Information deficiencies in banking crisis
Jinfo Blog

1st May 2009

By Tim Buckley Owen

Item

Read past the ‘astonishing mess’ headline of the House of Commons Treasury Committee report, Banking Crisis: Dealing with the Failure of the UK Banks (http://digbig.com/4yraw), and you'll find quite a few implications for corporate information professionals. Here are some of them. Too little information about the activities of UK Financial Investments (http://www.ukfi.gov.uk/), the body charged with managing the government's investments, is currently in the public domain, the MPs say; key information about its mandate, control strategy and envisaged role in promoting change should be published within three months. ‘We do not think it is in the national interest for UKFI to remain so enigmatic a body,’ the MPs conclude. Widespread inconsistency between bankers’ assurances that they are lending more and complaints from businesses that loans are still hard to come by should be resolved by the Lending Panel (background at http://digbig.com/4yray) publishing quarterly reports on lending progress, the Committee continues. Reporting annually on actual lending levels, as currently proposed, is inadequate, it adds; they too should be reported quarterly to the Treasury and made public. Greater clarity is also needed over the likely impact on the public purse of the Asset Protection Scheme (background at http://digbig.com/4yrba) set up to insure banks against losses on ‘toxic’ assets. The government should disclose as soon as possible how it will determine any losses and the timeline for their crystallisation. The Committee heard additionally about the lack of information provided with the securitised products that largely brought about the crisis in the first place; any information gathered was certainly no longer traded with the instruments when they got bundled up with 7,000 more as collateralised debt obligations (CDOs), MPs were told. The result was that some of these assets simply couldn’t be analysed, with Standard & Poors apparently admitting that it could ‘take a whole weekend’ for computers to perform the calculations needed to assess the risks. And finally, a potential information implication for all of us as private banking customers. Once financial stability has returned, the deposit guarantee of £50,000 per person per bank should be properly enforced, the MPs say – both to encourage depositors to consider carefully where they put their money and to induce banks not to be reckless. But BBC economics correspondent Robert Peston is sceptical whether individual customers could ever have enough relevant information to make such a judgement – even if the regulators did start to do their jobs properly (http://digbig.com/4yrbb). Of course these are only recommendations at this stage - but in their present chastened mood it’s likely that regulators will comply. Corporate infopros anxious to keep their users up to speed on disclosure issues will need to be ready.

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