Enhancing Bank Transparency: A Re-assessment

Ari Hyytinen () and Tuomas Takalo
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Ari Hyytinen : Bank of Finland, Postal: P.O. Box 160, FI-00101 Helsinki, Finland

No 10/2000, Research Discussion Papers from Bank of Finland

Abstract: Transparency regulation aims at reducing financial fragility by strengthening market discipline. There are however two elementary properties of banking that may render such regulation inefficient at best and detrimental at worst. First, an extensive financial safety net may eliminate the disciplinary effect of transparency regulation. Second, achieving transparency is costly for banks, as it dilutes their charter values, and hence it also reduces their private costs of risk-taking. We consider both the direct costs of complying with disclosure requirements and the indirect transparency costs stemming from imperfect property rights governing information and specify the conditions under which transparency regulation can (and cannot) reduce financial fragility.

Keywords: information disclosure; market discpline; bank transparency; deposit insurance; financial safety net (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2000-08-31
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Related works:
Working Paper: Enhancing Bank Transparency: a Re-assessment (2000)
Working Paper: Enchancing Bank Transparency: A Re-assessment (2002)
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