The code is designed to enhance investors' confidence in financial reporting and as an aid to compare banks' performance. It is based on the principle that UK banks are committed to providing high quality, meaningful and useful disclosures to users.
The FSA announced today that the major UK-headquartered banks have agreed to implement a tough new code for financial reporting disclosure.
The code forms part of proposals designed to enhance investors’ confidence in financial reporting, and to aid their ability to compare and contrast banks’ performance. It is based on an over-arching principle that UK banks are "committed to providing high quality, meaningful and decision-useful disclosures to users to help them understand the financial position, performance and changes in the financial position of their businesses".
The FSA is inviting views on the application of this code to banks and other credit institutions. In the meantime, at the FSA’s request, the major banks have agreed to implement the code in their 2009 year-end annual reports.
If the banks are unable to sufficiently improve the quality and comparability of their disclosures in their 2009 annual reports, the FSA is also seeking views as to whether the code needs to be supplanted by more detailed disclosure templates.
Paul Sharma, FSA director of prudential policy, said:
"In the Turner Review we set out our view that the financial crisis had raised questions as to the adequacy of financial disclosure by banks throughout all major economies and the level of confidence that investors could place in their financial reports”.
"The tough disclosure code published today puts UK banks further ahead of the game internationally in addressing these concerns. But when applying this code to their 2009 year- end accounts, the FSA expects firms to achieve significant improvement in the quality and comparability of disclosures."
The code is being launched to the industry by the British Bankers Association (BBA) today.
The Turner Review identified a concern that in spite of banks’ efforts to enhance disclosures during 2008 and 2009, investor confidence in financial reports appeared to remain low.
The FSA has worked closely with the BBA and major firms to develop the code, which sets out key principles accompanied by explanatory text to highlight how the principles should be applied in practice.
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