Why Banks Should Keep Secrets
AbstractI present an example showing it is sometimes efficient for a bank to commit to a policy that keeps information about its risky assets private. Current practices in banking result in bankers having private information: demand deposits are non-contingent contracts, there are time lags before the public has access to updated balance sheets, and certain items on a bank's balance sheet are marked at book-value rather than market-value. The Savings & Loan failures in the 1980's have led to an increase in banking legislation such as the FIRREA of 1989 and the FDICIA of 1991. These laws affect the release of information about a bank's assets by creating a minimum capital requirement, imposing a new examination standard for banks' assets, and implementing a risk-based insurance scheme.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Minnesota, Department of Economics in its series Working papers with number _005.
Date of creation:
Date of revision:
Contact details of provider:
Postal: 4-101 Hanson Hall, 1925 Fourth Street South, Minneapolis, MN 55455
Web page: http://www.econ.umn.edu/
More information through EDIRC
Other versions of this item:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- V.V. Chari & Ravi Jagannathan, 1984. "Banking Panics," Discussion Papers 618, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Chari, V V & Jagannathan, Ravi, 1988. " Banking Panics, Information, and Rational Expectations Equilibrium," Journal of Finance, American Finance Association, vol. 43(3), pages 749-61, July.
- Ted Temzelides & Bernandino Adao, 1995.
"Beliefs, Competition, and Bank Runs,"
- Bernardino Adao & Ted Temzelides, 1998. "Sequential Equilibrium and Competition in a Diamond-Dybvig Banking Model," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(4), pages 859-877, October.
- Gorton, Gary, 1985. "Bank suspension of convertibility," Journal of Monetary Economics, Elsevier, vol. 15(2), pages 177-193, March.
- Diamond, Douglas W & Dybvig, Philip H, 1983.
"Bank Runs, Deposit Insurance, and Liquidity,"
Journal of Political Economy,
University of Chicago Press, vol. 91(3), pages 401-19, June.
- Neil Wallace, 1988. "Another attempt to explain an illiquid banking system: the Diamond and Dybvig model with sequential service taken seriously," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 3-16.
- Roger B. Myerson, 1981.
"Mechanism Design by an Informed Principal,"
481, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- S. Rao Aiyagari, 1988. "Banking panics, information, and rational expectations equilibrium," Working Papers 320, Federal Reserve Bank of Minneapolis.
- David Andolfatto & Fernando Martin, 2013.
"Information Disclosure and Exchange Media,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 16(3), pages 527-539, July.
- Stenzel, A. & Wagner, W.B., 2013. "Asset Opacity and Liquidity," Discussion Paper 2013-066, Tilburg University, Center for Economic Research.
- Dieter Balkenborg & Todd Kaplan & Timothy Miller, 2011.
"Teaching Bank Runs with Classroom Experiments,"
The Journal of Economic Education,
Taylor & Francis Journals, vol. 42(3), pages 224-242, July.
- Kaplan, Todd R, 2008.
"Communication of Preferences in Contests for Contracts,"
18696, University Library of Munich, Germany, revised 08 Aug 2009.
- Todd Kaplan, 2012. "Communication of preferences in contests for contracts," Economic Theory, Springer, vol. 51(2), pages 487-503, October.
- Surajeet Chakravarty & Miguel A. Fonseca & Todd Kaplan, 2012. "An Experiment on the Causes of Bank Run Contagions," Discussion Papers 1206, Exeter University, Department of Economics.
- Frank Gigler & Thomas Hemmer, 2008. "On the welfare effects of allowing unlimited renegotiation in agency relationships," Economic Theory, Springer, vol. 37(2), pages 243-265, November.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel).
If references are entirely missing, you can add them using this form.