Financial disclosure requirements for banks could be reduced as the Reserve Bank looks at changing the current regime but a banking academic said the proposed changes are "more or less useless."
With 19 banks currently registered in New Zealand, the central bank said in a consultation document released today, its review aimed at reducing compliance costs associated with disclosure, while also matching the needs of key stakeholders.
The Reserve Bank proposed two preferred options for changes to disclosure requirements.
Currently, banks are required to publish a quarterly disclosure statement, which includes a brief key information summary, a larger general disclosure statement, and a supplemental disclosure statement.
Banks also face other disclosure requirements through the Financial Reporting Act 1993 and the Securities Act 1978.
Deputy governor Grant Spencer said the current regime was designed to improve market discipline on the banks, to increase the public's financial awareness, and to strengthen directors' responsibilities.
But feedback suggested the current system may not be the most effective way of meeting those objectives, he said.
The Reserve Bank has suggested cutting the key information summary, which was designed to provide a brief overview of the bank's financial condition.
And getting rid of bank disclosure for the first and third quarters and making the proposed six-monthly disclosure shorter.
"It is expected that this will improve comparability across banks and again significantly lower the compliance costs."
The second option would keep the quarterly key information summary, which will be revised to be more readable for retail depositors, and would be the only required disclosure in the first and third quarters.
"It will include the key corporate information, summarised income statement and balance sheet, key rations, a set of useful notes and a glossary."
Massey University's Centre for Banking Studies director David Tripe told NZPA the changes were "more or less useless" as it was difficult enough trying to understand bank disclosures anyway.
"And if the amount of the information disclosed is going to be reduced, it doesn't strike me of being a particular good thing."
Dr Tripe said the Reserve Bank's second proposed option to keep the key information summary for quarters one and three was worse because the document was useless.
"It's not the readability that's the problem, it's that it doesn't contain any useful information.
"A bare income statement and balance sheet doesn't tell you very much about what's going on. Unless, you've got some other information, you can't make sense of the changes."
Changes should be made, but they should not focus on reducing information, Dr Tripe said.
"Which key stakeholders do they think they are talking about because the only people who benefit from this is the bank."
"I haven't gone through the proposal in detail, but what is needed is an understanding firstly on what information can be useful to understanding the risks to which banks are exposed," he said.
NZPA and NBR staff
Fri, 06 Aug 2010