We hope that accounting guidance will be finalized soon in these areas, at which time we may have to revise our regulatory report requirements. We are also encouraging banks to disclose in their annual reports more data on their risk exposures and provide more in-depth discussions of their risk management processes and operating results. For example, in September 1996 and 1995 we published, as the lead articles in our official monthly publication, the Federal Reserve Bulletin , analyses of derivatives disclosure in the 1993-95 annual reports of the top ten U.S. dealer banks. Furthermore, the tables presented in these articles summarize the major types of derivatives disclosures made by the top ten U.S. dealer institutions. Improved public disclosure enhances market discipline, which in turn has the potential to allow regulation and supervision to be less intrusive.
External audits attest to the fairness of public financial statement disclosures.
Develop supervisory guidance on sound practices for banks' internal and external audit processes and improve the use of audit information in the risk-focused supervision process. These working groups are chaired by Jerry Edwards, our chief accountant, and they are expected to issue supervisory guidance on audits and recommendations for improved public disclosure in 1997. International Efforts Turning to international initiatives, the Federal Reserve has been active behind the scenes in promoting improvements in supervisory reporting and public financial statement disclosures, as well as enhancements to reporting on global market statistics. As banking and financial markets generally have become increasingly global in scope, efforts to press for increased market transparency must proceed in an international arena. The report was issued last year and is being implemented by supervisors of banks and securities firms in many major industrialized countries.