Transparency and Market Discipline

Remi Boutant, Dragan Crnogorac and Andrea Resti

The importance of data for supervisory purposes has been the leitmotiv of the book. However, data and information are important for many stakeholders beyond supervisors. Indeed, in many jurisdictions, banks have been subjected to additional disclosure requirements, on top of those generically aimed at enterprises, including listed ones. This trend has been reinforced by international accords (including the Basel II agreement), as well as by several documents reporting transparency principles and best practices that were promoted by supervisors and private sector associations.

In this chapter, we will first look at the benefits of transparency for banks and other financial institutions by surveying a number of relevant contributions from academics and supervisory authorities. We then turn to the main disclosure requirements that have been imposed on banks operating in the European Union, from both regulators and accounting standard setters, before exploring how market participants have been using data disclosures that were imposed on banks.

WHY TRANSPARENCY MATTERS: A REVIEW OF STUDIES ON BANK DISCLOSURE

Disclosure is both an action and a piece of information: “[t]he action

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