Bank Runs, Bank Competition and Opacity

David Martinez-Miera and Toni Ahnert

No 16207, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We model the opacity and deposit rate choices of banks that imperfectly compete for uninsured deposits, are subject to runs, and face a threat of entry. We show how shocks that increase bank competition or bank transparency increase deposit rates, costly withdrawals, and thus bank fragility. Therefore, perfect competition is not socially optimal. We also propose a theory of bank opacity. The cost of opacity is more withdrawals from a solvent bank, lowering bank profits. The benefit of opacity is to deter the entry of a competitor, increasing future bank profits. The excessive opacity of incumbent banks rationalizes transparency regulation.

Keywords: Competition; Entry; Opacity; Bank run; Fragility; Global games; Competition policy; Transparency regulation (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 (search for similar items in EconPapers)
Date: 2021-06
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP16207 (application/pdf)

Related works:
Working Paper: Bank Runs, Bank Competition and Opacity (2021)
Working Paper: Bank Runs, Bank Competition and Opacity (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:16207

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP16207

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().