Banking and Transparency: Is More Information Always Better?

This paper shows that transparency,in banking,can be harmful,from a social planner’s point of view. According to our model, enhancing transparency above a certain level may,lead to the inefficient liquidation of a bank.,The reason lies in the nature of a standard,deposit contract: its payoff scheme,has limited upside gains (cap) but leaves the depositor with the downside risk. Accordingly,