Abstract
This study aims to develop a proposed framework to explain the impact of disclosure of credit risks on financial reports to achieve bank stability in accordance with the requirements of the decisions of the Basel Committee. The results of the study showed there are specific criteria that can be relied upon in order to measure bank credit risk, create a provision, classify customers and creditworthiness. It is possible to incorrectly classify the merit of a customer to improve his image in front of investors and stakeholders and thus the value and the stability of the bank. The framework proposed by the researcher aids in the disclosure of bank credit risk of commercial banks to obtain more efficiency, competition, stability.
TopThe Problem Of The Study
The problem appears in the credit risk gap in the banks. Banks must provide the minimum amount of information required in the annual reports, and this has led to a lack of disclosure of credit risks in the annual reports of Egyptian banks. Research has indicated that current risk reports are not complete because they do not convey the full and useful meaning, as stakeholders need good information for the quality of decisions taken, and as a result, the cost of information is not required promptly, which may constitute an obstacle to rational decision-makers in making appropriate decisions that build on the integrity of the financial system in banks.
So, I Succumbed to a Major Question:
Does disclosure of credit risk have an impact on the quality of banks' financial reports?
Sub-questions:
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Is disclosure of credit risk on the impact of bank growth?
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Does the Basel Accord has an impact on the level of credit risk disclosure on banks?
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Will increasing disclosure of credit risks lead to the stability of the bank and increase the market share of the bank?
Key Terms in this Chapter
Risk Disclosure: Is the communication of information concerning firm's strategies, operations, and other external factors that have the potential to affect expected results.
Transparency: Is the extent to which investors have ready access to required financial information about a company, such as price levels, market depth, and audited financial reports.
Non-Performing Loans (NPL): Are loans in which the borrower is in default due to the fact that they have not made the scheduled payments for a specified period.
Banking Competition: Is struggle for consumer of banking services and creation of such conditions for other participants, which do now allow them having decisive influence upon the market.
Efficiency Banks: Are defined as the difference between observed. Quantity of input and output variables with respect to optimal quantity of input and output variables. An efficient bank can achieve a maximum value of one in comparison to an inefficient bank, which can reduce to the level of zero.
Governance: Is the system by which entities are directed and controlled. It is concerned with structure and processes for decision making, accountability, control and behavior at the top of an entity.
Credit Portfolio: Is any collection of credit exposures that is formed as part of financial intermediation activities (e.g., regular Lending products or derivative contracts) or as an investment in Credit Risk sensitive securities (such as corporate bonds).
International Financial Reporting Standards (IFRS): Are a set of accounting rules for the financial statements of public companies that are intended to make them consistent, transparent, and easily comparable around the world.