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Deposit Insurance (deposit + insurance)
Selected AbstractsBANK RUNS: DEPOSIT INSURANCE AND CAPITAL REQUIREMENTS*INTERNATIONAL ECONOMIC REVIEW, Issue 1 2002RUSSELL COOPER Diamond and Dybvig provide a model of intermediation in which deposit insurance can avoid socially undesirable bank runs. We extend the Diamond,Dybvig model to evaluate the costs and benefits of deposit insurance in the presence of moral hazard by banks and monitoring by depositors. We find that complete deposit insurance alone will not support the first-best outcome: depositors will not have adequate incentives for monitoring and banks will invest in excessively risky projects. However, an additional capital requirement for banks can restore the first-best allocation. [source] Deposit Insurance, Banking Reform, and Financial Sector Development in Several Nations of Southeastern EuropeFINANCIAL MARKETS, INSTITUTIONS & INSTRUMENTS, Issue 1 2006By Neil B. Murphy Deposit insurance has spread to many sections of the world. In the newly formed nations of the former Yugoslavia, this has occurred under conditions of post-conflict reconstruction, hyperinflation, and several different governmental structures. Three cases are examined; Bosnia and Herzegovina, Croatia, and Serbia and Montenegro. They all have developed deposit insurance programs. The implementation process was compared to "best practice" recommendations. It is found that the situation in Bosnia and Herzegovina was difficult due to the fractured nature of the Dayton Accord government structure on the one hand but easier to the strong international presence supporting required actions. In the case of Croatia, a unified state emerged from the war, but it was somewhat isolated. Its bank restructuring was costly, and a fragmented deposit insurance program was introduced in the middle of a banking crisis. In the case of Serbia and Montenegro, the bank restructuring process is still underway, and implementation of a functioning deposit insurance program properly awaits its completion. [source] Increased Concentration in Banking: Megabanks and Their Implications for Deposit InsuranceFINANCIAL MARKETS, INSTITUTIONS & INSTRUMENTS, Issue 1 2005Kenneth D. Jones During the past two decades, the U.S. banking industry has experienced an unprecedented wave of consolidation, marked by a substantial decline in the number of insured depository institutions and the emergence of banking behemoths with assets totaling in the hundreds of billions of dollars. This unparalleled concentration of assets and deposits among a handful of "megabanks" has important implications for deposit insurance. Most importantly, the Federal Deposit Insurance Corporation (FDIC) now faces a situation in which the failure of even a single megabank could overwhelm the resources immediately available to the deposit insurance system and expose both the banking industry and the government (i.e., taxpayers) to huge potential liabilities. This article highlights the current structure of the banking industry, examines the threat that this structure poses to the deposit insurance funds, and suggests possible approaches for dealing with megabanks and the increasing concentration of insured deposits. [source] Bank Capital Forbearance and Valuation of Deposit InsuranceCANADIAN JOURNAL OF ADMINISTRATIVE SCIENCES, Issue 3 2005Shih-Cheng Lee Abstract The authors set up a deposit insurance pricing model that treats forbearance as an option to delay the resolution of undercapitalized financial institutions and, subsequently, derive a closed-form solution for the deposit insurance put. The put is decomposed into a capital component and a time component. They then evaluate how the critical policy parameters relate to the cost of deposit insurance, and examine how moral hazard behaviour and the accompanying risk-taking behaviour affect deposit insurance premiums. Résumé Les auteurs de l'article qui suit mettent au point un modèle de fixation des prix de l'assurance-dépôts qui considère l'abstention comme un moyen visant à reporter la résolution des institutions financières sous-capitalisée. Ils en déduisent une solution analytique pour l'option de vente de l'assurance-depôts. Cette dernière comprend une composante de capital et une composante temporelle. Les auteurs de l'article évaluent lafaçon dont les paramètres de politique critique sont reliés au coût de l'assurance-dépôts. Ils examinent aussi la manière dont l'aléa de moralité et le comportement à risque qui l'accompagne influencent les primes d'assurance-dépôts. [source] Deposit Insurance, Banking Reform, and Financial Sector Development in Several Nations of Southeastern EuropeFINANCIAL MARKETS, INSTITUTIONS & INSTRUMENTS, Issue 1 2006By Neil B. Murphy Deposit insurance has spread to many sections of the world. In the newly formed nations of the former Yugoslavia, this has occurred under conditions of post-conflict reconstruction, hyperinflation, and several different governmental structures. Three cases are examined; Bosnia and Herzegovina, Croatia, and Serbia and Montenegro. They all have developed deposit insurance programs. The implementation process was compared to "best practice" recommendations. It is found that the situation in Bosnia and Herzegovina was difficult due to the fractured nature of the Dayton Accord government structure on the one hand but easier to the strong international presence supporting required actions. In the case of Croatia, a unified state emerged from the war, but it was somewhat isolated. Its bank restructuring was costly, and a fragmented deposit insurance program was introduced in the middle of a banking crisis. In the case of Serbia and Montenegro, the bank restructuring process is still underway, and implementation of a functioning deposit insurance program properly awaits its completion. [source] WAL-MART AND BANKS: SHOULD THE TWAIN MEET?CONTEMPORARY ECONOMIC POLICY, Issue 4 2009A PRINCIPLES-BASED APPROACH TO THE ISSUES OF THE SEPARATION OF BANKING AND COMMERCE The application in July 2005 by Wal-Mart to obtain a specialized bank charter from the state of Utah and to obtain federal deposit insurance reopened a national debate concerning the separation of banking and commerce. Though Wal-Mart withdrew its application in March 2007, the issue and the debate continue. This article offers a principles-based approach to this issue that begins with the recognition that banks are special and that safety and soundness regulation of banks is therefore warranted. Building on that recognition, the article lays out the principle that the "examinability and supervisability" of an activity should determine if that activity should be undertaken by a bank. Even if an otherwise legitimate activity is not suitable for a bank, it should be allowed for a bank's owners (whether the owners are individuals or a holding company), so long as the financial transactions between the bank and its owners are closely monitored by bank regulators. The implications of this set of ideas for the Wal-Mart case and for banking and commerce generally are then discussed. (JEL G21, G28) [source] RESTRUCTURING U.S. FEDERAL FINANCIAL REGULATIONCONTEMPORARY ECONOMIC POLICY, Issue 3 2007ROSE M. KUSHMEIDER Despite changes over the past 70 yr, the U.S. federal financial regulatory system remains rooted in the reforms of the 1930s. The institutions governed by this system have, nevertheless, continued to evolve. Today, regulation of large, multiproduct, internationally active financial organizations poses challenges for a system designed largely to regulate smaller, distinct, locally based organizations. Reform of the regulatory system, however, is not an easy task,complex issues regarding deposit insurance, the role of the central bank, and the dual banking system must be addressed. In the absence of a crisis, however, regulatory restructuring will not likely generate much political interest. (JEL G28) [source] European Banking Integration: Don't Put the Cart before the HorseFINANCIAL MARKETS, INSTITUTIONS & INSTRUMENTS, Issue 2 2006Jean Dermine This paper reviews the progress in European banking integration over the last twenty years, and evaluates the current system of banking supervision and deposit insurance based on ,home country' control. The public policy implications to draw from the paper are threefold: First, after a relatively slow start, European banking integration is gaining momentum, in terms of cross-border flows, market share of foreign banks in several domestic markets, and cross-border M&As of significant size. If this trend continues, the issue of adequate supervision and safety nets in an integrated European banking market will become even more pressing. Second, although until recently banks have relied mostly on subsidiary structures to go cross-border, this is changing with the recent creation of the European company statute, which facilitates cross-border branch banking. A review of the case of the Scandinavian bank, Nordea Bank AB, helps to understand some remaining barriers to integration, and the supervisory issues raised by branch banking. Third, it is argued that the principle of ,home country' supervision is unlikely to be adequate in the future for large international banks. Because the closure of an international bank would be likely to have cross-border spillovers, and because some small European countries might be unable to finance the bail-out of their very large banks, centralization, or at least Europe-wide coordination, of the decision to close or bail-out international banks is needed. This raises the issue of European funding of bail-out costs, European banking supervision, and European deposit insurance. [source] Increased Concentration in Banking: Megabanks and Their Implications for Deposit InsuranceFINANCIAL MARKETS, INSTITUTIONS & INSTRUMENTS, Issue 1 2005Kenneth D. Jones During the past two decades, the U.S. banking industry has experienced an unprecedented wave of consolidation, marked by a substantial decline in the number of insured depository institutions and the emergence of banking behemoths with assets totaling in the hundreds of billions of dollars. This unparalleled concentration of assets and deposits among a handful of "megabanks" has important implications for deposit insurance. Most importantly, the Federal Deposit Insurance Corporation (FDIC) now faces a situation in which the failure of even a single megabank could overwhelm the resources immediately available to the deposit insurance system and expose both the banking industry and the government (i.e., taxpayers) to huge potential liabilities. This article highlights the current structure of the banking industry, examines the threat that this structure poses to the deposit insurance funds, and suggests possible approaches for dealing with megabanks and the increasing concentration of insured deposits. [source] BANK RUNS: DEPOSIT INSURANCE AND CAPITAL REQUIREMENTS*INTERNATIONAL ECONOMIC REVIEW, Issue 1 2002RUSSELL COOPER Diamond and Dybvig provide a model of intermediation in which deposit insurance can avoid socially undesirable bank runs. We extend the Diamond,Dybvig model to evaluate the costs and benefits of deposit insurance in the presence of moral hazard by banks and monitoring by depositors. We find that complete deposit insurance alone will not support the first-best outcome: depositors will not have adequate incentives for monitoring and banks will invest in excessively risky projects. However, an additional capital requirement for banks can restore the first-best allocation. [source] Lessons from the Russian Meltdown: The Economics of Soft Legal ConstraintsINTERNATIONAL FINANCE, Issue 3 2002Enrico Perotti On 17 August 1998, Russia abandoned its exchange rate regime, defaulted on its domestic public debt and declared a moratorium on all private foreign liabilities, which was equivalent to an outright default. The depth and speed of the Russian meltdown shocked the international markets, and precipitated a period of serious financial instability. Important lessons on issues of bank supervision and international stability can be learned by understanding the roots of such a crisis. The visible reason of the crisis was an unsustainable fiscal deficit coupled with massive capital flight, but what were their underlying causes? We argue that the structure of individual incentives in a context of capture of state decisions by special interests, compounded by a rouble overvaluation driven by exceptional international support, helps to explain the build,up of non,payment, theft and capital flight that led to the crisis. We offer an explicit model of rational collective non,compliance, cash stripping and rational collective non,payment which led to the fiscal and banking crisis and, ultimately, to a complete meltdown. In our view, the banking sector was already insolvent prior to the crisis, and contributed directly and indirectly to it. We conclude with a radical policy proposal for a stable banking system for Russia, appropriate for its current capacity for legal and supervisory enforcement. It is based on a segmented, narrow banking sector, concentration in commercial banking and a cautious extension of deposit insurance. [source] A Theory of Bank CapitalTHE JOURNAL OF FINANCE, Issue 6 2000Douglas W. Diamond Banks can create liquidity precisely because deposits are fragile and prone to runs. Increased uncertainty makes deposits excessively fragile, creating a role for outside bank capital. Greater bank capital reduces the probability of financial distress but also reduces liquidity creation. The quantity of capital influences the amount that banks can induce borrowers to pay. Optimal bank capital structure trades off effects on liquidity creation, costs of bank distress, and the ability to force borrower repayment. The model explains the decline in bank capital over the last two centuries. It identifies overlooked consequences of having regulatory capital requirements and deposit insurance. [source] Bank Capital Forbearance and Valuation of Deposit InsuranceCANADIAN JOURNAL OF ADMINISTRATIVE SCIENCES, Issue 3 2005Shih-Cheng Lee Abstract The authors set up a deposit insurance pricing model that treats forbearance as an option to delay the resolution of undercapitalized financial institutions and, subsequently, derive a closed-form solution for the deposit insurance put. The put is decomposed into a capital component and a time component. They then evaluate how the critical policy parameters relate to the cost of deposit insurance, and examine how moral hazard behaviour and the accompanying risk-taking behaviour affect deposit insurance premiums. Résumé Les auteurs de l'article qui suit mettent au point un modèle de fixation des prix de l'assurance-dépôts qui considère l'abstention comme un moyen visant à reporter la résolution des institutions financières sous-capitalisée. Ils en déduisent une solution analytique pour l'option de vente de l'assurance-depôts. Cette dernière comprend une composante de capital et une composante temporelle. Les auteurs de l'article évaluent lafaçon dont les paramètres de politique critique sont reliés au coût de l'assurance-dépôts. Ils examinent aussi la manière dont l'aléa de moralité et le comportement à risque qui l'accompagne influencent les primes d'assurance-dépôts. [source] | ||||||||||