Standard Chartered confirms that lack of disclosure by banks is a direct contributor to bank runs

In case you missed it, a Telegraph article reported that Standard Chartered is practicing the modern day equivalent of a run on the Eurozone banks.  Their action publicly acknowledge the legitimacy of using the FDR Framework as a tool for risk management.

Bank runs occur when depositors and other investors no longer believe that the asset value of the bank exceeds its liabilities.

Please note, bank runs are based on the "fear" about the value of the bank's assets. If there was asset-level disclosure, the assets could be valued and banks, like Standard Chartered, could adjust their exposure based on facts.

Standard Chartered, the UK’s third-largest bank by market value, has made clear its fears of the likely fallout from the eurozone debt crisis by cutting back its lending to other European banks. 

Discussing the bank's first half performance, Richard Meddings, Standard Chartered's finance director, said lending to eurozone banks had been cut substantially due to concerns at the potential for contagion to the wider European banking system from the sovereign debt crisis. 

"We have been withdrawing liquidity from eurozone financial institutions and recycling it back into Asia," said Mr Meddings. 

Standard Chartered has no direct exposure to the sovereign debt of peripheral eurozone countries like Greece and Portugal, but Mr Meddings warned that the "dislocation" caused by a worsening in the crisis would hit all banks. 

Mr Meddings said there were likely to be "second order consequences" and that even banks with no holdings of the indebted countries' bonds could be hurt, though he added that Standard Chartered remained a net provider of funding to the interbank lending market.