After crisis, banks still "opaque" about risk - Moody's

NEW YORK (Reuters) - Even after the financial crisis, banks worldwide remain far from transparent about risks they take and that could make them vulnerable in the future, Moody's Investors Service said on Tuesday.

Though some big banks are now using forward-looking stress testing, pressure to produce short-term earnings may again expose institutions to excessive risks, said Moody's Alessandra Mongiardino.

"Despite market and regulatory pressure on banks to improve their risk disclosures, public information on their actual risk profiles remains opaque for most banks, particularly in the area of market risk," wrote Mongiardino, a London-based vice president and senior credit officer with Moody's and the author of the report.

Change is likely to be slow, at best, Mongiardino added in a telephone interview with Reuters.

Financial institutions may make improvements in managing risk, but this process is not going to be very fast and banks are usually reluctant to provide a lot of information to the market in terms of public disclosure, she said.

Some are still exceptionally opaque, particularly the U.S. investment banks, added Mongiardino, who is head of Moody's risk management specialist group.

One cause of the financial crisis was that banks' stress tests were not often used as a tool to set limits and frequently were not forward looking, the report said.

Top executives at many banks didn't listen to their risk managers, which led to financial institutions taking excessive risks with mortgage-backed and asset-backed securities and bank executives in some cases took decisions that relied on models that they did not fully understand, the report said.

"Maybe three years from now when the crisis starts to be not an immediate memory, the good intentions may not be set in stone," Mongiardino said.

(Reporting by John Parry; Editing by Andrew Hay)