Public Disclosure and Bank Failures
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Summary:
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.
Series:
Working Paper No. 1997/096
Subject:
Bank credit Bank deposits Banking Commercial banks Deposit rates Distressed institutions Financial institutions Financial services Money
Notes:
Also published in Staff Papers, Vol. 45, No. 1, March 1998.
English
Publication Date:
August 1, 1997
ISBN/ISSN:
9781451851878/1018-5941
Stock No:
WPIEA0961997
Pages:
25
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