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Andrew Bailey issued his call for transparency just before taking the helm of the new Prudential Regulation Authority, which will supervise the safety and soundness of 1,700 banks, insurers and large investment firms from Tuesday. His proposal would lift the lid on decades of tradition that have seen bank supervisors work behind the scenes to make individual lenders safer without ever telling the public of their concerns.
Mr Bailey told the Financial Times that Pillar 2 information should be made public as part of broader moves to make it easier for analysts and investors to understand and compare bank balance sheets. “I would do it. . . It is the logical consequence of where we’re heading to”, said Mr Bailey. “If you only disclose on Pillar 1 . . . you’ve given half the story. The history of supervising is that it’s a very secretive activity, because . . . it’s commercially highly confidential, and yet, if you go entirely down that road, what you lose is accountability. I think we have to be more transparent.”
Mr Bailey would need to convince other regulators to go along with his plans – particularly outside the UK. But global regulators are already moving to greater disclosure in other areas, including liquidity, “leverage”, which measures total borrowing, and the composition of capital. Mr Bailey said that, in a year, “I hope we’ll be further forward, and disappointed if we’re not".
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