Abstract
Impact of Risk-Related Disclosure on the Risk-Taking Behavior of Commercial Banks in Pakistan
Highlights
Bank supervisors have embraced the concept of market discipline as a supportive tool to their supervisory and regulatory measures; for monitoring risk in individual banks and in the banking system as whole (Benink & Wihlborg, 2002)
The role market discipline can play in evading financial crisis has come out ever stronger from this endeavor
The disclosure of information on the internal-models for market risk is inadequate with respect to the Pakistani commercial banks
Summary
Bank supervisors have embraced the concept of market discipline as a supportive tool to their supervisory and regulatory measures; for monitoring risk in individual banks and in the banking system as whole (Benink & Wihlborg, 2002). The financial crisis of 2007 and its worldwide consequences raised questions about the awareness of risks financial intermediaries remain exposed to, and the techniques and procedures they have in place to manage such risks (Krugman, 2009) In light of this Basel Committee for Banking Supervision (BCBS) devised risk disclosure requirements in Basel-II under Pillar-3 of market discipline to ensures adequate risk disclosures on the part of commercial banks, assisting shareholders and other stakeholders in decision-making (Hakenes & Schnabel, 2011).
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