Risk Reporting And Bank Runs
Increasing risk disclosure of banks, e.g., via risk reporting in their annual accounts, is high on the agenda. In this paper, the author analyzes whether risk reporting of banks shows only favorable effects, as regulatory authorities supposes, or whether there are also undesired effects. Following other studies on deposit contracts and bank runs, the author concentrates on the impact on depositors' withdrawal decisions and banks' insolvency risk. The author's analysis shows mixed results: risk reporting does not generally lead to a decrease in banks' risk exposure and the probability of bank runs, respectively.