Consider a competitive bank whose illiquid asset portfolio is funded by short-term debt that has to be refinanced … of social externalities of bank failures further lowers the optimal level of transparency. Moreover, asset risk taking …

represent uniquely opaque organizations for investors in capital markets. Although bank regulatory policy has long sought to … promote market discipline of banks through enhanced public disclosure, bank regulatory disclosures are notoriously lacking in … the confidentiality of a bank's proprietary investment strategies and customer information. When particular market sectors …

system. The nexus of bank governance is the board of directors, but they have proven inadequate in controlling the riskiness … of bank activities, an outcome due both of the complexity of modern banks, and because boards are uncertain about what is … expected of them. In this paper we propose a two step procedure to improve bank governance. First, we give bank directors an …

surplus when the social cost of bank failure c is large. When c is small and the banksíasset risk taking is not too sensitive …

the central bank is responsible for bank supervision and bank regulators are equipped with more supervisory resources, but …