Economic Quarterly

2008

 

Winter 2008

Should Bank Supervisors Disclose Information About Their Banks?

Edward S. Prescott

Bank supervisors spend a great deal of resources collecting information on banks, information that would be useful to investors and other market participants. Given that duplicating these efforts is expensive, why not require bank supervisors to disclose this information? In this article, the author argues that this type of disclosure makes it more expensive for supervisors to collect the information in the first place. Furthermore, existing regulatory rules forbid banks from releasing the results of their supervisory exam. The author shows that there are good reasons for these rules because allowing banks to voluntarily disclose their examination reports is effectively the same as requiring supervisors to disclose this information.

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