Using a detailed set of deposit insurance schemes (DIS) features for 27 EU countries, we assess the impact of national deposit insurance features on bank stability and investigate the existence of non-linearities in the relationship between coverage and bank stability both in crisis and normal times. Our results suggest that more protective DIS do not necessarily lead to greater bank risk. However, during the crisis some features that generate moral hazard incentives can decrease bank stability. We find an inverse U-shaped relation with bank stability decreasing at high levels of coverage during the crisis period. However, our evidence also suggests that the introduction of temporary measures like blanket guarantees are crucial to avoid panic among depositors and restore stability. Finally, our results seem to imply that the stabilizing effect of deposit insurance can be different along the economic cycle, so regulators should consider that to be able to achieve an optimal DIS that minimizes moral hazard incentives a ‘dynamic’ approach may be necessary.

Chiaramonte, L., Girardone, C., Migliavacca, M., Poli, F., Deposit insurance schemes and bank stability in Europe: how much does design matter?, <<EUROPEAN JOURNAL OF FINANCE>>, 2020; 2020 (26(7-8)): 1-27. [doi:10.1080/1351847X.2019.1607763] [https://hdl.handle.net/10807/135967]

Deposit insurance schemes and bank stability in Europe: how much does design matter?

Chiaramonte, Laura;Migliavacca, Milena;Poli, Federica
2020

Abstract

Using a detailed set of deposit insurance schemes (DIS) features for 27 EU countries, we assess the impact of national deposit insurance features on bank stability and investigate the existence of non-linearities in the relationship between coverage and bank stability both in crisis and normal times. Our results suggest that more protective DIS do not necessarily lead to greater bank risk. However, during the crisis some features that generate moral hazard incentives can decrease bank stability. We find an inverse U-shaped relation with bank stability decreasing at high levels of coverage during the crisis period. However, our evidence also suggests that the introduction of temporary measures like blanket guarantees are crucial to avoid panic among depositors and restore stability. Finally, our results seem to imply that the stabilizing effect of deposit insurance can be different along the economic cycle, so regulators should consider that to be able to achieve an optimal DIS that minimizes moral hazard incentives a ‘dynamic’ approach may be necessary.
2020
Inglese
Chiaramonte, L., Girardone, C., Migliavacca, M., Poli, F., Deposit insurance schemes and bank stability in Europe: how much does design matter?, <<EUROPEAN JOURNAL OF FINANCE>>, 2020; 2020 (26(7-8)): 1-27. [doi:10.1080/1351847X.2019.1607763] [https://hdl.handle.net/10807/135967]
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10807/135967
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 13
  • ???jsp.display-item.citation.isi??? 10
social impact