First, in order to measure risk, the country must have solid accounting and disclosure standards that provide accurate, relevant, comprehensive and timely information so that banks can assess the condition and performance of borrowers and counterparties.
To ensure accuracy, accounting systems need to be supplemented by auditing systems and backed up by enforceable legal penalties for providing fraudulent or misleading information to government agencies and outsiders. Banks also need reliable information on the credit history of potential borrowers and on macroeconomic and financial variables that can affect credit and other risks.