The International Financial Reporting Accounting Standards (IFRS) of financial instruments were implemented in 2010. It was found to have major impacts on risk transparency of the banking industry in Indonesia. This study examines the impact of IFRS of financial instruments on market discipline of banks in Indonesia. Data from the study period between 2007 and 2013 was analysed, and findings show an increase in market discipline after the implementation of the IFRS of financial instruments. Specifically, the quality of loan loss provision information and the disclosure of financial instruments based on IFRS in financial statements had improved market discipline among Indonesian banks. The study therefore, concludes transparency of risk information in financial statements enhances the ability of bank stakeholders to perform monitoring functions, which in turn enables effective market discipline.