Related Party Disclosures – A Precondition For Improving The Transparency Of The Financial Statements Of Commercial Banks In Bulgaria

Abstract

The specific nature of transactions between banking institutions and parties related thereto implies that such institutions have higher exposures to various types of risk (credit, interest, liquidity, market, etc.). This necessitates detailed disclosures in the financial statements of banking institutions. The aim of this paper is to examine the practices of banks in the Republic of Bulgaria regarding their approaches to disclosing information about their relationships and transactions with related parties in their financial statements. To this aim the authors have studied the existing literature and analysed practices related to disclosure of information about related parties in the financial statements of these banks. In order to achieve an in-depth analysis, the relationship between the detailed disclosures of bank institutions and the amount of their assets was investigated. The study resulted in an assessment of the applied disclosure approaches with concrete recommendations for their improvement in order to increase the transparency of the financial statements of banking institutions.