Deposit insurance and bank risk-taking: Evidence from internal loan ratings

Ioannidou, Vasso; Penas, Marı́a Fabiana

doi:10.1016/j.jfi.2009.01.002

Cited by 167 publications

(72 citation statements)

References 30 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…In the absence of deposit insurance coverage, monitoring of banks by private parties increases and thus uninsured depositors tend to discipline banks by demanding higher deposit rates (Demirguc-Kunt and Kane, 2002;Anginer et al, 2013). Moreover, deposit insurance could also impact the lending rates positively, as bank managers might lend to customers of low creditworthiness suggesting that they would require higher interest rates for the loans provided (Carapella and Giorgio, 2004;Ioannidou and Penas, 2010). This could suggest that deposit insurance coverage might have a positive impact on bank profitability through its effect on interest margins.…”

Section: Deposit Coverage Insurance Ump and Bank Performancementioning

confidence: 99%

“…This reduction in interest margins because of the monitoring of depositors could be strengthened for deposit uninsured banks. Moreover, at the presence of lower margins over unconventional monetary policy periods, insured banks are encouraged to relax further their credit standards because of lack of private monitoring and thus increase lending to borrowers of low creditworthiness (Carapella and Giorgio, 2004;Ioannidou and Penas, 2010).…”

Section: Deposit Coverage Insurance Ump and Bank Performancementioning

confidence: 99%

See 1 more Smart Citation

What is the effect of unconventional monetary policy on bank performance?

Mamatzakis

Bermpei

2016

Journal of International Money and Finance

View full text Add to dashboard Cite

This paper examines the relationship between unconventional monetary policy and the US banking performance. Unconventional monetary policy is captured through the central bank's assets and excess reserves. Results show that unconventional monetary policy has a negative relationship with bank performance. Further analysis shows that the negative association between unconventional monetary policy and performance is mitigated for banks with a high level of asset diversification and low deposit funding. We also find that the negative relationship between unconventional monetary policy and performance subdues for deposit insured financial institutions. Finally, we use dynamic panel threshold analysis which reveals that the negative association between unconventional monetary policy and bank performance is particularly pronounced above the reported threshold value.

show abstract

Section: Deposit Coverage Insurance Ump and Bank Performancementioning

confidence: 99%

Section: Deposit Coverage Insurance Ump and Bank Performancementioning

confidence: 99%

What is the effect of unconventional monetary policy on bank performance?

Mamatzakis

Bermpei

2016

Journal of International Money and Finance

View full text Add to dashboard Cite

show abstract

“…They emphasize the impact of a deposit insurance system on bank asset-side risk. Banks with a high share of large depositors undertook relatively less risk before the insurance system established in the context of Bolivia, but banks appear to take higher risk and do not seem to compensate increasing risk by adjusting requirements for collateral and maturity after the introduction of deposit insurance (Ioannidou & Penas, 2010). This is consistent with the fact that large depositors have greater ability to monitor banks in unguaranteed circumstance as proposed by England (1988).…”

Section: Previous Empirical Evidencementioning

confidence: 58%

The Effect of Deposit Insurance on Risk Taking in Asian Banks

Enkhbold

Otgonshar

2013

AJFA

View full text Add to dashboard Cite

This paper uses a panel database of 401 banks in 31 Asian countries over the period from 2000 to 2010 to examine the effects of deposit insurance on banks' risk-taking incentives. We find that risk-taking incentives vary with bank size and risks. In addition, differentiated premiums may not accurately reflect the level of risk that a bank poses. In the presence of a deposit insurance scheme, the pattern of the non-linear relationship between bank size and risk-taking significantly changes. Our results suggest that market discipline exercised by banks is stronger in the presence of mandatory deposit insurance scheme. Government-funded deposit insurance funds allow Asian banks to take a higher risk. A risk-based deposit insurance scheme functions more effectively in the countries with good regulatory framework and institutional quality.

show abstract

“…The empirical results do not support the existence of the risk effects of deposit insurance for the sample given in [5]. While [6] gives the opposite conclusion that deposit insurance significantly increases the credit risk of financial institutions. In fact, the benefit effects and the risk effects of deposit insurance may exist in the same time.…”

Section: Introductionmentioning

confidence: 79%

Estimating Probability Distribution of Asset Value Based on Dual Effects of Deposit Insurance with the Minimum Cross-Entropy Principle

Lv¹,

Qin²,

Sun³

2013

TEL

View full text Add to dashboard Cite

A model is proposed to estimate the probability distribution of asset value based on the benefit effects as well as the risk effects of deposit insurance with the minimum cross-entropy principle. Three scenarios are constructed to depict situations with different dual effects of deposit insurance. The corresponding assets distribution functions are obtained accordingly. The results show that it is positively correlated between the supervision level and the risk aversion effects of deposit insurance. The increase of the deposit insurance premium moves the bank's assets distribution to the right side although not significantly. The asset probability distributions estimated in this paper can be taken as a reference for banks to choose the proper credit investment projects.

show abstract

Deposit insurance and bank risk-taking: Evidence from internal loan ratings

Cited by 167 publications

References 30 publications

What is the effect of unconventional monetary policy on bank performance?

What is the effect of unconventional monetary policy on bank performance?

The Effect of Deposit Insurance on Risk Taking in Asian Banks

Estimating Probability Distribution of Asset Value Based on Dual Effects of Deposit Insurance with the Minimum Cross-Entropy Principle

Contact Info

Product

Resources

About