Public Disclosure and Bank Failures [electronic resource] / Eduardo Levy Yeyati.
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TextSeries: IMF Working Papers; Working Paper ; No. 97/96Publication details: Washington, D.C. : International Monetary Fund, 1997Description: 1 online resource (25 p.)ISBN: 1451851871 :ISSN: 1018-5941Subject(s): Bank Failures | Banking | Deposit Insurance | Deposit Rate | Deposit Rates | New ZealandAdditional physical formats: Print Version:: Public Disclosure and Bank FailuresOnline resources: IMF e-Library | IMF Book Store Abstract: This paper examines how public disclosure of banks' risk exposure affects banks' risk-taking incentives and assesses how the presence of informed depositors influences the soundness of the banking system. It finds that, when banks have complete control over the volatility of their loan portfolios, public disclosure reduces the probability of banking crises. However, when banks do not control their risk exposure, the presence of informed depositors may increase the probability of bank failures.
This paper examines how public disclosure of banks' risk exposure affects banks' risk-taking incentives and assesses how the presence of informed depositors influences the soundness of the banking system. It finds that, when banks have complete control over the volatility of their loan portfolios, public disclosure reduces the probability of banking crises. However, when banks do not control their risk exposure, the presence of informed depositors may increase the probability of bank failures.
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