Kaufmann, DanielVishwanath, Tara2014-02-202014-02-202001-04World Bank Research Observerhttps://hdl.handle.net/10986/17128The Asian financial crisis in the late 1990s not only highlighted the welfare consequences of transparency in the financial sector but also linked this relatively narrow problem to the broader context of transparency in governance. It has been observed that objections to transparency, often on flimsy pretexts, are common even in industrialized countries. This article argues that transparency is indispensable to the financial sector and describes its desirable characteristics: access, timeliness, relevance, and quality. The authors emphasize the need to weigh the costs and benefits of a more transparent regulatory policy, and they explore the connection between information imperfections, macroeconomic policy, and questions of risk. The article argues for developing institutional infrastructure, standards, and accounting practices that promote transparency, implementing incentives for disclosure and establishing regulations to minimize the perverse incentives generated by safety net arrangements, such as deposit insurance. Because institutional development is gradual, the authors contend that relatively simple regulations, such as limits on credit expansion, may be the most reasonable option for developing countries. They show that transparency has absolute limits because of the lack of adequate enforcement and argue that adequate enforcement may be predicated on broader reforms in the public sector.en-USCC BY-NC-ND 3.0 IGOACCESS TO INFORMATIONACCOUNTABILITYACCOUNTINGACCOUNTING PRACTICESACCOUNTING STANDARDSACCOUNTING SYSTEMSADVERSE SELECTIONARBITRAGEAUDITINGAUDITORSAUDITSBAILOUTBAILOUTSBALANCE SHEETBANK ACTIVITIESBANK FAILUREBANK FAILURESBANK FOR INTERNATIONAL SETTLEMENTSBANK LOANBANK LOAN GUARANTEESBANK OF ENGLANDBANK OFFICERSBANK PANICSBANK POLICIESBANK RATINGSBANK RUNSBANK SOLVENCYBANK TRANSPARENCYBANKING CRISESBANKING CRISISBANKING PRACTICESBANKING SUPERVISIONBANKING SYSTEMSBANKRUPTCYBASLE ACCORDBENEFICIARIESBONDSBORROWINGCAPITAL ADEQUACYCAPITAL CONTROLSCAPITAL MARKETSCAPITAL REQUIREMENTSCENTRAL BANKCENTRAL BANKINGCENTRAL BANKSCONFIDENTIALITYCONNECTED LENDINGCONTAGIONCONTINGENT LIABILITIESCORPORATE DISCLOSURECREDIBILITYCREDIT AGENCIESCREDIT APPROVALCREDIT EXPANSIONCREDIT RATIONINGCREDIT-RATING AGENCIESCREDITORSCREDITWORTHINESSDATA QUALITYDEGREE OF RISKDEPOSITDEPOSIT INSURANCEDEPOSIT RATESDEPOSITORSDEPOSITSDERIVATIVEDERIVATIVE INSTRUMENTSDERIVATIVESDEVALUATIONDEVELOPING COUNTRIESDISCLOSURE OF INFORMATIONDISCLOSURE REQUIREMENTSDISCLOSURE STANDARDSDISSEMINATION OF INFORMATIONDIVIDENDSDOMESTIC BANKSECONOMIC CONDITIONSECONOMIC COSTSECONOMIC CRISESECONOMIC EFFICIENCYECONOMIC GROWTHECONOMIC STABILITYEMERGING ECONOMIESENFORCEMENT MECHANISMSEXTERNALITIESFEDERAL RESERVEFINANCIAL CRISESFINANCIAL CRISISFINANCIAL INFORMATIONFINANCIAL INSTITUTIONFINANCIAL INSTITUTIONSFINANCIAL INSTRUMENTSFINANCIAL INTEGRATIONFINANCIAL LIBERALIZATIONFINANCIAL MARKETFINANCIAL MARKET INFORMATIONFINANCIAL MARKETSFINANCIAL REFORMFINANCIAL RISKFINANCIAL SAFETY NETSFINANCIAL SECTORFINANCIAL SERVICESFINANCIAL STABILITYFINANCIAL STUDIESFINANCIAL SYSTEMFINANCIAL SYSTEMSFINANCIAL TRANSACTIONSFISCAL POLICYFLOW OF INFORMATIONFOREIGN BANKSFOREIGN CURRENCYFOREIGN CURRENCY DEBTFOREIGN INVESTORSFULL DISCLOSUREGLOBAL FINANCIAL INTEGRATIONGLOBAL FINANCIAL SYSTEMGLOBALIZATIONGOOD GOVERNANCEGOVERNMENT POLICIESGOVERNMENT POLICYGOVERNMENT REGULATIONHEDGE FUNDSINDUSTRIAL COUNTRIESINFLATIONINFORMATION ASYMMETRIESINFORMATION DISCLOSUREINFORMATION SHARINGINFORMATION SYSTEMSINNOVATIONINNOVATIVE FINANCINGINSTITUTIONAL DEVELOPMENTINSTITUTIONAL INFRASTRUCTUREINSTITUTIONAL INVESTORSINTEREST RATESINTERNATIONAL BANKINTERNATIONAL BANKINGINTERNATIONAL ECONOMICSINTERNATIONAL MARKETINTERNATIONAL MARKETSINTERNATIONAL SETTLEMENTSINVESTMENT ACTIVITYLACK OF TRANSPARENCYLAW ENFORCEMENTLAWSLEGAL ENVIRONMENTSLENDERSLEVYLIBERALIZATION OF FINANCIAL MARKETSLIMITED LIABILITYLIQUIDITYLIQUIDITY CRISESLIQUIDITY POSITIONLOANLOAN CLASSIFICATIONLOAN CONTRACTSLOAN GUARANTEESLOCAL CURRENCYMACROECONOMIC POLICYMANDATESMARGINAL COSTMARKET DISCIPLINEMARKET ENVIRONMENTMARKET EXPECTATIONSMARKET INFORMATIONMARKET STABILITYMATURITYMONETARY FUNDMONETARY POLICYMORAL HAZARDNATIONAL SECURITYNONPERFORMING LOANSOUTPUTPENALTIESPORTFOLIOSPRICE VOLATILITYPRIVACYPRIVATE CREDITPROBLEM LOANSPROFITABILITYPROPERTY RIGHTSPUBLIC POLICYPUBLIC SERVICESREGULATORY ENVIRONMENTREGULATORY ENVIRONMENTSREGULATORY FORBEARANCEREGULATORY SYSTEMRENTSREPUTATIONRESERVESRESOURCE ALLOCATIONRETURNSRISK PROFILESRULE OF LAWSAFETYSAFETY NETSAFETY NETSSAVINGSSCANDALSSELF-REGULATIONSHARE PRICESHAREHOLDERSSOCIAL VALUESOLVENCYSTOCK EXCHANGESTOCK MARKETSTOCK MARKET VOLATILITYSTOCK RETURNTAXTAX SYSTEMSTECHNICAL ASSISTANCETRANSACTIONTRANSACTION COSTSTRANSPARENCYUNEMPLOYMENTVALUATIONVALUE OF ASSETSWARRANTSWEAK ENFORCEMENTWORLD FINANCIAL MARKETSJournal ArticleWorld Bank10.1596/17128