Basel II regulators lighten Pillar 3 disclosure burden

Regulators said they have reduced to hundreds from thousands the items of information that will be required from banks under the third pillar of Basel II. Pillar 3 will require banks to reveal more information so that investors, analysts and customers can better judge their risk management practices. Many banks claimed the initial Pillar 3 proposed requirements were far too burdensome.

But all information will have to be disclosed under the revised proposals. Under the original Pillar 3 proposals banks could opt out of disclosing some of the information nominated by the regulators.

The new proposals are contained in a working paper on Pillar 3 issued today by the Basel Committee on Banking Supervision, the body that in effect regulates international banking and which is the architect of Basel II.

Basel II will stipulate what proportion of their assets large international banks will have to set aside as reserve capital to guard against losses from the risks of the banking business from 2005.

The accord, which is intended to be more risk sensitive than the current Basel I accord, rests on three interdependent pillars. Pillar 1 lays down the capital charges, while Pillar 2 backs up the accord with strong supervision by regulators. Pillar three seeks to subject the banks to market discipline through greater disclosure of information.

The Basel I accord dates from 1988 and has been adopted by over 100 countries.