The proposal recommends specific disclosures to better convey an institution's capital adequacy and risk profile. The incentives in Basel II should greatly diminish the opacity that cloaks many international financial institutions and help bring about a convergence of international norms on banking disclosure. I believe that counterparties will expect, indeed force, greater disclosure.
Recent history certainly teaches us that understanding what drives a counterparty's financial performance and its risk appetite is necessary for accurately pricing any transaction or even for deciding whether to engage in a transaction. Conclusion Sound accounting, auditing, and disclosure concepts, consistently applied, have long been at the heart of efficient markets.