In November 1995, the Basle Committee on Banking Supervision (Basle Committee) and the Technical Committee of the International Organisation of Securities Commissions (IOSCO Technical Committee) issued a report on the public disclosure of trading (on-balance-sheet instruments and off-balance-sheet derivatives) and non-trading derivatives activities of banks and securities firms. The report contained a survey of disclosures about trading and derivatives activities in 1994 annual reports for a sample of large, internationally active banks and securities firms, as compared with 1993. It also contained a series of recommendations, both quantitative and qualitative, to stimulate further improvements in disclosure practices. These recommendations drew on the concepts developed in the Discussion Paper on Public Disclosure of Market and Credit Risks by Financial Intermediaries ("the Fisher report"), released by the Euro-currency Standing Committee of the G-10 central banks in September 1994 and on the Framework for Supervisory Information About the Derivatives Activities of Banks and Securities Firms ("the Supervisory Information Framework"), released jointly by the Basle Committee on Banking Supervision and the IOSCO Technical Committee in May 1995.

This document provides a follow-up survey that includes the 1995 disclosures about trading and derivatives activities of the internationally active banks and securities firms covered in the November 1995 report. It is intended to provide large banks and securities firms with a picture of the advances in disclosure practices over the 1993-1995 period and encourage further enhancements at the international level. As was discussed extensively in the November 1995 report, the Basle Committee and the IOSCO Technical Committee have stressed that meaningful public disclosures play an important role in reinforcing the efforts of supervisors to foster financial market stability. Improved disclosures should also benefit banks and securities firms themselves, enhancing their ability to evaluate and manage their exposures to other counterparties and reducing the likelihood that they become susceptible to market rumours and misunderstandings during periods of financial stress.

Compared with 1994, the banks and securities firms included in the survey continued to enhance their trading and derivatives-related disclosures in 1995 annual reports. Management discussion of the risks associated with trading and derivatives activities and the methods used to manage these risks continued to be expanded. Institutions also provided more detailed discussions of accounting and valuation techniques for their trading and derivatives positions. Particularly noteworthy was the increase in the number of institutions that provided quantitative disclosures drawn from their internal value-at-risk methodologies. More than half of the banks included in the survey provided such quantitative information. The Committees strongly encourage these institutions to continue their efforts to develop more meaningful disclosures for their trading and derivatives activities.

Despite these improvements at many leading financial intermediaries, there remain significant disparities, both within and across countries, as regards the type and usefulness of the information disclosed. Moreover, a significant proportion of institutions continue to disclose little about their trading and derivatives activities. These institutions are strongly encouraged to consider the quantitative and qualitative recommendations contained in the November 1995 report, which are reproduced in the Annex. They should also consider the types of disclosures provided by their peers at the international level, as outlined in Tables 2-6 of this year's disclosure survey. The Basle Committee and the IOSCO Technical Committee will continue to monitor improvements in banks' and securities firms' disclosure practices over the coming years.