Large Scale Supervisory Assessment of Banks: Where Is the Beef?

Full Disclosure and Financial Stability: How Does the Market Digest the Transparency Shock?

“…If such an outcome occurs, stress tests would completely fall short of expectations as the policy purpose behind their implementation is to revive the funding market and ease banks access to fresh capital injections. Hence, stress tests may have a considerable announcement effect changing the expectations of agents on the supervisory stance (as proved for the European Comprehensive Assessment by Lazzari et al (2016)). In light of this, it has become crucial to assess how markets risk perception would change in the event of such a disclosure, in order to make authorities able to implement a results communication policy that best addresses the task of stabilizing the banking system by restoring confidence in it when needed.…”