IMF/EU dispute highlights financial instability caused by regulators' information monopoly

The NY Times ran an article which ends any debate about whether the financial regulators' information monopoly on all the useful, relevant information for each financial institution is or is not a primary driver of financial instability.  This information monopoly is a primary cause of financial instability.

Asked about the IMF's estimate regarding a 200 billion euro capital shortfall at European banks, [European Commission Competition Commissioner Joaquin] Almunia said a set of rigorous stress tests on the banks had only recently been carried out and only nine had shown they needed capital.  

"We are very well placed to monitor the situation of the banking system in Europe and we are the best placed to assess what is the real situation of the sector," he said.

Apparently, the financial regulators are withholding information from the IMF even though they are asking for the IMF's help in bailing out various countries throughout the European Union.  Without this withheld information, how does the IMF know that its help is necessary and that it is not making the situation worse?

This blog has frequently discussed how the financial regulators with their information monopoly on the current asset and liability-level data for each financial institution are in the best place to assess what is the real situation.

The reason that the financial sector is unstable is that it is dependent on these financial regulators to correctly assess the real situation.  Failure to correctly assess the real situation results in financial instability.  An example of this is the ongoing financial crisis.