A positive analysis of deposit insurance provision: Regulatory competition among European Union countries

Merwan Engineer (), Paul Schure () and Mark Gillis

Journal of Financial Stability, 2013, vol. 9, issue 4, 530-544

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 deposit insurance levels, systemic risk and transaction costs. 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.

Keywords: Banking; Deposit insurance; Regulatory competition; European Union (search for similar items in EconPapers)
JEL-codes: D78 E42 G21 G28 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (25)

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Working Paper: A Positive Analysis of Deposit Insurance Provision: Regulatory Competition Among European Union Countries (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:9:y:2013:i:4:p:530-544

DOI: 10.1016/j.jfs.2013.10.001

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