Informing depositors: a proposed reform of the Australian banking sector

Byford, M and Davidson, S 2013, 'Informing depositors: a proposed reform of the Australian banking sector', Economic Papers: A Journal of Applied Economics and Policy, vol. 32, no. 4, pp. 417-425.


Document type: Journal Article
Collection: Journal Articles

Title Informing depositors: a proposed reform of the Australian banking sector
Author(s) Byford, M
Davidson, S
Year 2013
Journal name Economic Papers: A Journal of Applied Economics and Policy
Volume number 32
Issue number 4
Start page 417
End page 425
Total pages 9
Publisher Wiley-Blackwell Publishing Asia
Abstract Financial regulation has the perverse effect of reducing incentives for depositors to monitor the risks banks take. We propose a rating scheme - the Financial Stability Rating - that would work similarly to other product ratings to inform depositors of the risks they face. Our proposal entails greater disclosure of information that is already in the hands of the prudential regulator. There would be no additional regulatory burden on either financial institutions or the regulator. By linking our rating to a formal deposit insurance scheme, depositors would have both the incentive and ability to make informed decisions about the risk return profile of their deposits.
Subject Applied Economics not elsewhere classified
Keyword(s) banks
deposit insurance
information disclosure
regulation
DOI - identifier 10.1111/1759-3441.12050
Copyright notice © 2013 The Economic Society of Australia
ISSN 1759-3441
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