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Deposit insurance in theory and practice

Deposit insurance in theory and practice
Deposit insurance in theory and practice
Having been hailed as the most important contribution to stabilising the US financial system after the 1929—33 crash, deposit insurance is now being blamed for financial destabilisation, particularly in emerging markets. This paper focuses on the relationship between deposit insurance and systemic stability in the banking system, drawing on recent experience in the USA, Europe and Japan. The conclusion is that if there is an embedded perception that in the last resort depositors will be protected beyond insurance limits then market-orientated solution to the problems of ‘moral hazard’ and excessive risk taking cannot work.
1358-1988
36-56
Dale, Richard
b637fb4c-899e-4bec-82a4-0b2ca795f7c7
Dale, Richard
b637fb4c-899e-4bec-82a4-0b2ca795f7c7

Dale, Richard (2000) Deposit insurance in theory and practice. Journal of Financial Regulation and Compliance, 8 (1), 36-56. (doi:10.1108/eb025029).

Record type: Article

Abstract

Having been hailed as the most important contribution to stabilising the US financial system after the 1929—33 crash, deposit insurance is now being blamed for financial destabilisation, particularly in emerging markets. This paper focuses on the relationship between deposit insurance and systemic stability in the banking system, drawing on recent experience in the USA, Europe and Japan. The conclusion is that if there is an embedded perception that in the last resort depositors will be protected beyond insurance limits then market-orientated solution to the problems of ‘moral hazard’ and excessive risk taking cannot work.

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Published date: 2000
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Organisations: Management
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Identifiers

Local EPrints ID: 64677
URI: http://eprints.soton.ac.uk/id/eprint/64677
DOI: doi:10.1108/eb025029
ISSN: 1358-1988
PURE UUID: aad1b631-8836-44e2-85e6-f3e1140a44fe

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Date deposited: 21 Jan 2009
Last modified: 15 Mar 2024 12:01

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Author: Richard Dale

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