A Positive Analysis of Deposit Insurance Provision: Regulatory Competition Among European Union Countries

Merwan Engineer (), Paul Schure () and Mark Gillis
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Mark Gillis: Commonwealth Bank of Australia, Australia

Working Paper series from Rimini Centre for Economic Analysis

Abstract: We consider the provision of deposit insurance as the outcome of a non-cooperative policy game between nations. Nations compete for deposits in order to protect their banking systems from the destabilizing impact of potential capital flight. Policies are chosen to attract depositors who optimally respond to the expected return to deposits, which depends on both stability and deposit insurance levels. We identify both defensive and beggar-thy-neighbour policies. The model sheds light on the European banking crisis of 2008 in which individual nations ratcheted up their deposit insurance levels.

Date: 2012-06
New Economics Papers: this item is included in nep-ban, nep-cba and nep-ias
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Citations: View citations in EconPapers (3)

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Journal Article: A positive analysis of deposit insurance provision: Regulatory competition among European Union countries (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:rim:rimwps:29_12

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