the this leads to the breakdown of financial

the relevant article sets off on a notion whereby commercial
banks are cited as key contributors to the financial crisis. Banks have shown
to be discrete and disclosed in the past and one can reason that this leads to the
breakdown of financial systems. Inadequate or absence of market discipline can presumably
be the causal catalyst of this and the literature continues to evoke a general
consensus of this on its discourse. ‘Market discipline refers to the encouragement
of transparency and disclosure of the risks associated with a business or
entity’

 

The four fundamental requisites of information, ability,
incentives and powers are conspired to interdependently achieve an effectively
disciplined environment.

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

 

Information discrepancies leave investors less able to judge a banks risk and solvency
than bank insiders. Information provided regarding the areas of funding risk;
group structures; asset valuation; intra-annual information and financial interconnections
arguably equip investors with the means to judge and understand ongoing
activity. Being aware enables investors to exercise discipline over poorly
performing banks offering unattractive trade-offs between risk and return. 

x

Hi!
I'm Barry!

Would you like to get a custom essay? How about receiving a customized one?

Check it out