Bank Opaqueness and Intermediation

48 Pages Posted: 20 Jan 2017 Last revised: 2 Feb 2017

See all articles by Panayiotis C. Andreou

Panayiotis C. Andreou

Cyprus University of Technology

Demetris Koursaros

Cyprus University of Technology - Department of Commerce

Dennis Philip

Durham University Business School

Peter Paul Robejsek

PwC Strategy&

Date Written: February 1, 2017


Banks are believed to be opaque to outsiders, since opacity is a property of the assets that they hold. A social planner would like banks to be transparent, riskless and highly efficient intermediators of liquidity. However, these goals appear to be conflicting. Whether and how opacity and intermediation are connected is an important question of relevance to regulators, investors and the general public. The theoretical literature makes conflicting predictions about this relation. We formulate a theoretical model of opacity and intermediation and test the resulting conjectures on a large sample of US banks. We find that intermediation is positively associated with opacity, while controlling for a large number of other factors including fragility. These results imply that demanding full disclosure and transparency from banks may bring with it negative externalities in terms of intermediation, which policymakers may wish to take into account.

Keywords: Financial Institutions, Liquidity Creation, Regulation, Opacity

JEL Classification: C45, G21, G28, E44, E51

Suggested Citation

Andreou, Panayiotis C. and Koursaros, Demetris and Philip, Dennis and Robejsek, Peter Paul, Bank Opaqueness and Intermediation (February 1, 2017). Available at SSRN: or

Panayiotis C. Andreou

Cyprus University of Technology ( email )

School Of Management and Economics
P.O. Box 50329
Lemesos, 3036


Demetris Koursaros

Cyprus University of Technology - Department of Commerce ( email )

Pavlou Mela

Dennis Philip (Contact Author)

Durham University Business School ( email )

Mill Hill Lane
Mill Hill Lane
Durham, DH13LB
United Kingdom

Peter Paul Robejsek

PwC Strategy& ( email )

Friedrich-Ebert-Anlage 35-37

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