How Transparency at Banks Changes Deposit FlowsHigher bank disclosures bring volatility to uninsured deposits, and also hurt bank funding costs and profitability, according to a paper co-authored by Wharton’s Itay Goldstein.
Many bank depositors may not know if their bank is financially healthy or weak, or whether it has made too many risky loans that threaten its future. But contrary to popular perceptions, depositors do care about their bank’s financial health, and about whether federal deposit insurance will protect their savings. How transparent banks are about their finances will help depositors decide on where they want to park their savings, according to a recent paper by experts at Wharton and elsewhere.
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