A working paper, published by the Banque de France on August 3, studies the risk appetites of financial intermediaries, arguing that opacity of leverage and exposures may be encouraging intermediaries to take on too much risk.

The authors, Edouard Challe, Benoit Mojon and Xavier Ragot regress data from 90 French banks from 1993–2003, finding that when balance sheets are opaque, those with relatively low levels of capital may be tempted to hold higher risk portfolios. The paper suggests these