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Enhancing Bank Transparency: a Re-assessment

  • Hyytinen, A.
  • Takalo, T.

Transparency regulation aims at reducing financial fragility by strengthening market discipline. There are however two elementary properties of banking that may render such regulation detrimental. 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 reduce financial fragility.

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Paper provided by Department of Economics in its series University of Helsinki, Department of Economics with number 492.

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Length: 37 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:fth:helsec:492
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University of Helsinki; Department of Economics, P.O.Box 54 (Unioninkatu 37) FIN-00014 Helsingin Yliopisto

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