First, in March 2006, Prof. Lawrence Summers while delivering the L. K. Jha Memorial Lecture in Mumbai, argued that the level of reserves in many countries far exceeded the traditional measures of reserve levels required to guard against a foreign exchange crisis.
Banks have extensive information about borrowers through their lending relationship, and this information may be much better than the information available to other outside stakeholders. When the bank is also a shareholder or acts on behalf of shareholders, this information can reduce the informational asymmetries between firm owners and managers.