As was noted in the two earlier reports, the tabulation of disclosures is in part a subjective exercise and the review required criteria and judgement to determine whether or not an institution had made a particular disclosure. For example, one bank or securities firm might explicitly provide certain quantitative information, whereas in another bank's or securities firm's annual report, similar information might only be inferred from other complementary data. For purposes of this analysis, indirect communication of information was generally not included in the tables.

While the information on trading and derivatives disclosures included in Tables 2 through 6 is extensive, the tables are not intended to imply recommendations for "best practice" disclosures. The tables instead provide a relatively comprehensive overview of the types of trading and derivatives-related disclosures of large, internationally active banks and securities firms and the evolution of such disclosures over the 1993-1996 period⁹. The Committees believe that the survey should provide an important input to support banks' and securities firms' continued efforts to develop meaningful disclosures in this area.

For the vast majority of the institutions reviewed, disclosure about trading and derivatives activities is provided on a consolidated basis and appears in two main places in the annual report:

• Management's discussion and analysis: This is an analysis of the firm's financial condition and performance (including financial data) that typically includes a narrative of the firm's risk exposures and techniques for managing risk. This part of the annual report is not typically audited by independent accountants. In some countries, this portion of the annual report may be referred to as the financial review or management report.

• Annual financial statements: These financial statements generally include the statements of financial position (balance sheet), financial performance (income), changes in stockholders' equity and, in some countries, changes in financial position or cash flow. Footnotes, which present information on financial statement line items in narrative and tabular form, are also considered to be a part of the financial statements. The annual financial statements and their footnotes are audited by independent accountants.

This survey considers disclosures in both of these areas of the annual report.

The remainder of this report presents in greater detail the developments in qualitative and quantitative disclosures of trading and derivative activities since 1993. In reviewing quantitative trading and derivatives disclosures, the report addresses information about gross position indicators, credit risk, market risk and earnings. Market risk and earnings information is broken down by trading and non-trading (e.g., end-user) activities¹⁰. The qualitative and quantitative information is summarised in Tables 2-6 at the end of this section.

Footnotes:

7 The internationally active banks and securities firms included for each country were those headquartered in the country and not subsidiaries of foreign banks or securities firms. Luxembourg banks were not included in this analysis, since the large dealers and end-users of derivatives located in Luxembourg are subsidiaries of banks headquartered in other G-10 countries. Large, internationally active banks for which Luxembourg authorities carry out consolidated supervision tend to be moderate end-users of derivatives instruments.

In a number of jurisdictions, the largest institutions involved in securities activities are either universal banks or majority-owned subsidiaries of internationally active banks. Thus, in order to avoid double counting, the securities firm portion of this analysis focuses on the stand-alone securities firms of Hong Kong, Japan and the United States. In the case of Japan - where the close of the annual reporting cycle is 31 March 1997 - the choice of institutions included in Table 1 also depended on the availability of financial statements at the time of the writing of this report. For Canadian banks, the close of the annual reporting cycle is 31 October 1996.

In some cases, there were differences in the scope of disclosures provided in domestic as compared with foreign language annual reports.

8 The same banks and securities firms headquartered in G-10 countries were surveyed this year, as in the November 1996 survey. Since the release of that survey, however, there was one merger among the institutions included in the sample: in France, the Indosuez accounts are now incorporated in the consolidated accounts of Crédit Agricole. For consistency purposes, both banks have been retained in the sample. Also, one Hong Kong firm, Jardine Matheson Holdings Ltd, was removed from the sample since financial services only make up a small portion of its business. This deletion does not affect the aggregated figures, since Hong Kong firms are reported separately.

9 In some cases, there were differences in the scope of disclosures provided in domestic as compared with foreign language annual reports.

10 The same banks and securities firms headquartered in G-10 countries were surveyed this year, as in the November 1996 survey. Since the release of that survey, however, there was one merger among the institutions included in the sample: in France, the Indosuez accounts are now incorporated in the consolidated accounts of Crédit Agricole. For consistency purposes, both banks have been retained in the sample. Also, one Hong Kong firm, Jardine Matheson Holdings Ltd, was removed from the sample since financial services only make up a small portion of its business. This deletion does not affect the aggregated figures, since Hong Kong firms are reported separately.