In the longer term, therefore, the risk of adverse market reaction could be expected to promote a sounder financial system. One of the criticisms often made of public disclosure by banks is that the vast majority of depositors will not read banks’ disclosure statements. On this assumption, some observers suggest that disclosure is of very limited effectiveness. We do not agree.
It is certainly true that most depositors are unlikely to read the disclosure statements. But the disclosure regime in New Zealand is not predicated on the assumption of wide readership by the ordinary depositor. The source of market disciplines does not lie in wide public readership.