Market discipline is
the third pillar of Basel II as well as enhanced version of disclosure
requirements of Basel III. These may be taken as tool for judging the quality
of a bank Balance sheet.
As per RBI disclosure
requirements a person may judge at his own how the bank is performing. These
requirements include capital adequacy ratio. Risk exposure i.e. CRAR %, Tier I
Capital %, Tier II Capital %, Percentage
of shareholding of govt. in case of nationalized bank, amount of subordinated
debt raised as tire II capital etc.
Apart from the above
the value of investments, provision for depreciation if any in Inland or abroad, repo transactions, Non SLR investments, Position of securities held
till maturity and derivative business disclosures like exchange traded
derivatives etc are also important point to be looked into.
Notes to the accounts
of chartered accountant are very important annexure of balance sheet for the
purpose of disclosure requirements. These include
01) Information
regarding NPA%, NPA Movement in the year, provision for standard Asset,
movement provision for NPA. Overseas NPA%
02) Information
regarding advances restructured under Corporate Debt Restructuring Mechanism,
provisioning requirements thereof and up gradation degradation of previously
restructured accounts.
03) Exposure
% to real sector, movement thereof and NPA Percentage.
04) Exposure
to capital market
05) Risk
category wise country exposure as [per norms of export credit Guarantee
Corporation.
06) Details
of single borrower limit and single group limit exceeded by the bank, if any,
during the year.
07) Unsecured
Advances including advances granted against intangible securities like charge
over rights, licenses authority etc.
08) Any
change in accounting policy regarding revenue recognition, employee benefit,
business segmentation like national vs. international, treasury, corporate,
wholesale bankingetc.
09) Accounting
of taxes and income.
10) Disclosure
of letter of comfort issued.
11) Provisioning
coverage ratio.
12) Concentration
of business in one sector.
13) Off
Balance sheet exposure/ contingent liability, credit default swap etc
14) Details
of unamortized pension and gratuity liability.
15) Details
of remuneration paid to executives and employees
These may be viewed
to judge the strength or weakness of a bank.
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