Shortage of information on the condition of banks can adversely affect the volume of trading and interest rates prevailing in the interbank market for reserves.

Question

Quizplus · Accepted Answer

A shortage of information on the condition of banks can lead to increased uncertainty and risk aversion among participants in the interbank market for reserves. This can reduce the volume of trading as banks may be less willing to lend to each other, and it can also affect interest rates, potentially leading to higher rates as banks demand a premium for the perceived increased risk.

Shortage of Information on the Condition of Banks Can Adversely