating in the European Union, from both regulators and accounting standard setters, before exploring how market participants have been using data disclosures that were imposed on banks.
WHY TRANSPARENCY MATTERS: A REVIEW OF STUDIES ON BANK DISCLOSURE
Disclosure is both an action and a piece of information: “[t]he action
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Copyright Infopro Digital Limited. All rights reserved.
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