Does bank transparency benefit from the Volcker Rule?

Yuehua Li, Zhentao Liu and Sha Pei

Accounting and Finance, 2020, vol. 60, issue 2, 1471-1500

Abstract: The Volcker Rule intends to limit bank risk taking by prohibiting or restricting proprietary trading. We find that discretionary loan loss provision significantly increases for affected banks. Affected banks are also less timely in their loan loss recognition. Our findings suggest the Volcker Rule has unintended consequence on bank transparency. This is consistent with the current concern that the Volcker Rule increases bank risk and reduces the effectiveness of risk management.

Date: 2020
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