Transparency Between Banks and Their Customers: Information Needs and Public Intervention

In recent decades, factors such as the spread of complex financial instruments, the broadening of available alternatives, the general interest in making sure that financial activities are conducted efficiently and effectively, and the opening up of markets to international competition, have fostered more decisive public intervention in support of greater transparency between banks and their customers. The arguments in favour of greater disclosure are based essentially on the role played by transparency in the efficient allocation of resources and in the efficacy of the mechanisms for coordinating economic activities in a market system. The aim of this essay is to assess the extent and characteristics of the information needs, by analyzing the decision-making processes and the manner in which knowledge is built and used, with respect to the purchase of financial services. Factors such as high financial sacrifice, high perceived risks, considerable differences between the available alternatives, a high degree of involvement, seem to justify an intense search for information and a commitment in processing this information. The precision with which information is searched for and the time dedicated to making a choice would be reduced as an effect of financial experience and knowledge, and perceived excessive complexity of the service and stringent time pressure.