Deposit insurance in theory and practice

Journal of Financial Regulation and Compliance

Volumn 8, Issue 1, 2000, Pages 36-56

  Dale, Richard ^a,b  

^a UNIVERSITY OF SOUTHAMPTON   (United Kingdom)

^b QUEEN MARY UNIVERSITY OF LONDON   (United Kingdom)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 77956892181     PISSN: 13581988     EISSN: 17400279     Source Type: Journal    
DOI: 10.1108/eb025029     Document Type: Article

References (59)

1. Friedman, M. (1959) ‘The control of money. A program for monetary stability’, Bronx NY, Furdham University Press, p. 21.
2. United States Treasury (1991) ‘Modernising the financial system: Recommendations for safer, more competitive banks’, Washington DC, pp. 1-11.
3. Garcia, G. (1999) ‘Deposit insurance: A survey of actual and best practices’, IMF Working Paper.
4. Demirguc-Kunt, A. and Detragiache, E. (1999) ‘Does deposit insurance increase banking stability? An Empirical Investigation’, IMF Working Paper, p. 20.
5. Benston, G. and Kaufman, G. (1998) ‘Deposit insurance in the FDIC Improvement Act: The experience to date’, Federal Reserve Bank of Chicago Economic Perspectives, Vol. 22, No. 2, pp. 2-20.
6. Kaufman, G. (1994) ‘Bank contagion: A review of the theory and evidence’, Journal of Financial Services Research, April, pp. 124-50.
7. Temzelides, T. (1997) ‘Are bank runs contagious?' Federal Reserve Bank of Philadelphia Business Review, November-December, pp. 3-14.
8. Feldstein, M. (1991) ‘The Risk of Economic Crisis’, Chicago, p. 15.
9. Brewer, E. III (1995) ‘The impact of the current deposit insurance system on S & L shareholders’ risk/return tradeoffs’, Journal of Financial Services Research, pp. 65-69.
10. Calomiris, C. (1997) ‘The postmodern bank safety net: Lessons from developed and developing economies’, American Enterprise Institute, Washington DC, p. 10.
11. Cottrell, A., Lawlor, M. and Wood, J. (1995) ‘What are the connections between deposit insurance and bank failures?', in Cottrell, Lawlor and Wood (eds) ‘The causes and costs of depository institution failures’, Kluwer Academic, pp. 163-198.
12. Demirguc-Kunt, A. and Detragiache, E. (1998) ‘The determinants of bank crisis in developing and developed countries’, IMF Staff Papers, Vol. 45, No. 1, March, pp. 83-84.
13. Demirguc-Kunt and Detragiache (1999) ‘The determinants of bank crisis in developing and developed countries’, IMF Staff Papers, Vol. 45, No. 1, March, pp. 83-84
14. Goodhart, C. (1993) ‘Bank insolvency and deposit insurance: A proposal’, in Arestis, P. (ed.) ‘Money and banking: Issues for the Twenty-first Century’, Macmillan, pp. 75-94.
15. The UK Financial Services Authority (FSA), in a recent review of deposit insurance in the UK, commented as follows:‘initial research suggests that consumers’ general awareness of compensation arrangements is very low and that it is not a factor to which consumers attach much significance when making savings or investment decisions … which might suggest that the incentive of the co-insurance element in the existing schemes is limited’. (FSA (1999) ‘Consumer compensation:A further consultation’, June, p. 16)
16. Garcia (1999) Consumer compensation:A further consultation’, June, p. 16.
17. See, for example, Diamond, D. and Dybvig, P. (1986) ‘Banking theory, deposit insurance and bank regulation’, Journal of Business, January, pp. 55-68.
18. For example, Kovacevich, R. in Federal Deposit Insurance Corporation (1998) ‘Confidence for the future: An FDIC symposium’, 29th January, proceedings, p. 63.
19. Garcia (1999) ‘Confidence for the future: An FDIC symposium’, 29th January, proceedings, p. 12.
20. Calomoris (1997) Confidence for the future: An FDIC symposium’, 29th January, proceedings, p. 24.
21. Calomiris, C. (1999) ‘Building an incentive- compatible safety net’, Journal of Banking and Finance, Vol. 23, No. 10, October, pp. 1499-1519.
22. Bank for International Settlements (1999) ‘A new capital adequacy framework:Consultative Paper issued by the Basle Committee on Banking Supervision’, Basel, June.
23. Fratianni, M. (1995) ‘Bank deposit insurance in the European Union’, in Eichengreen, F. and von-Hagon (eds) ‘Politics and institutions in an integrated Europe’, Springer, pp. 144-76.
24. Mackintosh, J. (1999) ‘FSA seeks new powers over top financial jobs’, Financial Times, 31 July/1 August, p. 1.
25. Dale, R. (1996) ‘Risk and regulation in global securities markets’, Wiley.
26. Calomoris (1999) ‘Risk and regulation in global securities markets’, Wiley.
27. Flannery, M. in FDIC (1998) ‘Confidence for the future: An FDIC symposium’, 29th January, proceedings, pp. 118-124.
28. Benston and Kaufman (1998) ‘Confidence for the future: An FDIC symposium’, 29th January, proceedings, pp. 118-124.
29. Kaufman (1994) ‘Confidence for the future: An FDIC symposium’, 29th January, proceedings, pp. 118-124.
30. Hoenig, T. (1996) ‘Rethinking financial regulation, The Financial Regulator, June, pp. 22-29.
31. Flannery (1998) ‘Rethinking financial regulation, The Financial Regulator, June, pp. 22-29.
32. Stern, G. in FDIC (1998) ‘Confidence for the future: An FDIC symposium’, 29th January, proceedings, p. 110.
33. Calomoris (1999) Confidence for the future: An FDIC symposium’, 29th January, proceedings, p. 34.
34. US Treasury (1991) Confidence for the future: An FDIC symposium’, 29th January, proceedings, pp. 1-11.
35. US Treasury (1991) Confidence for the future: An FDIC symposium’, 29th January, proceedings, p. 17.
36. Benston and Kaufman (1998) Confidence for the future: An FDIC symposium’, 29th January, proceedings, p. 3.
37. Benston and Kaufman (1998) Confidence for the future: An FDIC symposium’, 29th January, proceedings, p. 10.
38. Federal Deposit Insurance Corporation (FDIC) (1998) ‘Confidence for the future:An FDIC symposium’, 29th January, proceedings.
39. Commission of the European Communities (1992) ‘Proposal for a Council Directive on deposit-guarantee schemes’, 35 OJ European Commission (No. C 163) 6, p. 5.
40. European Council (1993) ‘Common position on the proposal for a Directive on Deposit Guarantee Schemes’, (8915/1/93, Rev. 1).
41. Bank of England (1991) ‘Response to Treasury and Civil Service Committee, Issues relating to BCCI’.
42. Garcia (1999) ‘Response to Treasury and Civil Service Committee, Issues relating to BCCI’.
43. Benston and Kaufman (1998) ‘Response to Treasury and Civil Service Committee, Issues relating to BCCI’ 16.
44. The DGD refers specifically to ‘the right of a guarantee scheme to take any measures necessary for the rescue of a credit institution that finds itself in difficulties’ (Recital 10, italics added).
45. Dale, R. (1993) ‘Deposit insurance: U S -EC policy clash’, Journal of International Securities Markets, Spring/Summer.
46. Deutsche Bundesbank (1992) Monthly Report, July, p. 35.
47. Garcia (1999) Monthly Report, July, p. 35.
48. Germany v European Parliament and Council C-233/94, opinion of Advocate General Leger 10th December, 1996; judgment 13th May, 1997.
49. DGD Recital 14.
50. DGD Recital 13.
51. Financial Times Regulation Report, January/ February 1996.
52. Hall, M. (1999) ‘Deposit insurance reform in Japan: Better late than never?', Journal of Financial Services Research, Vol. 15, No. 3, p. 22.
53. Dale, R. (1995) ‘Tokyo shifts gear’, Financial Times Financial Regulation Report, September, pp. 1-2.
54. Dale, R. (1998) ‘Tokyo’s confidence crisis’, Financial Times Financial Regulation Report, March, pp. 1-2.
55. For instance, in relation to settlement risk, a senior official of the Bank of Japan commented in 1997 as follows: ‘For more than fifty years no financial institutions had failed in Japan. Thus it was believed that credits to financial institutions were safe and secure … It would not be too great an exaggeration to say that until very recently settlement risk was not recognised as a real risk’. (Muto, E. (1997) ‘A Japanese perspective on payment system reforms’, in ‘Managing change in payment systems’, Bank for International Settlements’, Basel. It is reasonable to assume that this perception of risk (or rather the lack of it) applied to all credit exposures to Japanese banks.
56. FDIC (1998), in ‘Managing change in payment systems’, Bank for International Settlements’, Basel. It is reasonable to assume that this perception of risk (or rather the lack of it) applied to all credit exposures to Japanese banks., p. 95.
57. Korea introduced a retail deposit insurance scheme in 1996.
58. Fiechter, J. in FDIC (1998) Korea introduced a retail deposit insurance scheme in, p. 141.
59. This episode has led to the suggestion that there should be an international agreement requiring that in future IMF-led rescue packages involving restructuring of the financial sector, governments cannot expect ‘blanket guarantee announcements’ (issued before the IMF arrives on the scene) to be honoured (see Morris Goldstein (1998) ‘The Asian financial crisis:Causes, cures and systemic implications’, Policy Analyses in International Economies’, Institute for International Economics, Washington DC, pp. 46-51).