Even requiring disclosure on a confidential basis solely to regulatory authorities may well inhibit such risk-taking. Innovators can never be fully confident, justly or otherwise, of the security of the information. Regulators may not always be able to differentiate easily between secrecy to protect intellectual property and secrecy to deceive or to commit outright fraud.
Yet a supervisory system must make that distinction as best it can. There is nothing unusual about making difficult tradeoffs in regulation. In fact, it is the rule rather than the exception for most regulatory regimes--whether in the financial or nonfinancial sectors of our economies. Indeed, such tradeoffs, in a wider sense, determine the differing regulatory regimes we see around the world.