Why Banks Should Keep Secrets
I 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.
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.econ.umn.edu/
More information through EDIRC
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.:
- 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.
- Gorton, Gary, 1985. "Bank suspension of convertibility," Journal of Monetary Economics, Elsevier, vol. 15(2), pages 177-193, March.
- Myerson, Roger B, 1983.
"Mechanism Design by an Informed Principal,"
Econometric Society, vol. 51(6), pages 1767-97, November.
- 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.
- 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.
- S. Rao Aiyagari, 1988. "Banking panics, information, and rational expectations equilibrium," Working Papers 320, Federal Reserve Bank of Minneapolis.
- V.V. Chari & Ravi Jagannathan, 1984. "Banking Panics," Discussion Papers 618, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
When requesting a correction, please mention this item's handle: RePEc:wop:minnec:_005. See general information about how to correct material in RePEc.
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.