Professor Eamonn Walsh:

That is a very good question. Let us take a hypothetical bank that is really bad. There is no way it would want to tell everybody that it had a really bad loan book. There are no incentives for a bank with a bad or risky loan book to disclose that fact. If anything, the incentives that operate are such that it might try to convey the impression that the loan book is a lot less risky than it really is because that will lower the cost of funds and make the bank more profitable. In that sense, an intervention is required which demands additional disclosure.