Yes, we believe that there should be greater granularity of information regarding encumbered and unencumbered assets, particularly in the event of a problem arising with a particular bank. More alignment in the information between regulators and unsecured creditors is also vital.
Yes, information regarding the credit quality of the assets should be included. These should be based on the lowest rating from S&P, Moody’s and Fitch.
Median values are useful to stop any potential ‘window dressing’ at a given point in time but inter-quartile ranges would also be advisable.
Market value would be more informative, particularly during times of stress when the value of the assets could potentially be falling rapidly.
In times of financial stress, if a bank has engaged in collateral swaps with a central bank, revealing this information could lead to a crisis of confidence and to systemic risk.
Contingent liabilities should be disclosed although the enforceability could differ across jurisdictions.
A point in time approach could lead to misleading ‘window dressing’. Our preference would be for median values and inter-quartile ranges.
We are concerned about the recommendation to classify as unencumbered assets legally pledged to central banks for emergency funding. Pension funds could well be lending on an unsecured basis to stressed banks while regulators with access to more information would remain fully secured. This lack of disclosure could prove more destabilizing than full disclosure of a bank's ELA as investors presume the worse in the instance of complete information.
Disclosures should be published at the same time as the financial statements given that they relate to the same point in time.