Disclosure Regulation in the Hands of Bank Regulators
49 Pages Posted: 10 Jul 2019 Last revised: 10 Jul 2020
Date Written: July 9, 2020
Using a unique setting in U.S. banking regulation where stand-alone banks submit filings to bank regulators, we examine the consequences of disclosure regulation in the hands of bank regulators. We find bank regulators are less concerned about transparency than the SEC. Bank regulators’ disclosure requirements are less strict, and the disclosure system maintained by bank regulators generate higher information-processing costs. Consistently, stand-alone banks make fewer disclosures and are more likely to violate filing deadlines. In addition, market reaction to filings by stand-alone banks are less timely, suggesting a cost to stock price efficiency. We also examine potential benefits of the reduced emphasis on transparency, such as timelier regulatory intervention and fewer runs on deposits. However, we do not find evidence supporting these potential benefits.
Keywords: Banks; regulation; transparency; FDICconnect; SEC EDGAR; filings; insider trading
JEL Classification: G14, G21, G28, M41, M48
Suggested Citation: Suggested Citation