NEW YORK A top executive from Chase Manhattan Corp. on Monday challenged the notion, popular among federal regulators, that expanding disclosure requirements for banks will result in more effective market discipline.
Dina Dublon, Chases Chief financial officer, said expanded disclosure could mislead investors in assessing a banks risk.
Banks dont all manage our risks in the same way, said Ms. Dublon at a conference sponsored by the Bank Administration Institute. We need disclosures of risk that are relevant to the way that we manage our business. Disclosure needs to have a strong link to what senior managers use to make decisions.
Rules that force all banks to squeeze information about their risk-taking philosophy into the same regulatory template are less likely to capture an individual banks true attitude toward risk, and are therefore less useful to investors, she said.
Standardized disclosures that are not meaningful to managers create a disconnect ... and reduce the value of information, she said.
Ms. Dublon is one of a dozen chief financial officers from major financial services firms who are on a task force that is addressing banking disclosure. The task force was created last spring by federal banking and securities regulators to suggest ways disclosure practices could be improved. The group, chaired by former Chase chairman and chief executive officer Walter V. Shipley, is expected to make recommendations by yearend.
Ms. Dublon declined to say whether her remarks are representative of other members on the panel, but made her own view quite clear: More is not better, she said.
I would like to see industry and regulators agree that the purpose of disclosures is to help investors understand how we manage risk qualitatively, and how risk changes quantitatively over time. I believe it can be improved. And improvement doesnt necessarily mean more disclosure, she said.
Excessive information can be confusing, she continued, arguing that it is more useful for an investor to understand the way bank management thinks about risk, and what decision-making process managers use, than it is to bombard them with specifics about particular deals or portfolios.
One bank analyst conceded at least half of Ms. Dublons point, noting that current disclosure requirements produce volumes of information that stock analysts routinely ignore.
The classic analyst always wants more disclosure, but there is a lot of stuff in financial statements that we dont even look at and if we dont, who does? said David S. Berry, executive vice president and director of research at Keefe, Bruyette & Woods Inc.
Analysts, he said, want more useful data. We would like to see segment disclosure: if banks broke down their financial statements into different lines of business, that would be a lot more clarifying, he said.
Ms. Dublons remarks come at a time when top United States and international regulators are hyping increased disclosure requirements as an important adjunct to bank supervision, and a possible replacement for increasingly intrusive examinations.
Earlier this year, Federal Reserve Bank of New York President William J. McDonough, who also chairs the Basel Committee on Banking Supervision, said, There is little question about the urgency of achieving dramatic progress in this area.