Bank Stability and the European Deposit Insurance Scheme (notice n° 547383)
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| fixed length control field | 02578cam a2200217 4500500 |
| 005 - DATE AND TIME OF LATEST TRANSACTION | |
| control field | 20250121114721.0 |
| 041 ## - LANGUAGE CODE | |
| Language code of text/sound track or separate title | fre |
| 042 ## - AUTHENTICATION CODE | |
| Authentication code | dc |
| 100 10 - MAIN ENTRY--PERSONAL NAME | |
| Personal name | Kiema, Ilkka |
| Relator term | author |
| 245 00 - TITLE STATEMENT | |
| Title | Bank Stability and the European Deposit Insurance Scheme |
| 260 ## - PUBLICATION, DISTRIBUTION, ETC. | |
| Date of publication, distribution, etc. | 2020.<br/> |
| 500 ## - GENERAL NOTE | |
| General note | 86 |
| 520 ## - SUMMARY, ETC. | |
| Summary, etc. | Empirical evidence shows that a financial distress, faced by a bank or the whole economy, might cause large-scale withdrawals of deposits even when bank deposits are protected by deposit insurance, implicitly or explicitly guaranteed by a government. Building on Kiema and Jokivuolle (2015), we present a new model of such partial bank runs. In our model withdrawals are caused by the fear that both the bank and the government’s deposit guarantee might fail in the future. Our focus is on a guarantee rather than on insurance, since the assets of deposit insurance funds might not be sufficient in large-scale systemic crises. Guarantee failure is possible because, being sovereign, the government may choose not to keep its promises. This option causes a fixed welfare cost (e.g. a reputational cost), which in a sufficiently severe crisis may be smaller than the costs from deposit guarantee payments. We also assume that, being welfare-maximizing, the government recapitalizes the bank during the early stage of the bank run. When decisions concerning deposit guarantee payments are made, recapitalization costs are already sunk costs, but the partial bank run has reduced the coverage costs that the remaining deposits might cause for the government. In this way, the depositors who withdraw funds during a partial bank run decrease the danger of a deposit guarantee failure and increase the incentives of the remaining depositors to keep their deposits in the bank. We apply our framework to the European Deposit Insurance Scheme (EDIS), and we view the reliability of the Single Resolution Fund and its backstop as the counterpart to the reliability of the government’s promises. It turns out that in an asymmetric shock that affects only a single eurozone country, the EDIS improves bank stability, but its effects might be ambiguous in a systemic crisis that affects the whole Banking Union. |
| 690 ## - LOCAL SUBJECT ADDED ENTRY--TOPICAL TERM (OCLC, RLIN) | |
| Topical term or geographic name as entry element | information induced bank runs |
| 690 ## - LOCAL SUBJECT ADDED ENTRY--TOPICAL TERM (OCLC, RLIN) | |
| Topical term or geographic name as entry element | bank crises |
| 690 ## - LOCAL SUBJECT ADDED ENTRY--TOPICAL TERM (OCLC, RLIN) | |
| Topical term or geographic name as entry element | deposit guarantee |
| 690 ## - LOCAL SUBJECT ADDED ENTRY--TOPICAL TERM (OCLC, RLIN) | |
| Topical term or geographic name as entry element | bank regulation |
| 700 10 - ADDED ENTRY--PERSONAL NAME | |
| Personal name | Jokivuolle, Esa |
| Relator term | author |
| 786 0# - DATA SOURCE ENTRY | |
| Note | Revue de l'OFCE | Supp. 2 | 6 | 2020-02-15 | p. 113-142 | 1265-9576 |
| 856 41 - ELECTRONIC LOCATION AND ACCESS | |
| Uniform Resource Identifier | <a href="https://shs.cairn.info/journal-revue-de-l-ofce-2019-6-page-113?lang=en&redirect-ssocas=7080">https://shs.cairn.info/journal-revue-de-l-ofce-2019-6-page-113?lang=en&redirect-ssocas=7080</a> |
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