New measures to lift veil on banks' capital

New Post Public Reply Private Reply Replies (0) Message Board
SaltyMutt

New measures to lift veil on banks' capital ratios

RELATED QUOTES

Symbol Price Change
DBK.DE 38.53 +0.32
SAN.MC 6.035 -0.144
HSBA.L 719.60 +2.90

By Laura Noonan

LONDON (Reuters) - The game may soon be up for banks that have made themselves look healthier by understating how risky their businesses are, which should help pension funds, savers and companies to decide which institutions to invest in.

Bowing to pressure from regulators and investors, some of the world's biggest banks will soon implement a landmark initiative that promises to reveal far more detail on how banks calculate how much capital they need to guard against potential future losses.

It's designed to restore faith in the capital ratios that are the global benchmark for banks' financial health, ratios that are highly sensitive to banks' risk judgments since they are determined as a percentage of banks' own measure of assets as weighted by risk.

"We're expecting a lot of good disclosure from the banks, and where it's not happening we're expecting institutional investors to challenge management on why they're not doing so," said Russell Picot, chief accounting officer at bank HSBC ( HSBA.L ) and co-chair of the industry taskforce that came up with the new standards for what banks should tell investors.

The initiative was instigated by global financial rules setter the Financial Stability Board (FSB).

A study by the Basel Committee last week showed precisely why it is necessary, revealing that the most aggressive banks assign just one eighth of the risk weighting applied by their most conservative competitors, making their capital position appear far more robust.

Deutsche Bank ( DBK.DE ) came under fire on Thursday when it told investors that it managed a better-than-expected improvement to its capital ratio in the fourth quarter, despite losing 2.5 billion euros ($3.4 billion), largely by changing its approach to risk-weighted assets (RWAs).

EXPERTS IN THE DARK

Even analysts who specialize in banks' finances are unable to unravel the figures and work out which banks are really the healthiest or making the most progress, because of inadequate disclosure.

The new measures, which have been publicly endorsed by industry giants including HSBC, Deutsche Bank and Santander ( SAN.MC ), will reveal key insights on the RWAs that feed into the banks' capital calculations.

Newly available information will include how much of their RWA improvements come from "optimization", or model changes such as Deutsche Bank revealed last week.

"There may be a bank that is neither well capitalized nor liquid, and they may feel concerned that by publishing in greater detail, it will become even more obvious," Picot said.

"The message for them has to be that the market is pretty good right now at understanding banks' shortcomings."

Some banks will show their hands in the 2012 annual reports they will publish in the coming weeks. Stragglers are expected to follow suit later in the year as the transparency drive intensifies.

The capital disclosure measures are part of a broader suite of reporting enhancements devised by a taskforce of the world's biggest banks, money managers, research houses and accountancy firms to address concerns about banks' often opaque accounting.

The initiative Picot co-chaired began on a wintry day in Basel in December 2011, when 82 senior executives convened for what one attendee described as a "frank" round-table debate on how banks could improve the way they report their results.

INVESTOR CONFIDENCE

The FSB, headed by the Bank of England's incoming Governor Mark Carney, wanted to restore investor confidence in banks rocked by the market turmoil that began in 2008 and has yet to abate.

"The FSB felt that certain risk information was needed by participants right now," said Gerald Edwards, a senior official with the U.S. Federal Reserve Board who was closely involved with the taskforce while on secondment to the FSB in 2011.

The taskforce executives, drawn from global leaders including BlackRock, BNP Paribas, Allianz, Ernst & Young, Fitch Ratings, JP Morgan, Royal Bank of Canada, Santander and KPMG, began work in earnest in May 2012 and were given until October to finish.

Such was the intensity of the job that HSBC's Picot said he had two of his bank's staff working on it full time and recalls getting emails at midnight on a Sunday from one of the taskforce's subgroups.

With the task completed in a fraction of the time formal regulation would have taken, the focus is now on implementation.

Picot said there was no set target for take-up, but he expected to see some banks incorporate the new measures in their 2012 annual reports.

"We would hope that in a particular country, a bank that adopts this report and adopts it well will reset the level of what is considered good disclosure, and that other banks would adopt similar practices, and from that, the tide would rise," he added.

Regulators across the globe, who had extensive engagement with the taskforce, are also keenly following progress and will be encouraging their banks to opt in, according to Picot and Edwards.

Those who don't, may end up having to give more information anyway. "Some of this will be picked up and put into regulations," said Edwards.

DOUBTS REMAIN

The effort does have its doubters, including Dierk Brandenburg, banking analyst with Fidelity Worldwide Investments.

"We remain skeptical that banks across a wide variety of jurisdictions (Europe, U.S. and Asia) and accounting regimes ... are in a position to meet the requirements," he said, adding that the increased links between governments and rescued banks could "put a limit to what authorities may deem to be the appropriate level of disclosure to investors".

Crispin Southgate, a taskforce member and director of Institutional Investment Advisors, has high hopes for banks' voluntary adoption, nonetheless.

Banks were consulted and were "very responsive", he said.

"This report is setting a marker for some very high standards, which we hope banks will reach for ... We don't want banks to wait for new rules."

(Reporting By Laura Noonan; Editing by Will Waterman)

Scroll down for more posts ▼

Top 10 Most Recent News Articles

Nuix Leverages AI for Transformative Legal Review

Updated Category News Views 0

Nuix Unveils AI Innovations in Legal Review Diving headfirst into the evolving world of legal technology, Nuix has just rolled out some serious upgrades to its eDiscovery toolkit. By plucking AI right out of the data science ethers, they're not just dabbling in futuristic tech—they're planting generative AI at the heart of legal review on their SaaS platform, Nuix...

Continue Reading
Hims & Hers Faces Class Action: Investors Beware

Updated Category News Views 2

Allegations and Legal Pressure There's trouble brewing in the land of health and wellness apps, with Hims & Hers Health, Inc. (NYSE:HIMS) taking center stage. Slap on your glasses, folks, because this one's a doozy. A class-action lawsuit has exploded against the company and some of its officers—allegations flying as they focus on serious accusations of misleading...

Continue Reading
Softcare Facilitates Standards Delegation Visit to Senegal

Updated Category News Views 3

Ever seen a whole nation's hygiene industry getting a deep dive from not just one, but three major standards bodies? That's what just went down in Senegal. Softcare opened its doors wide to folks from the Senegalese Association for Standardization (ASN), the International Organization for Standardization (ISO), and the Swedish Institute for Standards (SIS). This was no...

Continue Reading
Midea's VitaBreeze: Revolutionizing Personalized Climate

Updated Category News Views 6

A Fresh Breeze in Climate Control Here's something that'll shake up your household. Midea just announced their latest gizmo, called VitaBreeze, and they’re not messing around. They introduced it at IFA 2026, promising it's not just for cooling off in the summer or heating in the winter. Oh no, my friends, they've packed this unit with enough cutting-edge tech that...

Continue Reading
Asia-Pacific Media Forum Eyes Future Growth Strategies

Updated Category News Views 2

Media Heavyweights Converge in Shenzhen Picture this: Over 400 media moguls from the Asia-Pacific region, huddled together in Shenzhen under that blazing September sun. What for? They're on a mission, inspecting China's shifting landscape, hunting down fresh growth avenues in the Guangdong-Hong Kong-Macao Greater Bay Area. It kicks off within the walls of the Asia-Pacific...

Continue Reading
TCL’s AI Vision: Immersive Living at IFA 2026

Updated Category News Views 3

AI and Displays: A Match Made in Tech Heaven Every so often, a company stands up at a tech fair and gives a glimpse into the next chapter of living, as TCL did at IFA 2026. This time, they're not just talking about screens; they're weaving them into the fabric of everyday life alongside AI capabilities. From sporting arenas to your living room, it's a vision of what could...

Continue Reading
China's Manufacturing: Squeeze or Opportunity?

Updated Category News Views 3

Analyzing China's Impact on Global Markets Think of China's manufacturing clout and you're likely to picture booming factories, relentless steel, and smoke-churning industries reshaping the global chessboard. But here's the kicker: are they swallowing up room for others, or paving the way for their growth? It’s this debate that took the spotlight at the Asia-Pacific...

Continue Reading
Ice-Rock Avalanches: Future Risks and Urgent Lessons

Updated Category News Views 1

Mounting Threats in Mountain Chains That nightmare on August 26 at Mount Langtang Lirung in Nepal—where an ice-rock avalanche triggered a catastrophic mudslide—brought a harsh reminder that these mountains are cracking wide open. With 31 dead and over 500 souls still unaccounted for, it's a chilling warning about how vulnerable high-altitude regions have become. A...

Continue Reading
Mermaid Folklore Meets Revolution in New Short Film

Updated Category News Views 2

A Sea Haunting Like No Other Ever feel like history's forgotten tales deserve a fresh spin? Well, this one's shaking it up! Hoyt Dwyer, an Atlanta filmmaker, flips the script on a lesser-known bit from the American Revolution. Yeah, we're talking about Hessian soldiers and sirens here. Just hang on to your hats because this ain't your typical historical retelling. A...

Continue Reading
Changhong's IFA 2026 Showcase: AI, Culture & Localization

Updated Category News Views 4

Changhong's Game Plan: From Global Reach to Local Touch Well, Changhong's not sitting back at IFA 2026, let me tell you that. This isn't your run-of-the-mill showcase; it's a full-on reveal of what happens when a company takes AI tech and tunes it to the heartbeat of daily life. TVs, fridges, air conditioners—you name it, they've got an AI twist on it. But is this just...

Continue Reading

Top 5 Most Recently Viewed Articles

Non-muscle Invasive Bladder Cancer Market Shifts

Updated Category News Views 3

Surge in Bladder Cancer Cases Propels Market Growth Bladder cancer's surging numbers are turning heads and driving home the demand for novel treatments. In particular, the non-muscle invasive bladder cancer (NMIBC) slice of the pie is witnessing some remarkable action, largely due to an uptick in global cases. The booming numbers can't be ignored, folks—1.56 million...

Continue Reading
Investors Take Action: Unicoin's Class Action Investigation Overview

Updated Category News Views 337

Investigation of Unicoin, Inc. Claims The Rosen Law Firm, a leading global investor rights law firm, is currently investigating potential securities claims on behalf of investors in Unicoin Rights Certificates. Unicoin, previously known as TransparentBusiness, Inc., faces allegations regarding the issuance of potentially misleading business information. Your Rights as An...

Continue Reading
Funding Boost: Swvl's Strategic $2 Million Private Placement

Updated Category News Views 111

Swvl Holdings Corp Expands Funding for Growth Initiatives Swvl Holdings Corp (NASDAQ: SWVL), a key player in technology-driven mobility solutions for both enterprises and governmental organizations, has recently made headlines with a remarkable financial move. By securing a $2 million private placement, Swvl is poised to enhance its operational capabilities and facilitate...

Continue Reading
Signify Announces Recent Share Repurchase Activity Update

Updated Category News Views 156

Update on Signify's Share Repurchase Program Signify, recognized as a global leader in intelligent lighting, has shared a significant update regarding its ongoing share repurchase program. Recently, the company repurchased 63,368 shares between August 4 and August 8 at an average price of EUR 21.12 per share, amounting to a total of EUR 1.3 million. This initiative aims...

Continue Reading
Pakistan's Rare Earth Elements Shipment to US Transforms Trade

Updated Category News Views 349

Pakistan's Milestone Shipment of Rare Earth Elements Pakistan has successfully dispatched its first batch of enriched rare earth elements and critical minerals to the United States, marking the start of a significant partnership worth $500 million established in an agreement signed recently. A Positive Step for US-Pakistan Relations This groundbreaking shipment, delivered...

Continue Reading