This background report has been written by the Congressional Research Service.
Good background, an excellent primer. Of particular interest was:
The third pillar of the Basel II framework is public disclosure. Pillar three is a set of public information disclosures that a bank must make about itself. These disclosures are to make it easier for creditors and investors in financial markets to assess a bank’s risk posture more accurately and adjust borrowing and capital costs accordingly. The idea behind this requirement is to bring market discipline to bear to give bank management a cost incentive to adopt strong safety and soundness practices. The disclosure requirements will also make it easier for depositors, investors, and regulators to make comparisons across banking institutions. This knowledge, in turn, is expected to affect the willingness of investors to invest in banks and their related businesses. Without pillar three, financial institutions could become more opaque and more difficult to understand as the institutions develop new products and complex risk-hedging strategies that are difficult to evaluate. It could also make it more difficult to understand the risk profile of the firm creating and selling these products as well as the firms buying and using them.
Stirring principals certainly; I’m not sure how well it works in practice, but I do find American disclosure far superior to Canadian disclosure. OSFI, for instance, will not reveal why they have given Royal Bank an increased Assets to Capital multiple cap for the last five-odd years.
[…] Basel II in the United States […]