Bank Insolvency Procedures and Market Discipline in European Banking


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Bank Insolvency Procedures and Market Discipline in European Banking

Show simple item record Angkinand, Apanard en_US Wihlborg, Clas en_US 2009-02-04T10:24:52Z 2009-02-04T10:24:52Z 2005-12-09T00:00:00Z en_US
dc.description.abstract Market discipline in banking requires that explicit and implicit insurance schemes for financial sector firms are limited, and that the lack of insurance of important stakeholders is credible. This credibility cannot be achieved without transparent, predictable procedures for distress resolution for banks, including explicit rules for the liquidation of insolvent banks. We find that very few European countries have explicit procedures for dealing with problem banks. The propositions tested in this paper are that the credibility of non-insurance in European banking depends strongly on (i) the degree of coverage of deposit insurance schemes, and (2) on the existence of enforceable rules that enhance the credibility of non-insurance of groups of bank. The proxy used for credibility of non-insurance in Europe is the probability of banking crisis. Finding a U-shaped relation between the probabiity of banking crisis and the coverage of explicit deposit insurance we derive the degree of coverage that minimizes the probability of crisis in Western and Eastern Europe. JEL Classification: G21; G28; F43 Keywords: Deposit Insurance; Banking Crisis; Insolvency Procedures, Market Discipline en_US
dc.format.extent 37 s. en_US
dc.language eng en_US
dc.relation.ispartofseries LEFIC Working paper;2005-006 en_US
dc.title Bank Insolvency Procedures and Market Discipline in European Banking en_US
dc.type wp en_US
dc.accessionstatus modt05dec09 miel en_US
dc.contributor.corporation Copenhagen Business School. CBS en_US
dc.contributor.department Institut for Finansiering en_US
dc.contributor.departmentshort LEFIC en_US
dc.contributor.departmentuk Department of Finance en_US
dc.contributor.departmentukshort FI en_US
dc.idnumber x656504225 en_US København en_US
dc.publisher.year 2005 en_US

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