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New Basel Disclosure Rules Are a Win for Market Discipline 

January 30, 2015

Investors need a clear and reliable picture of banks' risk exposures in order to exert market discipline on less creditworthy institutions. The Basel Committee's newly released revisions to banks’ disclosure requirements will give shareholders a much better handle on those risks, thereby helping to avert future bailouts.

The revisions to Basel III's Pillar III should go a long way toward improving the existing requirements, which are undeniably poorly implemented. Numerous banks, including continental European banks, have been abiding by Pillar III disclosures since 2006. But the disclosures were only required to be released on an annual basis and were not uniform. This made it impossible for investors to glean anything meaningful from information about banks' exposures — which is the whole point of requiring transparency.

Read More: American Banker

 
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