Public Disclosure and Bank Failures

August 1, 1997

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Eduardo Levy Yeyati, and Tito Cordella. Public Disclosure and Bank Failures, (USA: International Monetary Fund, 1997) accessed September 27, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines how public disclosure of banks’ risk exposure affects banks’ risk-taking incentives and assesses how the presence of informed depositors influences the soundness of the banking system. It finds that, when banks have complete control over the volatility of their loan portfolios, public disclosure reduces the probability of banking crises. However, when banks do not control their risk exposure, the presence of informed depositors may increase the probability of bank failures.

Subject: Bank credit, Bank deposits, Banking, Commercial banks, Deposit rates, Distressed institutions, Financial institutions, Financial services, Money

Keywords: Bank credit, Bank deposits, Charter value, Commercial banks, Deposit rate, Deposit rates, Distressed institutions, Loan portfolio, Maximization problem, Risk choice, Risk level, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1997/096
Stock No:

WPIEA0961997
ISBN:

9781451851878
ISSN:

1018-5941

Notes

Also published in Staff Papers, Vol. 45, No. 1, March 1998.

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