Abstract
Increasing risk disclosure of banks, e.g. via risk reporting in their annual accounts, is high on the agenda. In this paper, we analyse whether risk reporting of banks only shows favourable effects as supposed by regulatory authorities or whether there exist undesired effects as well. Referring to the literature on deposit contracts and bank runs, we concentrate on the impact on depositors' withdrawal decisions and banks' insolvency risk. Risk reporting does not generally lead to a decrease in banks' risk exposure and the probability of bank runs, respectively. Instead it induces higher insolvency risk under certain conditions, which are identified in this paper.
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