In an interesting post on Bruegel.org, the authors examine the trend towards more opacity in EU bank supervision.  Why is this trend important?  As the authors say:

there are compelling reasons why supervisory transparency for individual banks should lead to more financial stability, not less. Bankers will want to prevent adverse market reactions if they know that more data about them will be made public. Better transparency may facilitate contestability and mergers, especially cross-border mergers where information asymmetries are high. Data transparency allows parliaments and the public to better judge supervisors’ performance. This means that supervisors expect more scrutiny and so should act more responsibly. These benefits of transparency are well established in the relevant literature. For example, Nier (2005) finds that more transparent banks are less likely to experience a crisis, while Tadesse (2006) reports that countries with more extensive bank disclosure requirements were less likely to experience a systemic banking crisis.

Please focus on two benefits of transparency the authors cite as contributing to more financial stability:

1. Bankers will take less risk when everyone can see what they are doing.
2. Market discipline doesn’t just apply to bankers, but also to their regulators when there is transparency.

note: I couldn’t have said it much better myself, although I did in Transparency Games.