Bank reporting is opaque

I have just spent a few days researching the annual reports of 6 Nordic banks to see how much money they have actually lent and to which customers. I have been doing this since 1970’s when I first took a job in banking in London and have continued on a regular basis each year. Today it is fascinating to read the amount they print about profitability, risk management, corporate social responsibility, customer relationships and their organization. There is anything except clear data on their various loan portfolios. It goes on for hundreds of pages of fine print with glossy pictures of smiling men and women. You would think that all the printed information is informative but it is far from that. I would say that is impossible to understand, opaque at best and misleading. Few people outside the bank can have little idea of what they are really saying because the story gets lost in complexity and size of banks operations. Complexity and a lack of transparency is also reflected in their operations. You should recall that the 3 largest banks here in Finland have seen their payment systems failing at least 3 to 4 time each year. Simple things are made complicated. Most banks are only open “by appointment” for customers and few branches are willing to handle physical cash. Furthermore, they are all a little too eager to sell you expensive and complex investment funds and derivative instruments when far more efficient and simple investment solutions are available. It is the same with housing loan that are now packaged routinely with various insurance products and interest rate derivatives. Bank clients have to pay high fees for services where most of the work is actually handled by the customers over their own computers. Expert equity analysts, who regularly cover the banking sector, have also voiced their concern about the opacity of these bank reports. Banks claim that they are being forced to write them because of the regulators demands. What is clear is that banking has become too complex and I am willing to bet a considerable amount of money that regulators are far from really understanding what these companies are doing. The risks of banking for taxpayers have grown with the size of banks. In countries like Finland and other Nordic countries where just a few very big banks operate there are justified reasons for demanding bank breakups. We do not want more accidents from these companies that are many more time bigger that the last time problems emerged. Being too big to fail is a sound reason to act. Increasing the demand for more share capital and longer reports are no longer acceptable solutions when simple annual reports cannot be produced or understood.