 Preventing Banking Crises--with Private Insurance?CESifo Economic Studies, 2013, vol. 59, issue 4, 609-627 Abstract: In this article, we review the functioning of private insurance against banking crises and identify its potential. The essential idea is that banks are recapitalized by private investors when negative events would otherwise cause a write-down of capital--or even bank insolvency. There are two modes of private insurance: pure insurance contracts and contingent debt contracts. In the former, funding of banks and insurance are separated, whereas in the latter, debt holders provide insurance. We summarize the main insights regarding the potential and limits of private insurance. We also discuss how such crisis insurance could be strengthened through complementary regulatory measures. Finally, we outline the overall pecking order of buffers and insurance for banking systems. (JEL codes: D41, E4, G2) Copyright The Author 2013. Published by Oxford University Press on behalf of Ifo Institute, Munich. All rights reserved. For permissions, please email: journals.permissions@oup.com, Oxford University Press. Date: 2013 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:oup:cesifo:v:59:y:2013:i:4:p:609-627 Ordering information: This journal article can be ordered from Access Statistics for this article CESifo Economic Studies is currently edited by Panu Poutvaara More articles in CESifo Economic Studies from CESifo Group Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC. |
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