Public Disclosure and Bank Failures

Author/Editor:

Eduardo Levy Yeyati ; Tito Cordella

Publication Date:

August 1, 1997

Electronic Access:

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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.

Series:

Working Paper No. 1997/096

Subject:

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

Notes:

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

English

Publication Date:

August 1, 1997

ISBN/ISSN:

9781451851878/1018-5941

Stock No:

WPIEA0961997

Pages:

25

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