How Does Deposit Insurance Affect Bank Risk? Evidence from the Recent Crisis

Anginer, Deniz ; Demirguc-Kunt, Asli ; Zhu, Min

World Bank, Washington, DC

关键词: ACCOUNTING;    ADOPTION OF DEPOSIT INSURANCE;    ASSET VALUE;    ASSET VALUES;    ASSETS RATIO;   

DOI  :  10.1596/1813-9450-6289
RP-ID  :  WPS6289

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Deposit insurance is widely offered in anumber of countries as part of a financial system safety netto promote stability. An unintended consequence of depositinsurance is the reduction in the incentive of depositors tomonitor banks, which leads to excessive risk-taking. Thispaper examines the relation between deposit insurance andbank risk and systemic fragility in the years leading to andduring the recent financial crisis. It finds that generousfinancial safety nets increase bank risk and systemicfragility in the years leading up to the global financialcrisis. However, during the crisis, bank risk is lower andsystemic stability is greater in countries with depositinsurance coverage. The findings suggest that the"moral hazard effect" of deposit insurancedominates in good times while the "stabilizationeffect" of deposit insurance dominates in turbulenttimes. Nevertheless, the overall effect of deposit insuranceover the full sample remains negative since thedestabilizing effect during normal times is greater inmagnitude compared with the stabilizing effect during globalturbulence. In addition, the analysis finds that good banksupervision can alleviate the unintended consequences ofdeposit insurance on bank systemic risk during good times,suggesting that fostering the appropriate incentiveframework is very important for ensuring systemic stability.