Deposit Insurance in Times of Crises: Safe Haven or Regulatory Arbitrage? (RM/15/026-revised-)

Stefanie Kleimeier - Ros, Shusen Qi, H. Sander

Research output: Working paperProfessional

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Abstract

This paper examines the impact of deposit insurance (DI) schemes on bilateral cross-border deposits. Our results suggest that not only the existence of explicit DI, but also DI design features, which reflect its credibility, have an impact on cross-border deposits. Relative differences between reporting and depositor countries also matter. In times of crises, depositors rely more on DI in general, but DI acts primarily as a “Safe Haven” rather than enabling “Regulatory Arbitrage”. During the global financial crisis of 2008/09 the emergency actions of bank country governments, which supply and maintain these safe havens, have led to substantial relocations of cross-border deposits. These results suggest that un-coordinated policy actions matter in times of crises and harmonization of DI schemes could have stabilizing effects on the allocation of cross-border deposits.
Original languageEnglish
PublisherMaastricht University, Graduate School of Business and Economics
DOIs
Publication statusPublished - 2016

Publication series

SeriesGSBE Research Memoranda
Number026

JEL classifications

  • f34 - International Lending and Debt Problems
  • g18 - General Financial Markets: Government Policy and Regulation

Keywords

  • deposit insurance
  • cross-border deposits
  • systemic banking crises
  • gravity model

Cite this

Kleimeier - Ros, S., Qi, S., & Sander, H. (2016). Deposit Insurance in Times of Crises: Safe Haven or Regulatory Arbitrage? (RM/15/026-revised-). Maastricht University, Graduate School of Business and Economics. GSBE Research Memoranda, No. 026 https://doi.org/10.26481/umagsb.2016026