On the other hand, disclosure of reliable information facilitates market discipline, cultivates confidence and reduces the possibility of adverse instability. The credibility of information allows market participants to process the right information and make appropriate decisions, thus a good signalling mechanism. Disclosure of information, however, should not compromise proprietary data, but must be flexible enough to accommodate future advancement in risk management.
Such outcomes therefore, have obvious implications for the supervisor’s ability to oversee the safety and soundness of financial institutions. It is necessary for banks and non-bank financial institutions to prepare quality financial statements so that shareholders and other stakeholders are well-informed and a sound judgement on their financial status can be made by the market.