The financial crisis, Basel III, and large banks’ financial reports: a topic modeling approach

• Sentence-level LDA on risk sections of 30 global banks’ annual reports (2005–2018) enhances semantic precision. • Five risk-management themes identified and tracked across the crisis and Basel III era. • European banks increased capital-focused disclosures during the crisis, whereas U.S. banks remained stable. • Basel III increased focus on capital and governance and reduced attention to market risk globally. • Liquidity disclosures adjusted earlier in the U.S. than in Europe. • Results indicate how supervisory reforms shape risk disclosure and support policy monitoring. This study examines how the global financial crisis and Basel III reforms are associated with changes in risk-disclosure themes in banks’ annual reports. Using Latent Dirichlet Allocation (LDA) on disclosures from thirty major banks (2005–2018), we track shifts in topic emphasis across crisis and regulatory phases. European disclosures show reduced emphasis on Market Risk and increased emphasis on Capital Requirements during the crisis, while U.S. disclosures are comparatively stable. During Basel III implementation, both Europe and the United States shift toward Capital Requirements and Policy and Control, while Canada and Australia show a more concentrated increase in Capital Requirements.