FED ensures that bank opacity is beneficial
The Federal Reserve Bank of New York assured that the reduction of public information on accounts and balance sheets allows to reduce deposit leaks
Reducing public information about banks’ accounts and balance sheets temporarily during a crisis is a good thing, as it reduces leakage of deposits and investors, according to a study published by the Federal Reserve Bank of New York.
“It is valuable that regulators suppress bank-specific information in a crisis as a way to stop leaks in those same banks by depositors and other types of investors”, explained the vice president of Research and Statistics at Bank of the New York Federal Reserve.
The monetary authority has reached these conclusions through a study that has compared the evolution of deposits during the Great Depression of the 1930s in the United States.
At that time, when regulation was more fragmented, the New York State institution decided to suppress public information from local banks for two years, while banks present in New York but nationwide did have to offer all the data. about the accounts.
The results of the New York FED study indicate that banks with less transparency in information managed to avoid deposit leakage to some extent, although the decline was widespread in the years after the crisis.
Comments are closed.