James Moore: Banks need more than a reports code

Outlook: The financial sector has been allowed to operate behind a veil of obscurity for too long
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The Independent Online

Britain's banks would have had Sir Humphrey Appleby beaming with pride when they reported their interim results this year. Each produced voluminous tomes, running to more than 100 pages and packed with information that was of use to almost no one, and appeared to have been put together with the express intention of obscuring anything meaningful while, at the same time, chopping down a forest or three.

Each of them claimed that they absolutely had to do this because the regulations demanded it. If the regulations really were responsible – and that's a dubious assertion to say the least – the regulator they really need to worry about appears to have decided that enough is enough.

It often appears that the Financial Services Authority is guilty of employing more than it's fair share of Sir Humphreys. You only need to read some of its windier consultation papers to see that. (And there are plenty of them.) But yesterday the under-fire watchdog was commendably blunt in saying that it is time to shake up the way banks report so we can actually see what is going on.

For now, that means that they will agree to abide by a code developed in conjunction with the British Bankers' Association in time for next year's annual reports.

This code is apparently based on an "overarching principle" that 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".

Sorry, but we've heard this sort of fluff before. In fact, you'd have probably seen similar statements concerning overarching commitments – together with "principles", "values" and any number of other trite homilies – in the investor relations sections of most banks' websites.

Turkeys don't vote for Christmas. And these are turkeys that have lost billions of pounds of our money.

The worry is that for all its honeyed words, the code will allow the banks to continue presenting themselves in the best possible light, while obscuring a real and meaningful view of where they are and how they are doing in relation to their rivals.

The FSA is now consulting on whether the code should apply to other financial companies. It has described it as tough, but has said it may be necessary to impose its own standards through the use of detailed disclosure templates.

Why not do that now?

The FSA has come up with some cack-handed and even downright stupid ideas during the past few weeks, not least its spectacularly foolish proposal to ban self-certification mortgages and cut a million people out of the housing market.

But here, amid all the hoo-hah about bonuses, it appears to have identified a real problem and proposed a workable solution, one that might actually improve things.

Yes, let's have a disclosure template so that each bank has to tell us the really important information in the same format where it can be easily seen by investors, regulators and, frankly, those of us who entrust our money to them.

And while we're at it, why not apply it to other credit institutions, and to fund managers, and to insurers that have outdone even the banks in finding ever more devious ways to present their figures in such a way that anyone without a qualification in actuarial science would find them impossible to understand.

The financial sector remains vital to the economy of this country. We really do need it to become successful again. But it has been allowed to operate behind a veil of obscurity and obfuscation for too long.

If people are better able to see what Britain's financial companies are up to, there is a chance that the type of crisis we are still suffering the after effects of might be averted. That might apply to future crises as well.

The watchdog is facing an open goal on this one, but it needs to stick to its guns. There will be those who will criticise its idea of a disclosure template for the banks and other financials as box-ticking. If such a table is constructed sensibly it need not be so. It could be just what the industry needs. The FSA should stop messing around with industry codes and show us how one might look.