Banks remain too much of a black box and more needs to be done to give investors a better idea of the level of uncertainty surrounding their balance sheets, senior Bank of England official Andrew Haldane said on Monday.
Published annual accounts did not do a good job of informing investors of the impending financial crisis before it hit, Haldane, the central bank's Executive Director for Financial Stability, said.
A lot more can and probably should be done to shed a little light on both sides of the balance sheet, he told an event in London's Canary Wharf financial district.
Globally, banking remains too much of a black box which is why, for many investors today, banks are scarcely an investible proposition.
While such large and complex portfolios of assets are difficult to value, giving investors a sense of the margin of error would help, he said.
Haldane, who is also a member of the Bank's Financial Policy Committee, said that while a huge amount had been done already to regulate the systematic risk of banks, there was still unfinished business.
We still do not have a structure of banking, a structure of finance that allows birth and death. There is still very little birth in the banking market, there is still too little death in the banking market, he said.
But as well as more or better regulation, policy makers need to think more imaginatively about the underlying structure of the financial industry, he said.
There is a missing market in lending, said Haldane, who has called for an easing of rules which potentially constrain lending to small-and-medium sized businesses when the economy is suffering.
There are a small number of very large banks and a large number of very small banks and almost none in the middle ... therefore it should come as no surprise that the firms in the middle are somewhat starved; there is a missing market for bank finance, he said.
The right response is not to regulate more ... it is to fill that missing middle, to alter the industrial organisation of banking.