Banks agree new FSA code for reporting
THE MAJOR UK-based banks have agreed to implement a new code for financial reporting which aims to address investor concerns over the disclosure of complex, risky products.
The Financial Services Authority (FSA) yesterday confirmed that the institutions – including bailed-out banks Lloyds Banking Group and Royal Bank of Scotland – have agreed to apply the code to their 2009 year-end accounts.
The FSA said the code formed part of proposals designed to “enhance investors’ confidence” in financial reporting following the financial crisis, and to help them “compare and contrast banks’ performance”.
The code focuses on increasing the comparability of financial reports – both to other banks’ reports and over time – and reducing their complexity by removing detail and language which makes them unnecessarily difficult to understand.
The Institute of Chartered Accountants in England and Wales (ICAEW) welcomed the proposal, but warned of the dangers of standardising financial reports too much.
“The difficulty is that different banks have different business models,” said the ICAEW head of financial services faculty Iain Coke. “It’s about getting a balance between telling a story about the business and getting everyone to report in the same way.”
The FSA worked with institutions and the British Bankers’ Association to develop the code, and is now entering a consultation period. It has set out two possible approaches to enhance the disclosure, a “template” approach – which would involve institutions providing reports in a pre-defined format – or a more flexible “code” approach.
But the FSA, led by chief executive Hector Sants, fell short of recommending that banks should give full quarterly reports.