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Global regulator proposes standards to allow bank comparisons

Investors and regulators faced a near impossible challenge during the financial crisis trying to compare the health of banks in one country to their counterparts in another – a problem global regulators are now attempting to fix.

The Basel Committee on Banking Supervision, which is responsible for drawing up new rules that will affect the world’s largest financial institutions, is proposing a set of standards that would create a universal method for reporting capital levels at banks around the globe.

When the financial crisis hit in 2007-2008, a multitude of different reporting standards made it hard for the market to judge which banks had adequate capital to backstop their lending and trading operations, the Switzerland-based committee said in documents released Tuesday.

That meant investors and regulars couldn’t easily compare the capital situations of banks in Europe with those in Canada or the United States.

“During the financial crisis, many market participants and supervisors have attempted to undertake detailed assessments of the capital positions of banks and comparisons of their capital positions,” the Basel Committee document says.

“The level of detail of the disclosure and the lack of consistency in the way that [capital] was reported typically made this task difficult and often made it impossible to do with any accuracy. It is often

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Tags: Bank, Bank Comparisons