Deposit Insurance as a Tool for Banking Supervision

Christophe Morel

Revue d'Économie Financière, 2000, vol. 60, issue 5, 233-244

Abstract: [eng] After reminding of the economic justifications of bank regulation, this paper pays particular attention to one of the instruments of this regulation, the deposit insurance. While offering a protection to the depositors, the deposit insurance would allow to prevent bank runs and thus reduce the occurrence probability of a systemic crisis. We present the features of such a scheme identified as « optimal » in the academic literature in the sense that they avoid moral hazard and adverse selection phenomena. Thus, ideally, the system should be public and compulsory for all banks ; the guarantee should be limited and all-in price ; the premium paid by the banks should directly depends on each bank’s risk level. . JEL Classifications : G28

Date: 2000
Note: DOI:10.3406/ecofi.2000.4518
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