Bank Insolvency, Deposit Insurance and capital Adequacy

François Marini
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François Marini: LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper extends the Dowd (2000) model by introducing a risky investment technology. This assumption allows to introduce the possibility of an insolvency crisis. A banker may earn a positive expected profit by insuring depositors against the technological risk. If the bank has adequate capital, the insurance is credible and an insolvency crisis cannot occur. A public safety net may be unnecessary to prevent insolvency crises.

Keywords: Bank; Capital; Insurance company (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (7)

Published in Journal of Financial Services Research, 2003, 24

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03575556

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