Deposit Insurance Coverage, Credibility of Non-insurance, and Banking Crises

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Deposit Insurance Coverage, Credibility of Non-insurance, and Banking Crises

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dc.contributor.author Wihlborg, Clas en_US
dc.contributor.author Angkinand, Apanard en_US
dc.date.accessioned 2009-02-04T10:24:54Z
dc.date.available 2009-02-04T10:24:54Z
dc.date.issued 2006-01-02T00:00:00Z en_US
dc.identifier.uri http://hdl.handle.net/10398/6808
dc.description.abstract The ambiguity in existing empirical work with respect to effects of deposit insurance schemes on banks’ risk-taking can be resolved if it is recognized that absence of deposit insurance is rarely credible and that the credibility of non-insurance can be enhanced by explicit deposit insurance schemes. We show that under reasonable conditions for effects on risk-taking of creditor protection in banking, and for effects on credibility of non-insurance of explicit coverage of deposit insurance schemes, there exists a partial level of coverage that maximizes market discipline and minimizes moral hazard incentives for risk-taking in banking. Using both the occurrence of banking crises and non-performing loans in the banking sector as proxies for excessive risk-taking the results strongly support this hypothesis in industrial and emerging market economies. Policy recommendations on the country level require analyses of institutional factors affecting the credibility of non-insurance. In particular, the implementation of effective distress resolution procedures for banks would allow governments to reduce explicit deposit insurance coverage and, thereby, to strengthen market discipline. JEL Classification: G21; G28; F43 Keywords: Deposit Insurance; Banking Crisis; Insolvency Procedures, Market Discipline en_US
dc.format.extent 55 s. en_US
dc.language eng en_US
dc.relation.ispartofseries LEFIC Working paper;2005-010 en_US
dc.title Deposit Insurance Coverage, Credibility of Non-insurance, and Banking Crises en_US
dc.type wp en_US
dc.accessionstatus modt06jan02 miel en_US
dc.contributor.corporation Copenhagen Business School. CBS en_US
dc.contributor.department Center for Law, Economics and Financial Institutions at CBS en_US
dc.contributor.departmentshort LEFIC en_US
dc.contributor.departmentuk Center for Law, Economics and Financial Institutions at CBS en_US
dc.contributor.departmentukshort LEFIC en_US
dc.idnumber x656517289 en_US
dc.publisher.city København en_US
dc.publisher.year 2005 en_US


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