Bank reporting cocktail leaves investors groggy
The variety of approaches covering critical matters such as when a loan becomes impaired and defining what is suspect directly affects how much capital banks must hold and the sort of returns investors can expect.
Efforts to harmonise reporting standards have been going on for nearly a decade, but the financial crisis has brought the issue to a head as investors, burned by tumbling share prices and emergency cash calls, are steering clear of those lenders whose risk models they don't trust.
"This lack of comparability does in our view weigh on the investibility of some banks," said Jon Peace, a London-based banking analyst with Nomura.
"Where transparency is too low to form a clear view on the accuracy of the calculations, investors will be inclined to discount the shares for the uncertainty, whether or not it is warranted.
" Other analysts, who will only speak anonymously because of the sensitivity of the topic, are more blunt, with one describing financial statements as "pointless", given the lack of consistency across banks and the discretion they have on key metrics.
COMPARING APPLES WITH APPLES
The treatment of mortgage arrears is particularly diverse.
As a general rule, home loans are defined as being in arrears if the repayments are more than 90 days overdue, but it varies widely across Europe.
In Portugal, a home loan is overdue when just one month's payment is missed.
In Italy, it is
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