Why banks should keep secrets

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Why banks should keep secrets

Please use this identifier to cite or link to this item: http://hdl.handle.net/10036/24456


Title: Why banks should keep secrets
Author: Kaplan, Todd R.
Citation: Economic Theory, February 2006 27, 341–357
Publisher: Springer
Journal: Economic Theory
Date Issued: 2006-02
URI: http://hdl.handle.net/10036/24456
DOI: 10.1007/s00199-004-0597-y
Links: http://www.springerlink.com/
Abstract: We show that it is sometimes efficient for a bank to commit to a policy that keeps information about its risky assets private. Our model, based upon Diamond-Dybvig (1983), has the feature that banks acquire information about their risky assets before depositors acquire it. A bank has the option of using contracts where the middle-period return on deposits is contingent on this information, but by doing so it must also reveal the information. We derive the conditions on depositors preferences and banking technology for which a bank would prefer to keep information secret even though it must then use a non-contingent deposit contract.
Type: Article
Keywords: Deposit contractsInterim information.BanksConfidentiality
ISSN: 0938225914320479

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