Corporate Governance for Banks in Southeast Europe: Policy - IFC

Skepticism regarding disclosure
Beyond these technical concerns, there is considerable skepticism regarding the benefits of disclosure in
the region. In best-practice countries, the usual benefits of disclosure are described as better accountability
to owners and the public, improvements in performance, better access to capital, and improved public
perceptions. Yet, SEE managers and owners tend to be more conscious of the short-term costs than of the
considerably less tangible benefits that might accrue to them in the longer term.
For disclosure to work, information must be easily available for the public and the markets to use. The Internet
is often a cost-effective way of getting information into the public’s hands (see Chart 8). In SEE, banks make
most basic information publicly available directly in their branches, in government publications, or in the
published media.
Chart 8: Web-based Disclosure by SEE Banks
Are the following disclosures of the bank posted on the website?
Director remuneration report
Corporate governance report
Terms of reference/charters
of the board and committees
Composition and structure
of the board
Ownership structure
Financial statements
0 10 20 30 40 50 60 70 80 90 100
Source: Data from EBRD, Corporate Governance Assessment of Banks (2010–2011). Question asked to selected banks in the region.
Yet, even where information is freely available, it is
uncertain whether the public and depositors can
understand complex issues such as risk, gearing, or
capital adequacy, or whether they would access such
information if it were available on a website.
Some SEE supervisors express concern that information
given to the public could damage trust in the financial
markets and destabilize them. Supervisors’ concerns
are not with public disclosure itself but rather with
what should be disclosed. Supervisors tend to agree
that problems should be handled initially in discussions
with supervisors, with disclosure occurring only when
problems become worse.
Capacity of the Public to
Understand Disclosures
“In practice in this region I do question
whether the depositors can really
understand market risk, ordinary risk,
risk-weighted assets, all of these issues
which are of course relevant. I wonder
whether they actually understand them
and whether it gives them any comfort
at all to read about it on a website.”
Belgrade Conference 2009
44
Policy Brief
Corporate Governance for Banks in Southeast Europe