SEC ENCOURAGES REGISTRANTS TO CONSIDER RECOMMENDATIONS OF WORKING GROUP ON PUBLIC DISCLOSURE

Earlier this year, the
private sector Working Group on Public Disclosure issued a
report recommending several enhancements to public
disclosure for large banking organizations and securities
firms in the areas of credit and market risk.  The Working
Group was established by the Federal Reserve Board in April
2000 to develop options for improving the public disclosure
of financial information by banking and securities
organizations. The Office of the Comptroller of the Currency
and the Securities and Exchange Commission participated with
the Federal Reserve Board in support of that effort.

     In its report, the Working Group recommended several
specific practices to enhance current disclosures.  These
include quarterly disclosure of some market risk information
now disclosed annually, and enhanced quarterly disclosures
about credit concentrations and credit quality of
portfolios.  In particular, the Working Group recommended
that firms disclose:
     
  (1)  Aggregate high, average and low trading value-at-risk
       (VAR) over the quarter;

  (2)  High, average, and low trading VAR by major risk
       category (e.g., fixed income, currency, commodity and
       equity) over the quarter, including diversification
       effects;

  (3)  Quantification of how well market risk models performed
       (e.g.. histogram of daily trading revenues compared to
       average VAR over the quarter);

  (4)  Current credit exposures by internal rating, reflecting
       the effects of netting, collateral and other credit
       protection;

  (5)  Information about the maturity profile of transactions
       giving rise to material current credit exposures; and

  (6)  Insight into credit concentrations (e.g., industry
       sector and country risk).

     A copy of the report of the Working Group on Public
Disclosure is available on the Commission’s web site at
www.sec.gov.

     The Commission has long supported meaningful voluntary
public disclosure that provides investors with greater
transparency and enhances market discipline and stability.
Transparent financial information allows market participants
to better evaluate counterparty risks and adjust the
availability and pricing of funds in ways that can promote
more efficient financial markets.   Accordingly, the
Commission encourages all large registrants involved in
lending and trading activities, including large securities
firms and finance companies, to use these recommendations as
they develop enhanced disclosures about their risk
portfolios.

     Lynn Turner, the Commission’s Chief Accountant, stated
“The Working Group has developed thoughtful recommendations
that should be considered carefully by any registrant
contemplating disclosures about credit and market risk in
its portfolios.”  The staff is continuing to discuss the
report with bank regulators and financial institutions and
explore additional ways of enhancing disclosures.