English, Article, Journal or magazine article edition: Market discipline and financial safety net design Demirguc-Kunt, Asl1; Demirguc-Kunt, Asli; Huizinga, Harry

User activity

Share to:
 
Bookmark: http://trove.nla.gov.au/version/188487
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Market Discipline and Financial Safety Net Design
Author
  • Demirguc-Kunt, Asl1
  • Demirguc-Kunt, Asli
  • Huizinga, Harry
Physical Description
  • preprint
Notes
  • There has been little empirical work on the effectiveness of safety nets designed for banks, for lack of data on safety net design across countries. The authors examine cross-country data on bank-level interest expense and deposit growth for evidence of market discipline in individual countries. In addition, using cross-country information on deposit insurance systems, they investigate the impact of explicit deposit insurance (and its key features) on bank interest rates and market discipline. They find that: 1) Many countries retain some degree of market discipline, regardless of the type of safety net. 2) The existence of explicit deposit insurance lowers banks'interest expenses and makes interest payments less sensitive to bank risk factors, especially bank liquidity. 3) Higher explicit coverage, broader coverage, and the existence of an earmarked insurance fund increase required-deposit rates and reduce market discipline. 4) Private (especially joint) management of insurance schemes lowers deposit rates and improves market discipline.
  • Financial Intermediation,Banks&​Banking Reform,Insurance&​Risk Mitigation,Payment Systems&​Infrastructure,Insurance Law,Banks&​Banking Reform,Financial Intermediation,Insurance&​Risk Mitigation,Insurance Law,Financial Crisis Management&​Restructuring
  • RePEc:wbk:wbrwps:2183
  • An important question is whether the financial safety net reduces market discipline on bank risk taking. For countries with varying deposit insurance schemes, we find that deposit rates continue to reflect bank riskiness. Cross-country evidence suggests that explicit deposit insurance reduces required deposit interest rates at a cost of reduced market discipline. Internationally, deposit insurance schemes vary widely in their coverage, funding, and management. Hence, there are widely differing views on how deposit insurance should optimally be structured. To inform this debate, we use a newly constructed data set of deposit insurance design features to examine how different design features affect deposit interest rates and market discipline.
  • Deposit Insurance; Market Discipline
  • RePEc:cpr:ceprdp:2311
Language
  • English
Contributed by
OAIster

Get this edition

  • Set up My libraries

    How do I set up "My libraries"?

    In order to set up a list of libraries that you have access to, you must first login or sign up. Then set up a personal list of libraries from your profile page by clicking on your user name at the top right of any screen.

  • All (1)
  • Unknown (1)
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.

User activity


e.g. test cricket, Perth (WA), "Parkes, Henry"

Separate different tags with a comma. To include a comma in your tag, surround the tag with double quotes.

Be the first to add a tag for this edition

Be the first to add this to a list

Comments and reviews

What are comments? Add a comment

No user comments or reviews for this version

Add a comment