IMF research discusses bank capitalisation as a signal

International Monetary Fund headquarters

An International Monetary Fund (IMF) working paper, released in May, discusses the value of bank capitalisation as a market signal.

Author Daniel Hardy writes that banks may enjoy lower funding costs as a result of more secure capital positions.

However, the researcher finds that the asymmetry of information between market insiders and outsiders, which in itself makes capitalisation a valuable signal, may result in exaggerated behaviour from "strong" banks anxious to distinguish themselves from

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