Legal Aspects of the Interests of Depositor Creditors: The Case for Deposit Protection Systems

Campbell, Andrew; Singh, Dalvinder

doi:10.1007/978-1-349-58268-6_2

Cited by 20 publications

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“…Consequently, it seems that banks need to balance the interests of shareholders and depositors more than other corporations, given the large amount of funds depositors provide to enable them to undertake their business (Campbell and Singh, 2007)[6]. Nevertheless, this power is limited as long as informational asymmetry regarding a bank's business makes the timing of the decision to withdraw deposits "virtually impossible" (Singh and LaBrosse, 2010).…”

Section: As They Are Financially Unsophisticated Creditorsmentioning

confidence: 99%

“…The examination of this bank-customer relationship presents a key starting point for identifying depositors' legal position within the UK financial system. This section draws on Campbell and Singh's (2007) study of the legal aspects of depositor creditors' interests, as they provide a solid ground for analysis.…”

Section: Deposit Insurance Can Protect Depositorsmentioning

confidence: 99%

“…A curb on the high degree of discretion the banker has with the way he can use depositors' money (Campbell and Singh, 2007) is the fact that "he has contracted, having received that money, to repay to the principal, when demanded, a sum equivalent to that paid into his hands" (Edward Thomas Foley v. Thomas Hill and Others [1848] II H L C., 27 1002). Consequently, it seems that banks need to balance the interests of shareholders and depositors more than other corporations, given the large amount of funds depositors provide to enable them to undertake their business (Campbell and Singh, 2007) [6]. Nevertheless, this power is limited as long as informational asymmetry regarding a bank's business makes the timing of the decision to withdraw deposits "virtually impossible" (Singh and LaBrosse, 2010).…”

Section: As They Are Financially Unsophisticated Creditorsmentioning

confidence: 99%

“…Campbell and Singh's (2007) study of the legal aspects of depositor creditors' interests, as they provide a solid ground for analysis. The Edward Thomas Foley v. Thomas Hill and Others case authoritatively established a key foundation of banking law, a position which was rather ambiguous in previous cases; namely, the relationship between a banker and customer, who deposits money with the bank, is the ordinary relationship of a debtor and creditor [2].…”

mentioning

confidence: 99%

“…However, depositors of a bank fall into the category of unsecured creditors, which means that they queue for payment behind both the preferred and secured creditors [4]. Even if they receive any of what they are owed, there will be a significant delay before distributions to unsecured creditors can be made, in light of procedural obstacles, such as the verification of the existence of all claims, costs of the liquidation process and repayment of preferred and secured creditors (Campbell and Singh, 2007).…”

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Meeting the rationale of deposit protection system

Kleftouri

2014

Journal of Financial Regulation and Compliance

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If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -The purpose of this paper is to explore the full potential of an effective deposit insurance system. The current financial crisis in Europe has arguably casted fresh doubt on the role and need for deposit insurance. In this regard, the deposit insurance system's rationale is a key starting issue in order to fully understand its design and role within a financial safety net system. Design/methodology/approach -Using the UK regulatory regime as the main reference point, the deposit insurance system's objectives are divided into two broad categories: depositor protection and financial stability. Findings -It is argued that a deposit insurance system could only be effective if designed to perform key regulatory objectives. Otherwise, authorities will keep resorting to other rescue measures, as this system will never be well equipped to respond to a bank failure. Practical implications -Notwithstanding recent regulatory reforms, there is still a lack of clear objectives and, thus, a clear profile for the Financial Services Compensation Scheme, as the UK deposit compensation scheme. In light of systemic risk and increased demands on prudential banking regulation, the UK deposit insurance system should be reformed to perform significant regulatory objectives. Social implications -The further reform of the UK deposit insurance will enhance depositor protection and financial stability, especially amid the euro-crisis. Originality/value -An effective reform of deposit insurance requires a clear role-setting for deposit insurance. To this end, this paper offers a comprehensive analysis of all regulatory objectives that the post-crisis UK deposit insurance system should serve.

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Section: As They Are Financially Unsophisticated Creditorsmentioning

confidence: 99%

Section: Deposit Insurance Can Protect Depositorsmentioning

confidence: 99%

Section: As They Are Financially Unsophisticated Creditorsmentioning

confidence: 99%

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Meeting the rationale of deposit protection system

Kleftouri

2014

Journal of Financial Regulation and Compliance

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Deposit Protection and Bank Resolution

Kleftouri¹

2015

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The 2007–08 global financial crisis proved that the interests of bank depositors are inadequately protected. Although a vast expansion in deposit protection systems around the world followed, our understanding of the impact of those systems and their interaction with bank resolution is still in its infancy. The focus of bank resolution studies has been on the largest systemically important banks, which have wholesale creditors who would be bailed in, leaving retail depositors untouched. However, many banks rely mostly on deposits for financing, and the number of banks of this form is expected to increase. This book aims to explain and provide current material analysis of deposit protection and bank resolution regimes. The analysis is based on an examination of the traditional rationales for creating deposit insurance and bank resolution, and a specific study of the UK, EU, and US legal frameworks. It aims to offer an analysis of this topic and to cover all relevant regulations, from its origins to its most recent developments, in a systematic and thorough way. It approaches the much-desired objective of financial stability from a different angle: that of depositor protection. This book comprises ten chapters, analysing: the rationales for creating a deposit protection system; the limitations of deposit protection systems; the European deposit insurance framework; the European banking union; recent cases on deposit guarantee schemes; international standards on deposit insurance; the UK deposit insurance framework; international and European regulatory developments on bank resolution; the UK Special Resolution Regime; and the US paradigm.

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2015

Deposit Protection and Bank Resolution

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Legal Aspects of the Interests of Depositor Creditors: The Case for Deposit Protection Systems

Cited by 20 publications

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Meeting the rationale of deposit protection system

Meeting the rationale of deposit protection system

Deposit Protection and Bank Resolution

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