Bank Regulation - General Principles of Bank Regulation - Market Discipline

Market Discipline

The regulator requires banks to publicly disclose financial and other information, and depositors and other creditors are able to use this information to assess the level of risk and to make investment decisions. As a result of this, the bank is subject to market discipline and the regulator can also use market pricing information as an indicator of the bank's financial health.

Read more about this topic:  Bank Regulation, General Principles of Bank Regulation

Other articles related to "market discipline, markets":

Market Discipline - Deposit Safety Nets
... in 1934 to restore depositor trust into the financial markets following the devastation of the Great Depression ... Concerning market discipline, one can easily say that mispriced deposit insurance distorts the incentives of depositors to monitor bank risk taking activities ...

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