the relevant article sets off on a notion whereby commercialbanks are cited as key contributors to the financial crisis. Banks have shownto be discrete and disclosed in the past and one can reason that this leads to thebreakdown of financial systems. Inadequate or absence of market discipline can presumablybe the causal catalyst of this and the literature continues to evoke a generalconsensus of this on its discourse. ‘Market discipline refers to the encouragementof transparency and disclosure of the risks associated with a business orentity’ The four fundamental requisites of information, ability,incentives and powers are conspired to interdependently achieve an effectivelydisciplined environment.
Information discrepancies leave investors less able to judge a banks risk and solvencythan bank insiders. Information provided regarding the areas of funding risk;group structures; asset valuation; intra-annual information and financial interconnectionsarguably equip investors with the means to judge and understand ongoingactivity. Being aware enables investors to exercise discipline over poorlyperforming banks offering unattractive trade-offs between risk and return.