What Market Risk Capital Reporting Tells Us About Bank Risk

18 Pages Posted: 25 Aug 2005

See all articles by Beverly Hirtle

Beverly Hirtle

Federal Reserve Bank of New York - Banking Studies Department

Abstract

In recent years, financial market supervisors and the financial services industry have increasingly emphasized the role of public disclosure in ensuring the efficient and prudent operation of financial institutions. This article examines the market risk capital figures reported to bank regulators by U.S. bank holding companies with large trading operations to assess the extent to which such disclosure provides market participants with meaningful information about risk. It argues that when one looks across banks, market risk capital figures provide little additional information about the extent of an institution's market risk exposure beyond what is conveyed by simply knowing the relative size of its trading account. In contrast, when one examines individual banks over time, these figures appear to provide information not available from other data in regulatory reports. These findings suggest that market risk capital figures are most useful for tracking changes in individual banks' market risk exposures over time.

Keywords: market risk, disclosure, regulatory reporting, banking, bank capital

JEL Classification: G21, G28

Suggested Citation

Hirtle, Beverly, What Market Risk Capital Reporting Tells Us About Bank Risk. Economic Policy Review, Vol. 9, No. 3, September 2003. Available at SSRN: https://ssrn.com/abstract=789806

Beverly Hirtle (Contact Author)

Federal Reserve Bank of New York - Banking Studies Department ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-7544 (Phone)
212-720-8363 (Fax)

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