 Explicit deposit insurance design: International effects on bank lending during the global financial crisis✰Iftekhar Hasan, Liuling Liu, Anthony Saunders and Gaiyan Zhang Journal of Financial Intermediation, 2022, vol. 51, issue C Abstract: Studies find that during the 2007–2009 global financial crisis, loan spreads rose and corporate lending tightened, especially for foreign borrowers (a flight-home effect). We find that banks in countries with explicit deposit insurance (DI) made smaller reductions in total lending and foreign lending, experienced smaller increases in loan spreads, and had quicker post-crisis recoveries. These effects are more pronounced for banks heavily relying on deposit funding. Evidence also reveals that more generous or credible DI design is associated with a stronger stabilization effect on bank lending during the crisis, confirmed by the difference-in-differences analysis based on expansion of DI coverage during the crisis. The stabilization effect is robust to the use of country-specific crisis measures and control of temporary government guarantees. Keywords: Deposit insurance; Generosity design; Credibility design; Bank lending activities; Global financial crisis; Stabilization effect (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:51:y:2022:i:c:s1042957322000110 DOI: 10.1016/j.jfi.2022.100958 Access Statistics for this article Journal of Financial Intermediation is currently edited by Elu von Thadden More articles in Journal of Financial Intermediation from Elsevier |
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