IDEAS home Printed from https://ideas.repec.org/p/exe/wpaper/0014.html

Why Banks Should Keep Secrets

Author

Listed:
  • Kaplan, T.R.

Abstract

We show that it is sometimes efficient for a bank to commit to a policy that keeps information about its risky assets private. Our model, based upon Diamond-Dybvig [1983], has the feature that banks acquire information about their risky assets before depositors acquire it. Banks have the option of using contracts where the middle-period return on deposits is contingent on this information, but by doing so they must also reveal the information. We derive the conditions on depositors' preferences and bankers' technology for which banks would prefer to keep information secret even though they must then use non-contingent deposit contracts.

Suggested Citation

  • Kaplan, T.R., 2000. "Why Banks Should Keep Secrets," Discussion Papers 0014, University of Exeter, Department of Economics.
    • Handle: RePEc:exe:wpaper:0014
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chakravarty, Surajeet & Choo, Lawrence & Fonseca, Miguel A. & Kaplan, Todd R., 2021. "Should regulators always be transparent? a bank run experiment," European Economic Review, Elsevier, vol. 136(C).
    2. Romans Pancs, 2015. "Efficient dark markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 59(3), pages 605-624, August.
    3. Kentaro Asai & Bruce Grundy & Ryuichiro Izumi, 2025. "Opacity, Signaling, and Bail-ins," Wesleyan Economics Working Papers 2025-003, Wesleyan University, Department of Economics.
    4. Stenzel, A. & Wagner, W.B., 2013. "Asset Opacity and Liquidity," Other publications TiSEM 36533529-29b8-4e85-9abd-0, Tilburg University, School of Economics and Management.
    5. Biancini, Sara & Verdier, Marianne, 2023. "Bank-platform competition in the credit market," International Journal of Industrial Organization, Elsevier, vol. 91(C).
    6. 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.
    7. Chakravarty, Surajeet & Fonseca, Miguel A. & Kaplan, Todd R., 2014. "An experiment on the causes of bank run contagions," European Economic Review, Elsevier, vol. 72(C), pages 39-51.
    8. Stenzel, André, 2018. "Security design with interim public information," Journal of Mathematical Economics, Elsevier, vol. 76(C), pages 113-130.
    9. André Stenzel & Wolf Wagner, 2022. "Opacity, liquidity and disclosure requirements," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 49(5-6), pages 658-689, May.
    10. Jungherr, Joachim, 2018. "Bank opacity and financial crises," Journal of Banking & Finance, Elsevier, vol. 97(C), pages 157-176.
    11. Ryuichiro Izumi, 2021. "Opacity: Insurance and Fragility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 40, pages 146-169, April.
    12. 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.
    13. Frank Gigler & Thomas Hemmer, 2008. "On the welfare effects of allowing unlimited renegotiation in agency relationships," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 37(2), pages 243-265, November.
    14. Wagner, Wolf & Uras, Burak, 2017. "Efficient Lemons," CEPR Discussion Papers 11803, C.E.P.R. Discussion Papers.
    15. Jeremy Bertomeu & Davide Cianciaruso, 2018. "Verifiable disclosure," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(4), pages 1011-1044, June.
    16. Timmermann, Allan & Schmidt, Lawrence & , & Wermers, Russ, 2017. "Transparency, Investor Information Acquisition, and Money Market Fund Risk Rebalancing during the 2011-12 Eurozone Crisis," CEPR Discussion Papers 11895, C.E.P.R. Discussion Papers.
    17. Stenzel, A. & Wagner, W.B., 2013. "Asset Opacity and Liquidity," Discussion Paper 2013-066, Tilburg University, Center for Economic Research.
    18. Karlo Kauko, 2016. "Does Opaqueness Make Equity Capital Expensive for Banks?," Revista de Economía del Rosario, Universidad del Rosario, vol. 17(2), pages 203-227.
    19. Sara Biancini & Marianne Verdier, 2023. "Bank-platform competition in the credit market," Post-Print hal-04300815, HAL.
    20. Todd Kaplan, 2012. "Communication of preferences in contests for contracts," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 51(2), pages 487-503, October.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:exe:wpaper:0014. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sebastian Kripfganz (email available below). General contact details of provider: https://edirc.repec.org/data/deexeuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.