Arbeitspapier
Persuasion by stress testing: Optimal disclosure of supervisory information in the banking sector
The game-theoretical analysis of this paper shows that stress tests that cover the entire banking sector (macro stress tests) can be performed by institutional supervisors to improve welfare. In a multi-receiver framework of Bayesian persuasion we show that a banking authority can create value when committing to disclose the stress-testing methodology (signal-generating process) together with the stress test result (signal). Disclosing two pieces of information is a typical procedure used in stress tests. By optimally choosing these two signals, supervisors can deliver superior information to prudent investors and enhance welfare. The paper offers a new theory to explain why stress tests are generally welfare enhancing. We also offer a treatment of the borderline case where the banking sector is hit by a crisis, in which case the supervisor will optimally disclose an uninformative signal.
- ISBN
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978-3-86558-868-5
- Language
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Englisch
- Bibliographic citation
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Series: Bundesbank Discussion Paper ; No. 32/2012
- Classification
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Wirtschaft
Criteria for Decision-Making under Risk and Uncertainty
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
Financial Institutions and Services: Government Policy and Regulation
- Subject
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Stress Tests
Supervisory Information
Bayesian Persuasion
Multiple Receivers
Disclosure
- Event
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Geistige Schöpfung
- (who)
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Gick, Wolfgang
Pausch, Thilo
- Event
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Veröffentlichung
- (who)
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Deutsche Bundesbank
- (where)
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Frankfurt a. M.
- (when)
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2012
- Handle
- Last update
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10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Gick, Wolfgang
- Pausch, Thilo
- Deutsche Bundesbank
Time of origin
- 2012