Mr Tyrie said he was expressing concerns on behalf of the committee about the balance of public disclosure. The committee wants to see more transparency and disclosure to help warn investors of risks when selecting banks and other financial providers. He believes the regulators may be withholding some information for competition reasons but this is putting investors at a disadvantage.
He wants the PRA to force providers to share more information and wants “maximum possible disclosure.”
He said: “Market discipline was found to be severely lacking prior to the financial crisis. Investors were not just ignorant of the risks on bank balance sheets, but content to be. Many were narrowly focused on encouraging banks to generate high returns, supported by very high levels of gearing. But even those investors who tried to identify those risks were unsighted, and often had scarcely any information available to work from.
“Effective market discipline should be a priority for regulators. For this a high degree of transparency is required. Risks on bank balance sheets need to be visible. Regulators collect a great deal of information valuable to an effective assessment of these risks. But it is not available to shareholders, creditors and depositors, the people with most ‘skin in the game’.
Mr Tyrie has been engaged in a correspondence with the PRA, which regulates the banks and large providers, to put more pressure on the regulator to improve disclosure of financial strength and other financial criteria.
Mr Tyrie added: “Parliament and the public rely on regulators to do their job properly and acquire a deep understanding of the main sources of bank risk. This in turn requires trust between regulators and firms. Firms need to be confident that commercially confidential information provided to the regulator does not end up with the competition. Nonetheless, a primary tool of regulation is – and should be – market discipline. Markets require information to work properly. There may be occasions when regulators need to withhold information on financial stability grounds. But these are likely to be rare. The regulators need to ensure the maximum possible disclosure - consistent with the reasonable demands for commercial confidentiality - to markets and the public.
“Some welcome progress has been made by the regulators in recent years. Retention of confidentiality may be justified in some areas – but it is now in the public interest that a full justification for it be spelt out in detail by regulators. What may be needed is a presumption of disclosure, supported by clarity and detail about the necessary exemptions.”