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Enhancing Bank Transparency: A Re-assessment

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Author Info

  • Hyytinen, Ari

    ()
    (Bank of Finland)

  • Takalo, Tuomas

    ()
    (Bank of Finland Research)

Abstract

Transparency regulation aims at reducing financial fragility by strengthening market discipline. There are however two elementary properties of banking that may render such regulation inefficient at best and detrimental at worst. First, an extensive financial safety net may eliminate the disciplinary effect of transparency regulation. Second, achieving transparency is costly for banks, as it dilutes their charter values, and hence it also reduces their private costs of risk-taking. We consider both the direct costs of complying with disclosure requirements and the indirect transparency costs stemming from imperfect property rights governing information and specify the conditions under which transparency regulation can (and cannot) reduce financial fragility.

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File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/0010.pdf
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Bibliographic Info

Paper provided by Bank of Finland in its series Research Discussion Papers with number 10/2000.

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Length: 34 pages
Date of creation: 31 Aug 2000
Date of revision:
Handle: RePEc:hhs:bofrdp:2000_010

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Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/
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Keywords: information disclosure; market discpline; bank transparency; deposit insurance; financial safety net;

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References

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Citations

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Cited by:
  1. Reint Gropp & Hendrik Hakenes & Isabel Schnabel, 2011. "Competition, Risk-shifting, and Public Bail-out Policies," Review of Financial Studies, Society for Financial Studies, vol. 24(6), pages 2084-2120.
  2. Korkeamäki, Timo & Rainio, Elina & Takalo, Tuomas, 2010. "Law and stock markets: evidence from an emerging market," Research Discussion Papers 1/2010, Bank of Finland.
  3. Hyytinen, Ari & Takalo, Tuomas, 2003. "Preventing systemic crises through bank transparency," Research Discussion Papers 25/2003, Bank of Finland.
  4. Moreno, Diego & Takalo , Tuomas, 2012. "Optimal bank transparency," Research Discussion Papers 9/2012, Bank of Finland.
  5. Ari Hyytinen & Mika Pajarinen, 2005. "External Finance, Firm Growth and the Benefits of Information Disclosure: Evidence from Finland," European Journal of Law and Economics, Springer, vol. 19(1), pages 69-93, January.
  6. Arnaud Bourgain & Patrice Pieretti & Skerdilajda Zanaj, 2009. "International Financial competition and bank risk-taking in emerging economies," CREA Discussion Paper Series 09-08, Center for Research in Economic Analysis, University of Luxembourg.
  7. Hyytinen, Ari & Pajarinen, Mika, 2003. "External Finance, Firm Growth and the Benefits of Information Disclosure: Evidence from Finland (Revised)," Discussion Papers 805, The Research Institute of the Finnish Economy.
  8. Delis, Manthos D & Staikouras, Panagiotis, 2009. "On-site audits, sanctions, and bank risk-taking: An empirical overture towards a novel regulatory and supervisory philosophy," MPRA Paper 16836, University Library of Munich, Germany.
  9. Juha-Pekka Niinimäki, 2003. "Fairly Priced Deposit Insurance under Adverse Selection," Finnish Economic Papers, Finnish Economic Association, vol. 16(1), pages 38-48, Spring.
  10. Brack, Estelle & Saidane, Dhafer, 2010. "Qu’attend-on de la finance mondiale après la crise ? Les quatre commandements oubliés
    [What do we expect form global finance after the crisis? The four forgotten Commandments]
    ," MPRA Paper 23472, University Library of Munich, Germany.
  11. Nicole Allenspach, 2009. "Banking and Transparency: Is More Information Always Better?," Working Papers 2009-11, Swiss National Bank.
  12. Chen, Yehning & Hasan, Iftekhar, 2005. "The transparency of the banking industry and the efficiency of information-based bank runs," Research Discussion Papers 24/2005, Bank of Finland.
  13. Bhide, M G & Prasad, A & Ghosh, Saibal, 2001. "Emerging Challenges in Indian Banking," MPRA Paper 1711, University Library of Munich, Germany.
  14. Jukka Vauhkonen, 2012. "The Impact of Pillar 3 Disclosure Requirements on Bank Safety," Journal of Financial Services Research, Springer, vol. 41(1), pages 37-49, April.

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