During the financial crisis it emerged that the public and politicians desire more transparency about DNB’s supervision of financial institutions. Transparent supervision carries various benefits. It reinforces the supervisor’s legitimacy and enables it to give accountability, all of which helps to safeguard the supervisor’s independence. Transparency also makes supervisors’ actions more predictable, enhancing the likelihood that banks will comply with the regulations. Transparency additionally helps to influence expectations and compels supervisors to take cautious decisions and work consistently. Nonetheless, transparency on supervision has its limits, mainly because transparency about difficulties at a bank might cause a bank run, exacerbating the problems.
To discover how transparent DNB is in comparison to other supervisors, DNB researchers distributed a survey to fellow supervisors and used the responses to work out the degree of transparency of 24 supervisors. A distinction was made between five different dimensions of transparency, see Figure 1. These dimensions relate to various stages of supervision. Openness on policy targets results in political transparency and openness about the information reported to the supervisor leads to economic transparency. Procedural transparency relates to how supervisory decisions are taken. If policy decisions are announced and explained immediately, there is policy transparency. Operational transparency exists if the supervisor is open about the implementation of policy actions and discloses its progress in achieving its objectives. The overall maximum score is 15.