Certainly, here’s a detailed overview of disclosure requirements for banks that are commonly included as notes to the financial statements:
- Risk Management and Capital Adequacy:a. Credit Risk Exposure:
- Details of credit risk exposure, including concentration of credit risk, credit quality of loan portfolios, and provisions for loan losses.
- Disclosure of market risk exposures related to interest rate risk, foreign exchange risk, and commodity price risk. Explanation of risk management strategies.
- Explanation of operational risk management practices, including risk assessment methods, control mechanisms, and incidents.
- Disclosure of capital adequacy ratios, including Common Equity Tier 1 (CET1), Tier 1, and Total Capital ratios. Details of regulatory capital requirements.
- Financial Instruments:a. Derivative Instruments:
- Information about derivative instruments, including types, purpose, notional amounts, fair values, and associated risk management policies.
- Details of financial instruments measured at fair value, including valuation techniques, inputs, and sensitivity analysis.
- Classification of financial assets and liabilities, including available-for-sale, held-to-maturity, and loans. Explanation of valuation methods.
- Loan Portfolios:a. Loan Maturity Analysis:
- Breakdown of loans by maturity, including short-term and long-term loans, and the impact on cash flows.
- Disclosure of impaired loans, including details of provisioning, collateral, and efforts to recover.
- Deposits and Borrowings:a. Deposits by Type:
- Segmentation of deposits by type (savings, demand, time deposits) and interest rates.
- Details of borrowings, including types, terms, and covenants.
- Interest Rate Risk Management:a. Interest Rate Sensitivity:
- Disclosure of the bank’s sensitivity to changes in interest rates, including potential impact on net interest income.
- Liquidity Risk:a. Liquidity Management:
- Description of liquidity risk management strategies, including sources of funding, contingency plans, and stress testing results.
- Analysis of asset and liability maturities, illustrating the bank’s liquidity position.
- Related Party Transactions:a. Related Party Transactions:
- Details of transactions with related parties, including nature, terms, and amounts involved.
- Segment Reporting:a. Business Segments:
- Information about the bank’s business segments, including revenue, profit, and assets by segment.
- Operating Leases and Commitments:a. Operating Leases:
- Details of operating lease commitments, including future rental payments.
- Contingent Liabilities and Commitments:a. Contingent Liabilities:
- Explanation of contingent liabilities, including legal claims and guarantees.
- Disclosure of off-balance-sheet commitments, including letters of credit and guarantees.
- Regulatory Compliance:a. Regulatory Changes:
- Information about regulatory changes and their potential impact on the bank’s operations.
- Other Regulatory Disclosures:a. Anti-Money Laundering and KYC:
- Details of anti-money laundering and know-your-customer compliance measures.
- Disclosure of regulatory capital requirements and compliance.
- Description of data protection measures and privacy policies.
These are just some of the many disclosure requirements that banks need to provide in the notes to their financial statements. The exact nature and extent of disclosures may vary depending on the regulatory framework, accounting standards, and specific circumstances of the bank. The goal of these disclosures is to provide transparency, enable stakeholders to assess risk, and make informed decisions about the bank’s financial position and operations.