RISK-BASED CONTRIBUTION IN DEPOSIT GUARANTEE SCHEMES: A ROBUST PRINCIPAL COMPONENT ANALYSIS IN KEY RISK FACTORS’ WEIGHTING STEP

Saverio Giorgio, Pina Mur㈠(), Cosimo Paccione () and Lucilla Bittucci
Additional contact information
Saverio Giorgio: Università degli Studi di Roma “La Sapienza†, Rome, Italy
Pina Murãˆ: Università degli Studi di Roma “La Sapienza†, Rome, Italy
Cosimo Paccione: Luiss Guido Carli, Rome, Italy
Lucilla Bittucci: European Central Bank, Germany

Journal of Financial Management, Markets and Institutions (JFMMI), 2024, vol. 12, issue 02, 1-34

Abstract: This paper investigates the method for calculating funding banks must provide to Deposit Guarantee Schemes (DGSs) according to the “ex-ante†and “risk-based†criteria introduced by Directive 2014/49/EU (DGSD). We aim to further support the existing documents providing an approach to identify risk indicators and assign weights thereof to determine fundings to be paid to DGSs. It is worth noting that such an approach could enhance current practices as it takes into account the risk and performance of banks as opposed to the overall banking market. By doing so, a more targeted funding can be encouraged. Our results consider the Texas ratio as one of the indicators to look out for. Likewise, such methods could serve as self-assessment frameworks for Institutional Protection Schemes (IPSs) and banks, fostering sound and prudent management, in turn warding off “moral hazard†issues.

Keywords: Banking systems; banking instability; bankruptcy; Deposit Guarantee Schemes (DGSs); Institutional Protection Schemes (IPSs); risk-based premia; risk-based contribution; risk management; Principal Component Analysis (PCA); moral hazard (search for similar items in EconPapers)
JEL-codes: C14 G01 G21 G28 H81 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S2282717X24500038
Open Access

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:jfmmix:v:12:y:2024:i:02:n:s2282717x24500038

Ordering information: This journal article can be ordered from

DOI: 10.1142/S2282717X24500038

Access Statistics for this article

Journal of Financial Management, Markets and Institutions (JFMMI) is currently edited by Santiago Carbo-Valverde

More articles in Journal of Financial Management, Markets and Institutions (JFMMI) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().