I acknowledge that, in some circumstances, disclosure could exacerbate a bank’s difficulties. For example, where a bank is required to disclose a loss or a severe deterioration in asset quality, this could lead to a sharp adverse reaction by the market, possibly causing the bank in question to come under liquidity pressure.
Of course, this possibility exists with even the barest disclosure requirements - such as with the release of an annual report or a six monthly interim disclosure. And the risks of adverse market reaction are present even in the absence of disclosure requirements - for example, as a result of market BIS Review /1997  -8-  speculation as to a bank’s financial condition.