Banks propose to derive and tell

A TOP-LEVEL group of international banks yesterday announced proposals to publish far more information on their dealings in derivatives, writes Peter Rodgers. The plans are part of a campaign to combat political pressures that bankers fear could lead to regulations restricting the derivatives markets.

The Institute of International Finance, a Washington-based club of bankers that includes Barclays, Midland, Bankers Trust and JP Morgan, said it wanted to encourage greater transparency in the derivatives market.

The new information had to be meaningful to the markets, comparable between banks and based on data it was practical to collect. It was hoped to encourage new international reporting standards.

However, the IIF conceded there was one key area it was impossible to standardise. There was no consensus among banks about how to quantify market risk - the impact of large fluctuations in the markets on the value of holdings.

As a substitute, it recommended that detailed written discussions of accounting, risk measurement and other policies should be included in published reports.

The plan sets out how banks should tabulate their derivatives exposure in reports, separating it into different categories of riskiness.