Basel II international convention: general rules on market discipline, demand to disclose information

The article concludes the study of Basel II Agreement; the author examines the general requirements for commercial banks to comply with the market discipline. Structurally, the paper investigates the provisions of the Third pillar of Basel II (part IV of the Agreement); the pillar integrates the disciplinary rules in the banking market in the member countries of Basel II Agreement “International Convergence of Capital Measurement and Capital Standards: New Approaches”, including the requirements for commercial banks on information disclosure. The purpose of the study is to examine the foundations of the discipline in the banking market and the content of the requirements for commercial banks on information disclosure. Methods: there are applied in conjunction the methods of scientific knowledge, including the basic methods of systematicity, analysis and the comparative law method. Results: it is proved that the submission of banks to the market discipline is the basis of forming the banking sector with low levels of risk and high level of reli ability of the participants of the banking market. The need to ensure the safe and reliable functioning of this market legitimizes the requirement of the supervisory bodies for banks on information disclosure. Practically, the Thir d pillar of Basel II contains the requirements on information disclosure by the banks, which are enshrined in th e form of 13 tables, paragraphs 822-826 of the Agreement. Each table provides for specific positions reflecting the disclosure by the bank of specific qualitative information and specified in the relevant table of specific quan titative information. Conclusions: the Third pillar of the “International Convergence of Capital Measurement and Capital Standards: New Approaches” of Basel II Agreement is entirely devoted to the market discipline; the provisions of the document provide for the powers and resources of the supervisory authorities to compel the ba nks to disclose information. The result of this disclosure becomes a qualifying criterion, based on which different methodologies are applied and the related banking transactions and tools are recognized. Basel II Agreement establishes a validation rule by the user and the need for expert evaluation by the user whether the information disclosed by the bank he is interested in is significant.