Basel outlines capital disclosure rules for banks

Reuter's reports that regulators are working on improving transparency in the reporting of bank capital.  While this is a step forward, to be truly valuable it needs to be matched with ultra transparency under which banks report on an on-going basis their current asset, liability and off-balance sheet exposure details.

Market participants need this data to really assess how well capitalized a bank is.

Banks across the world will have to use a common format for disclosing the size and quality of their capital safety buffers from 2013 to help reassure investors they are stable.... 

Without ultra transparency, capital disclosure does not reassure investors that banks are stable.  Capital is only one part of the equation.

In the run-up to the financial crisis, it was hard for regulators and investors to compare capital buffers of banks. 

"It is often suggested that lack of clarity on the quality of capital contributed to uncertainty during the financial crisis," the Swiss-based Basel Committee said in a statement. 

"Furthermore, the interventions carried out by the authorities may have been more effective if capital positions of the banks were more transparent," the committee said....

All of which ignores that regulators encouraged extend and pretend with loans by engaging in regulatory forbearance as well as regulators dropped the mark-to-market requirement on opaque, toxic structured finance securities.

In short, the problems lurking both on and off the balance sheet were hidden.  It was these problem that called into doubt capital adequacy.

Banks are already disclosing their capital levels in a bid to reassure jittery investors. 

Given the current level of bank stock prices and the inability of banks to access the capital markets for more equity, clearly this disclosure is not working.