Should more supervisory information be publicly disclosed?

Thomas M. Hoenig

Economic Review, 2003, vol. 88, issue Q III, 5-14

Abstract: Within our financial system, a bank?s prospects and viability depend on its ability to attract investors and customers. This fundamental need means that banks and bank management must operate under the framework of market discipline and in a manner that meets the dictates of market participants. In other words, market discipline serves as the principal force influencing the performance of our financial markets.> In a speech given at the Federal Reserve Bank of Chicago?s Annual Conference on Bank Structure and Competition, Mr. Hoenig explored how the financial revolution we are now experiencing is clearly increasing the importance of market discipline in banking. Most notably, the removal of many traditional bank regulatory restraints and controls over the past few decades is expanding the role of the marketplace in allocating financial resources, encouraging innovation, and exerting discipline over banks.> However, as the importance of market discipline is increasing, an essential prerequisite for effective market discipline?timely and accurate information to guide market participants?is becoming more difficult to achieve, even with the many advances we are making in processing and analyzing financial data. Consequently, a critical goal for us to explore is how to enhance market discipline by providing market participants with adequate, timely, and accurate information for making decisions. Mr. Hoenig?s comments focus on what bank supervisors might be able to do to improve market access to information on banking organizations and to thereby enhance financial market discipline.

Keywords: Bank; supervision (search for similar items in EconPapers)
Date: 2003
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