THE Hong Kong Monetary Authority (HKMA) has decided to focus on improving the transparency of banks' 1994 profit and loss accounts and may temporarily put off other proposals because of time constraints and disagreements over the disclosure of certain items on banks' balance sheets. The HKMA decided to postpone a requirement for banks to disclose segmental information and off-balance sheet items until next year after receiving comments from the banking sector and accounting firms on a consultation paper on financial disclosure issued in mid-May. Under the HKMA's proposal, both items would be included in notes to the balance sheet. The feedback from banks revealed, surprisingly, that sectoral breakdowns of advances and asset and profit distribution by class of business were more contentious issues than disclosure of the banks' inner reserves, said David Carse, deputy chief executive (banking) of the HKMA. To allow banks adequate time to prepare their 1994 accounts, the HKMA, the territory's de facto central bank, will concentrate on pressing for a full disclosure of banks' profit and loss accounts this year, leaving other items for the 1995 accounts. ''We are running out of time, especially on some of the items on the balance sheet,'' Mr Carse said. Meanwhile, David Li Kwok-po, chief executive of the Bank of East Asia, said his bank wanted to lead the way in financial disclosure by revealing the actual stock of its inner reserves. ''If we are not the first, we will definitely be one of the first local banks to start disclosing inner reserves,'' he said. After reviewing the size of its inner reserve compared with that of other domestic banks, the board of the Bank of East Asia was confident that it had a positive tale to tell, Mr Li said. He said his bank, which is re-evaluating its property, would disclose its inner reserves in its 1995 or 1996 accounts. Unrealised gains on property revaluation are sometimes treated as part of inner reserves. In the consultation paper on financial disclosure, it was suggested that banks should separate such revaluation reserves from their inner reserves which consist mostly of earnings accumulated in the past. With fully disclosed profit and loss accounts, banks would have to show transfers into and out of their inner reserves, interest and other operating income, profit on disposal of fixed assets and investments and charges for bad and doubtful debts. Some banks, in their comments to the HKMA, argued that the level of detail sought was excessive, in particular the recommendations on segmental analysis, cash flow statements and the reporting of off-balance sheet items. It was recommended in the consultation paper that banks should report the notional or contractual amount of each off-balance sheet financial product. Because other, more developed financial centres are still struggling to find ways to show the actual underlying credit or market risks of such instruments, the HKMA will wait for further developments. in the accounting practices of these countries first. The banks uniformly expressed a preference for a consistent approach for both listed and non-listed banks and suggest that the disclosure standards of the HKMA and the Stock Exchange of Hong Kong should converge. In response to this request, a technical working party comprising representatives from both regulators will be set up to draw up a joint approach on the banks' disclosure requirements. Mr Carse said the exchange's disclosure regime had more similarities to that proposed by the HKMA than differences. While the stock exchange would like to see banks' actual stock of inner reserves disclosed in the 1995 accounts, the HKMA has suggested reviewing the situation by mid-1995, but has put no firm deadline on the disclosure of this sensitive item. ''There is not much conflict there. All we need is to work out a joint approach, using the same language,'' said Mr Carse.