The health of banks and their financial stability in any society determines how stable the economy is and helps make important decisions on issues affecting the stability of the financial system. To this end, the continued research on banks and their financial stability' financial reporting and financial stability ensures that there is sufficient information on the financial reporting and stability of banks and their financial stability thereby giving rise to continued insight on the financial system. It also aids in identifying and implementing decisions that will help promote the stability of any financial system. Therefore focusing on Research on Banks and their financial stability' Financial Reporting and Financial Stability provides the reader and the rest of society the opportunity to well informed on matters that affect banks and their financial stability across the nation and world at large and further ensures that people are well –informed of any decisions that will affect their relationships with their banks and their financial stability and the overall stability of their economic status. The focus on banks and their financial stability' financial reporting and financial stability is interesting as it makes matters of finance especially as they touch on the wealth of banks and their financial stability easy to understand and therefore provides the opportunity for one to evaluate specifics of the bank he or she associates with and make critical banking decisions based on this information. It is therefore prudent to examine research on banks and their financial stability' financial reporting and financial stability to overall public information and critical decision making at the personal and societal level.
The research question the paper looks to answer is “what is the purpose of recent research on banks and their financial stability' financial reporting and financial stability?” The question helps delve into issues of bank discipline and how banks and their financial stability may overlook their regulatory requirements while taking advantage of their customers’ naivety to carry on business and gain profits ( Ryan, 2018) . Such systems as their controls, information and risk management are put into great consideration to ensure that the overall internal environment of the banks and their financial stability is examined as expected. The external environment is equally important and it includes competition, government regulations, financiers, marketing intermediaries and much more ( Ryan, 2018) . These factors help answer the question at hand and sufficient information on them is critical for the effectiveness of the current research paper. It is mainly informed by research carried out by other individuals on the issue and their conclusions on the significance of recent research on banks and their financial stability' financial reporting and financial stability.
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The financial crisis of 2007 to 2008 resulted in many questions concerning regulations that govern issues of financial reporting by banks and their financial stability. Many researchers believe that if effective reporting regulations were in place for financial institutions, it would have been easy to determine the stability of institutions like banks and their financial stability and help address the crisis to reduce its effects or prevent it entirely ( Ryan, 2018) . Overall, prudent financial reporting would have promoted financial stability which would have in turn helped prevent the crisis. Nonetheless, the crisis came with lessons that have contributed to the overall caution and stricter regulations concerning financial reporting. Economic institutions and decision makers have worked to ensure that the practice is governed by certain regulations requiring institutions to adhere to these promptly ( Ryan, 2018) . Overall, economists and researchers at large have now shifted focus to the continued research in financial reporting to identify how this economic sector is establishing itself and the contribution it is making towards the maintenance of financial stability across different regions in the world. Previously, research on the area was limited as many institutions had not experienced a crisis as that which occurred in 2008 ( Ryan, 2018) . From then scholars have ensure to keep tabs with the changing trends in financial reporting for banks and their financial stability and to ensure that the required standards for reporting are observed.
Economists believe that various financial practices resulted to the crisis to some extend or even some made it worse. As one of the major characteristics of the event was the significant increase in illiquid markets and distressed sales. It was also a failure on the side of those who set standards as they were not vigilant on monitoring financial institutions such as banks and their financial stability. Research indicates that the procyclicality of standards in accounting often determines the overall observance of regulations covering accounting and disclosure for banks and their financial stability ( Ryan, 2018) . In many instances, banks and their financial stability are recognized to violate capital regulatory requirements as these arise from the banks and their financial stability’ internal discipline. Such financial crises are indicative of internal issues on risk management and financial discipline that is not at par with the required international standards ( Singleton-Green, 2012) . The external environments and overall discipline of banks and their financial stability also matter in the financial reporting and the eventual financial stability of the economy.
Those who depend on financial reports and financial stability of banks and their financial stability include the stakeholders, suppliers, employees, creditors, government, and customers among others. The investors give capital and thus they are involved with the bank’s risk inherent moreover because the returns for his or her investments. They so would like the money statistics represented in the reports therefore on modify them to understand on if they must sell, get or hold shares ( Singleton-Green, 2012) . Many if not all bank investors additionally need the statistics and information represented in the reports therefore to verify the aptitude of the bank to pay dividends. The staff, aside from their respective employment unions need the statistics represented in the reports therefore they can verify their profit and stability of their company. The employees additionally need knowing the bank’s ability to compensate them well, to open up employment chances for them and additionally to supply them with the retirement advantages ( Singleton-Green, 2012) . The lenders give the bank with the specified funding and thus , they're curious about money statistics represented in the reports therefore on modify them to understand as high whether or not or not the bank is ready to pay their loans and interests once due. The suppliers need the statistics represented in the reports therefore on modify them to understand on whether or not or not the bank is capable of paying them the amounts unsettled ( Singleton-Green, 2012) . Customers’ square measure in the main interested with the continuity of a bank and then , they would need statistics represented in the reports therefore on modify them to understand on whether or not or not the bank can continue meeting their wants . The government regulates the business entities and thus , they need the money statistics represented in the reports so as to understand that activities need to be regulated and additionally to see the taxation policies. These users need to build such options as whether or not or to not invest during a specific bank etc. The external users sometimes depends on the money statements i.e. record , profit and loss account and also the income statement therefore on acquire statistics represented in the reports ( Singleton-Green, 2012) . The statement of economic position permits the users to understand the obligations that square measure due shortly and additionally the sort of assets that square measure obtainable within the bank. The profit and loss account permits the users to see the expenses and revenues of a business entity during a given fundamental measure . The income statement provides the users with statistics represented in the reports regarding the sources money and additionally however the cash was used during a bound amount . Another necessary tool that's used for providing the external users is that the notes. Information in the reports plays a crucial role of providing key details regarding a bank’s accounting practices moreover as different important factors that may have an effect on the bank’s overall financial performance when compared to other players in the industry ( Acharya & Ryan, 2016) .
The users need to clearly perceive the accounting policies that a bank adopts in preparation of the money statements and thus , the accountants considers the subsequent ; the purpose of economic reportage , the salient options that build the statistics represented in the reports helpful , the foremost ideal manner of displaying the statistics represented in the reports obtained within the income statements, record and profit and loss account. Apart from providing the users with money statistics represented in the reports , money reportage serves different functions i.e. money reportage helps to mirror the potential money receipts to creditors and investors, money reportage reflects the money flows that a corporation is probably going to get in close to future and additionally , money reportage reflects s the resources of a bank ( Acharya & Ryan, 2016) . Statistics represented in the reports is deemed to be relevancy if it is capable of influencing the users’ selections . Consistent with the International Accounting Standards, statistics represented in the reports ought to be prognostic , timely and even have feedback price for it to be considered relevancy . Prognostic accounting prices entail the flexibility of knowledge to predict past, gift and future outcomes. Feedback price entails the capability of knowledge to modify the users to substantiate with the previous expectations.
The relevancy of economic statistics represented in the reports is principally determined by its materiality ( Acharya & Ryan, 2016) . Materiality primarily involves the importance and relative size of the financial behaviour and internal environment of a bank. An item of consideration that is taken into account as necessary if it's capable of influencing the choices of the users of economic statements is the banks and their financial stability’ external environment.
With regards to reliability an d validity, statistics represented in the reports is taken into account to be reliable if it's free from any bias or error and additionally represents dependably what it purports to sell or what it's expected to show to the public ( Howard, 2017) . Consistent with the International Accounting Standards, statistics represented in the reports should be able to meet the subsequent conditions for it to be thought-about as reliable i.e. statistics represented in the reports ought to be verifiable, the statistics represented in the reports ought to have devoted illustration and additionally, the statistics represented in the reports ought to be neutral. Faithful illustration entails that the statistics represented in the reports mustn't have any error or bias. So as for the statistics represented in the reports to be deemed as reliable, statistics represented in the reports is needed to dependably represent the transactions it purports to represent. This me an s that the record is needed to dependably represent the transactions in assets and liabilities of a business entity at the reportage time. Verifiability entails that the statistics represented in the reports ought to be simple to subst an tiate. Neutrality implies that the statistics represented in the reports do not seem to acquire pl an ned outcomes ( Howard, 2017) . Another facet that helps to confirm that the statistics represented in the reports is true and reliable is that the facts herein can be accompanied by the necessary source of information which also need statistics and to be valid. So as for the statistics represented in the reports to dependably represent what it purports to face for, it's necessary that it's conferred and accounted for with regards to their economic and substance reality instead of its legal kind. With regards to similitude, the statistics represented in the reports ought to be simple to match with different comp an ies within the business ( Howard, 2017) . Comprehension is a vital characteristic of the money statistics represented in the reports and it primarily implies that the statistics represented in the reports within the money statements ought to be simple to grasp so as to modify the users to form sensible selections. With this regard, the users square measure so assumed to underst an d the varied economic and business activities moreover as accounting. The users also are needed to possess a temperament to be told the money statistics represented in the reports during a diligent manner. Quality and quality of knowledge goes along. There square measure varied basis of measure and valuing the money statements i.e. historical price, current price, settlement price and gift price. Historical price refers to the money qu an tity or the equivalent that's paid so as to get quality. Current price entails the money qu an tity that's needed to be paid if quality was to be purchased nowadays. The settlement price entails the money qu an tity that might presently be obtained once quality is being disposed of. This price entails this discounted price of future internet income that an item will generate throughout the traditional course of a business. The sound judgment need statistics an d that the assets and liabilities an d also the price of the dealings ought to be verifiable.
References
Acharya, V., & Ryan, S. (2016). Banks’ Financial Reporting and Financial System Stability. Journal Of Accounting Research , 54 (2), 277-340. doi: 10.1111/1475-679x.12114
Howard, M. (2017). Banks’ Financial Reporting and Financial System Stability. CFA Digest , 47 (1). doi: 10.2469/dig.v47.n1.1
Ryan, S. (2018). Recent Research on Banks’ Financial Reporting and Financial Stability. Annual Review Of Financial Economics , 10 (1), 101-123. doi: 10.1146/annurev-financial-110217-022700
Singleton-Green, B. (2012). Commentary: Financial Reporting and Financial Stability: Causes and Effects. Australian Accounting Review , 22 (1), 15-17. doi: 10.1111/j.1835-2561.2011.00161.x
