After all, investors increasingly will demand openness when they are considering big investments. Some banks worry such candor would reveal the extent of their inefficiency. Japan's institutions are notoriously unprofitable, to a large extent because of overstaffing and excess capacity. It is not clear if overly protective and permissive regulators contributed to Japan's slow response to its banking woes. But at the very least, they were tardy in acknowledging the scope of bad loans and their implications.
Inadequate information causes other problems.
China has argued that Moody's couldn't possibly have had enough data to grade its banks so negatively. While that may be true, such a state of affairs is nothing to shout about. Solutions are hard enough to formulate without problems being obscured by inadequate accounting systems and incomplete reporting. None of this is to say that Asian banks should throw caution to the winds. In some cases, more safety may be the answer.