While the banks’ risk exposures and their riskmanagement strategy is usually an item of public disclosure, there is a corresponding need for corporates too to make adequate disclosures regarding their risk exposures, specially to derivatives and foreign exchange. This would enable the banker to assess the risk profile of the corporate accurately and to evaluate the appropriateness of various financial products on offer.
While these disclosures could be made mandatory through the Accounting Standards – on which, I understand, ICAI is working – it would be desirable if the corporates adopt such disclosures voluntarily, sooner than later, in their own as well as the system’s interest. It is useful for the bankers to track the changing dynamics of the pattern of corporate financing.