Bank Transparency and Deposit Flows
57 Pages Posted: 1 Aug 2018 Last revised: 16 May 2019
Date Written: May 2019
How much information bank depositors should have on the assets of banks is a hotly debated issue. On the one hand, information allows depositors to monitor banks’ actions, but on the other hand, it might interfere with banks’ liquidity-transformation role. We provide, for the first time, empirical evidence that links transparency to deposit flows, deposit rates, banks’ investments and profitability. We demonstrate that uninsured deposits respond more strongly to performance when banks are more transparent, and provide other evidence consistent with the idea that transparency adversely affects banks’ unique role in creating safe assets for depositors.
Keywords: bank transparency, deposits, liquidity provision, opacity
JEL Classification: G21, M4, D80
Suggested Citation: Suggested Citation