Brussels, 26/07/2000 (Agence Europe) - This week the European Commission published a recommendation aimed at improving transparency of the financial information included on the accounts of banks. It favours that more information be provided on the risk operations carried out be financial institutions, notably in the derivatives markets (options, fixed term contracts, exchange rate contracts and currencies). Since the adoption, in 1986, of a Directive on banks annual and consolidated accounts (86/635/EEC), this type of operation has seen considerable growth. Thus the European Commission intends to help users to better assess the financial health of an establishment and reinforce investor confidence. "Increased advertising tries to strengthen the internal discipline and grant greater attention to internal accounting systems and management. It can also contribute to reducing risk taking, due to the fact that companies must publicly justify their practices before their shareholders," believes the Commission.
The European Commission proposes that the information concerning derivatives and certain other elements are established on the basis of their "true value" (that often corresponds to the market price), in opposition to the historic cost or the acquisition cost. This information should be listed in the annex to the account and in the management report, which means that the basic accounting methods and the figures effectively presented in the accounts are not modified. "The recommendations coincides with similar moves by all the major steers of accounting standards (including the International Accounting standards Committee and the US Financial Accounting Standards Board) aimed at enhancing accounting practices, explained the Commission spokesperson. The spokesperson felt it premature to propose a modification of European legislation, as long as the talks continue at an international level.
The recommendation is part of the framework of the action plan aiming to create an integrated market for financial service by 2005. It directly relates to the financial establishments and the Member State, which will have to notify the Commission of the measures taken for its implementation, and will have to work on the account for the financial year following its publication in the Official Journal of the European Communities. The Commission reserves itself the right to propose in the future, if necessary, other measures aimed at ensuring sufficient harmonisation in this field. The full text of the recommendation can be found on the Commission's Europa web site at the following address: http: //europa.eu.int/comm/internal_market.