Bank Opacity and Safe Asset Moneyness

75 Pages Posted: 19 Oct 2023 Last revised: 25 Oct 2023

See all articles by Sang Rae Kim

Sang Rae Kim

Vanderbilt University - Owen Graduate School of Management

Date Written: October 2023


A bank is more effective as a supplier of money-like safe assets when 1) its return on equity (ROE) is relatively lower, and 2) it is relatively more opaque about its balance sheet. A model is presented to support this, emphasizing that safe asset investors focus on the left tail of the bank asset value distribution, which ultimately determines its debt’s moneyness. Empirical tests on dealer banks and money market mutual funds’ (MMFs) funding relationships confirm that higher ROE leads to MMF withdrawal due to lower moneyness of safe assets. Bank opacity mitigates the strength of this relationship, making it optimal for the banking system to maintain a certain level of opacity.

Keywords: safe asset, private money, bank opacity, safe asset moneyness, bank profitability

JEL Classification: E44, E61, G01, G18

Suggested Citation

Kim, Sang Rae, Bank Opacity and Safe Asset Moneyness (October 2023). Available at SSRN: or

Sang Rae Kim (Contact Author)

Vanderbilt University - Owen Graduate School of Management ( email )

401 21st Avenue South
Nashville, TN 37203
United States

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