Discussion Paper

The Value of Opacity in a Banking Crisis

Abstract: During moments of heightened economic uncertainty, authorities often need to decide on how much information to disclose. For example, during crisis periods, we often observe regulators limiting access to bank‑level information with the goal of restoring the public's confidence in banks. Thus, information management often plays a central role in ending financial crises. Despite the perceived importance of managing information about individual banks during a financial crisis, we are not aware of any empirical work that quantifies the effect of such policies. In this blog post, we highlight results from our recent working paper, demonstrating that in a crisis, a policy of suppressing information about banks' balance sheets has a significant and positive effect on deposits.

Keywords: Information management; Bank Opacity; Great Depression; Banking Crisis;

JEL Classification: G1; G2; N0;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2020-04-02

Number: 20200402