Optimal Deposit Insurance

Dávila, Eduardo; Goldstein, Itay

doi:10.2139/ssrn.3549975

Cited by 11 publications

(6 citation statements)

References 57 publications

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“…This finding has significant implications for financial stability, since even some insured funds are likely to flee banks in response to stress, and can serve to inform banking theory models (such as Davila and Goldstein (2016)). 19…”

Section: Account Liquidation and The Withdrawal Of Insured Fundsmentioning

confidence: 88%

Deposit Inflows and Outflows in Failing Banks: The Role of Deposit Insurance

Martin

Puri

Ufier

2018

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and members of the FDIC for comments and helpful feedback. The views expressed herein are those of the authors and do not necessarily reflect the views of the Federal Deposit Insurance Corporation or the National Bureau of Economic Research.NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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Section: Account Liquidation and The Withdrawal Of Insured Fundsmentioning

confidence: 88%

Deposit Inflows and Outflows in Failing Banks: The Role of Deposit Insurance

Martin

Puri

Ufier

2018

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“…3 It follows that only part of households' wealth can be invested in insured deposits, so that as we assume in our model, each bank is de facto limited in the total dollar amount of riskless debt it can issue using deposit insurance. This limit may stem, for instance, from fiscal costs (see Davila and Goldstein, 2016), or ex-ante distortions in banks' behavior (Calomiris and Kahn, 1991;Diamond and Rajan, 2001).…”

Section: Non-technical Summarymentioning

confidence: 99%

Shadow Banking and Financial Stability Under Limited Deposit Insurance

Voellmy

2019

SSRN Journal

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“…The increase in the coverage limit impacts not only financial stability, but also the demand and supply of deposits. An increase in coverage may therefore affect the equilibrium interest rate on deposits and consequently banks' cost of funding (Davila and Goldstein, 2015;Cooper and Ross, 2002). While there is a long-standing debate in the literature regarding the impact of deposit insurance on the banks' cost of deposit funding, there are few attempts in the related empirical literature that use a quasi-experimental setting to examine the issue.…”

Section: Introductionmentioning

confidence: 99%

Deposit Insurance and Banks’ Deposit Rates: Evidence from the 2009 EU Policy Change

Gatti

Oliviero

2019

SSRN Journal

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Deposit insurance is one of the main pillars of banking regulation meant to safeguard financial stability. In early 2009, the EU increased the minimum deposit insurance limit from e20, 000 to e100, 000 per bank account with the goal of achieving greater stability in the financial markets. Italy had already set a limit of e103, 291 in 1994. We evaluate the impact of the new directive on the banks' average interest rate on customer deposits by comparing banks in the Eurozone countries to those in Italy, before and after the policy change. The comparability between the two groups of banks is improved by means of a propensity score matching. We find that the increase in the deposit insurance limit led to a significant decrease in the cost of funding per unit of customer deposit and that the effect is stronger for riskier banks, suggesting that the policy reduced the risk premium demanded by depositors.

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Optimal Deposit Insurance

Cited by 11 publications

References 57 publications

Deposit Inflows and Outflows in Failing Banks: The Role of Deposit Insurance

Deposit Inflows and Outflows in Failing Banks: The Role of Deposit Insurance

Shadow Banking and Financial Stability Under Limited Deposit Insurance

Deposit Insurance and Banks’ Deposit Rates: Evidence from the 2009 EU Policy Change

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