Broad and Focused Learning

Wolf Wagner and Shuo Zhao

No 21847, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We analyze how a regulator can learn about the aggregate health of banks by asking individual banks to understand and communicate risks. Focused learning (banks report on the same risks) disciplines banks, yielding higher quality information. Broad learning (reporting on different risks) yields better coverage of information. The information gain from either approach is undermined by banks reducing their exposure to designated risks, resulting in correlated risk exposures and regulatory blind spots. Having each bank report on all risks appears to combine the benefits of focused and broad learning — but instead increases strategic complementarities across banks and weakens discipline.

Keywords: supervision (search for similar items in EconPapers)
JEL-codes: D82 G28 (search for similar items in EconPapers)
Date: 2026-08
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